Autoline Daily 1526 - Google's Refined Bubble Car

Lots of the old gm was devoted to maintain the large dealership network and keep union employment up. Bankrupcy chaangd all that, but also they got rid of Roger Smith and Rick Wagoner. Lots of the dead wood is gone, but much remains as we see from the ignition recall fiasco. Probably best perspective is here

How Rick Wagoner Lost GM - Businessweek

 

First this is quite different from Enron, enron hinged on accounting tricks that really were fraud. Hinding losses in shadow companies.

The story of GM as the BW article pinpointed is about corporate governance, and a lot was written about this over the years. We have problems even before Roger Smith, but he really stacked the board to support some really bad decissions that a good board should have stopped. We get Roger and Me, a entertaining slightly made up documentary about that time. Sure dealers and unions caused some of the problems, but good CEOs would have cut off brands and fired enough workers to make the business work. Instead everything was great in the up cycle and a crisis in the down cycle.

The bankers did continously downgrade the debt eventually to junk. I had cases in grad school about gm mismanagement. You know there is no scapegoating here. Smith and Wagoner both packed the board to collect lots of dollars while mismanaging a once great company. Others were at fault too, but we need to learn these lessons. When I am investing in individual stocks I look at the management and GM had some of the worst scum rise to the top. Post Wagoner management has been better, but as I said lots of the old bad thinking is still there in the culture. This is true at toyota post watenabe also, akio toyoda is moving more slowly dealling with the dead wood, and that includes the chairman of the board and american management. Toyota's management never got as bad as gm's, but I have to think that moving us headquarters to texas has more to do with shaking up and getting rid of dead wood than cost cutting.

I think autoline didn't really pinpoint things correctly. The charge against gm was not wasted engineering in reducing manufacturing costs, it was really under funding new product development.

Toyota is really the leader at design for manufacturing and the whole TMS really results in lower costs for higher quality. GM would have been wise devoting even more engineering tallent there.

The mistakes were spelled out quite well. Instead of designing new exciting cars like the cruze, engineering was spent taking the same boring car and making it for other brands. You had the same boring car as a chevolet, a buick, and a cadillac. Cadillac instead of being what it once was lost its quality as they were just changes from chevies or pontiacs. This is quite different than the Lexus idea (a couple are toyota's but whole new designs with the flagships gs and ls. They did hummer, than labeled I think a chevy tahoe a hummer.

So smart moves with hindsight for smith

1) Instead of creating saturn and keeping all the brands, change pontiacs name to saturn or keep it pontiac. Do the single pricing. Take the money saved and buy 30% of toyota or honda. Have your japanese partner design the compact and subcompact. Your Japanese partner makes money, you lose it, but make up for it in rising stock on the balance sheet. Never create geo.

2) Kill Oldsmobile. Let the dealers die or move over to buick/cadilac or your new partner (toyota or honda).

3) Give UAW workers stock options as a concession, demand that you can have flexible work rules, or move plants to non-union states.

For Wagoner (He said most of these)

1) Don't crush the ev-1, keep the program going, and start making the volt.
2) Invest $1B more in hybrid technologies. When toyota offers you the prius take it.
3) Watch the credit quality of gmac, when it goes low cut it off
4) Sell saab and hummer for cash invest in better designs for your other lines
5) Invest in JIT (part of TMS) manufacturing, when the auto downturn happens, cut production fast.
6) Don't piss away $2.5B on fuel cell cars in an attempt to justify crushing the ev-1. $1B is probably fine.
7) Invest engineering to build exciting cars, don't ignore cars for SUVs