The ever-evolving question surrounding General Motors is whether or not they can resuscitate the company. On one level, it’s almost unimaginable to understand how a company, who enjoyed a 50 percent market share during the 1960s, could steadily watch its market share drop to 20 percent over a 50-year period.   Furthermore, the market share reductions eventually led to the enterprise burning more cash than it was generating, which in turn led to a trip to Washington to request funding to continue operations and a 39-day bankruptcy proceeding. First, let me say it is perplexing that GM, with its worldwide brainpower and tremendous resources, could not get out of its own way and fix the company’s problems on its own. We cannot change history, but it is difficult to digest the notion that the company needed to approach Washington for financial survival. Never the less, it did approach its higher power to solve its short term problems.

MISALIGNED CORPORATE STRUCTURE

Let’s take a closer look at the main issues (in no particular order) which led to the company’s demise:

• Complacency:  Historically speaking, GM was caught sleeping in the early 1970s as the company continued to build the high-profit gas guzzlers when the oil crisis hit. Data was available in the mid 1960s suggesting that consumer tastes had begun to switch to the smaller, fuel efficient imports. Rather than re-tool their product line up to mirror changing consumer demand, they opened the door to Toyota and other import brands. Even after the oil crisis, they put too much emphasis on the higher-margined product and watched their competition slowly grasp the attention of the American consumer. During the ensuing years, the competition for market share became more intense as the number of competitors increased and their product line ups ramped up. Over time, their products began moving up the food chain to include higher end luxury vehicles and the ever popular trucks. There is plenty of blame to go around spanning 40 years of management teams; however, finger pointing is not the answer.

• Quality:  I would certainly agree that GM has placed a lot of emphasis in this area in recent years and has made significant improvements. However, it still needs to improve and in many cases, the company still suffers from the “20 foot rule,” which basically says that the vehicle appears to have very few blemishes, until you get within 20 feet of the vehicle.

• Culture:  Decision making typically took too long and often yielded a compromised decision. It’s been said that when you shake the head of General Motors, it could take months or years before the tail moves. Also, management ranks were not encouraged to take risks and therefore maintaining the status quo became the strategy.

• Short Term Thinking:  Senior management was too focused on short term profits and satisfying Wall Street at the peril of long term success.  In addition, senior managers were often too far removed from the day to day issues affecting the company and unable to fix the inherent issues affecting market share and product cost.

I intentionally omitted the union from the above issues as I believe a united company, focused on the long term solutions, would have solved its union differences a long time ago. In essence, the above issues are a result of a misaligned corporate structure. Somewhere along the way, the company strayed from promoting those with market driven ideas, risk takers and solution oriented individuals.  Instead, executive promotions became more about political connections within the corporate machine, promoting those focused on maintaining the status quo and biding their time until retirement.

A ‘VOLT’ OF LIGHTNING?

Moving forward, a successful GM will likely focus on the following:

• China Market:  The company has focused on this market and has made significant investments and in roads into this growing opportunity. This country proves to be a growth area for the industry and GM has a strong start.

• Alternative Energy:  Research and development activities have been proactive in identifying the next generation of power sources for vehicles. For example, the battery powered Chevy Volt is scheduled to launch in 2010 and early estimates indicate the vehicle can achieve upwards of 230 MPG. The Volt is powered from a lithium ion battery with a gas powered engine.   At 230 MPG, this is a game changer with tremendous upside. 

• Align Corporate Goals with Management Incentives and Promotions:  GM needs to promote its best and brightest and ensure their goals are consistent with company objectives. For too long, managers operated their business units with the goal of not making mistakes and pushing forward the status quo. Simply put, this is a recipe for failure. Further, corporate goals and objectives must be pushed from the top to the lowest point of the organization, since the day-to-day activities are executed by the lower tier managers.

• Entreprenurial Thinking:  A lot has been debated concerning the company’s “60-day Buy-Back” plan and whether or not it will be successful. However, this is just the type of risk taking and style needed by this company to be successful. The plan indicates that management has confidence in its product and isn’t afraid to “lay it all out”. If it proves to help the company reach its objectives, then it can continue the program until adjustments are required.  If it’s not successful or inconsistent with overall objectives, then the program can always be scrapped and replaced by another opportunity. The key here is that while GM must operate within its overall strategy, it must also be nimble enough to make adjustments as required.

• Better Relationship with Government:  For whatever reason, the auto industry has often been at odds with regulators and Washington. This was never more apparent as we watched the banking and insurance industries receive their bailout monies after a few soft questions, but the auto industry first needed to “Have the skins beat off their backs.”  The reason for the strained relationship isn’t as important as the need to repair it. Both lawmakers and the industry will be farther ahead once they realize their goals should be aligned to push forward the industry and America. 

And so, the company has watched its once dominant position in the marketplace erode and result in a bankruptcy filing. However, it’s not too late for GM to re-invent itself from a corporate giant to a technology driven, fast moving enterprise. The adjustments won’t be achieved overnight, but they are happening as we speak. The faster the enterprise can push its goals and objectives down the organization and evaluate its personnel against the objectives, the sooner the company can achieve its goals.  
 
GETTING IN GEAR

It does appear GM is prepared and engaged to initiate its fight for revival. The company has launched a major advertising blitz to persuade consumers to consider its products and compare these to the competition.  GM Chairman Edward Whitacre, Jr., who was installed as Chairman by the Treasury Department is leading the campaign.  Whitacre’s spot will precede GM’s new ad campaign titled “May the Best Car Win.”  The campaign includes the consumer buy-back guarantee which guarantees anyone that buys a GM vehicle can return it after 60 days and get his or her money back. The bold idea is exactly the type of initiative the company needs. The GM product line up is better than it’s ever been, and this program will help consumers realize that and help the company build some much needed momentum. 


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