What Happened to GM?

1. What Happened to GM?

2. GM History • 1950’s - Half of all cars in the US

3. I’m Not Piling On

4. GM History • 1980 - 853,000 to 284,000 worldwide

5. 1st Q 2009Passenger cars • Toyota 19.4% • GM 15% • Honda 12.4% • Nissan 10.2% • Ford 10.0% • Hyundai 6.2% • Chrysler 5.2% • Mazda 3.4% • BMW 3.2% • VW 3.2% • Kia 2.6% • Subaru 2.6% • Volvo 0.8% • Saab 0.2%

6. JD Power Top 10 Reliability 2004 • Buick145 • Lexus 145 • Cadillac 162 • Mercury 168 • Honda 169 • Toyota 178 • BMW 182 • Lincoln 182 • Subaru 192 • Jaguar 197

7. Focus On What MattersBMW • “We don’t make automobiles [we make] moving works of art that express the drivers love of quality.”

8. Honest DesignWorld Cars • Porsche • VW Beetle • Volvo • BMW • Jeep • Benz

9. Bureaucracy & the Status Quo • Risk taker to Risk avoidance • Cash poor to Cash comfortable • Contribution to Playing favorites • Opportunities to Problems • Marketing & sales to Finance & bean-counting • Momentum to Inertia • Working to Meetings • END

10. 100 • Market Value • 50 • 0 • -50 • -100 • Strategic • Investments • 0% • $ Billion • -150 • -200 • -250 • -300 • 10% • -350 • -400 Market Value versus Cumulated Strategic Investments at General Motors$167 Billion or $332 Billion

11. Ross Perot on the Subject • From 1980 to 1985 GM spent $45 billion in capital investments but only increased worldwide market share by 1%....... • "For the same amount of money, we could buy Toyota and Nissan outright, instantly increasing market share to 40%.” • Gorilla dust

12. GM Highlights • Planned obsolescence (lack of real competition) • “No money” in small cars (calculate with certainty) • Fuel economy legislation in 80s (unintended consequence) • Same design centers (status quo and lack of diverse opinion) • Competition between design departments • Competition is the best motivator (beliefs) • Avoid failure • Bring in “paid renegade” • De Lorean fired at GM • Iacocca fired at Ford • Focus on financing cars (avoiding difficult issues)

13. GM Highlights • Corporate Culture • Car guys and bean counters– no marketing • Stability over conflict • Continuity over disorder • Status quo over change • 50 year old decision making structure • Conformity over rebellion • Caught unprepared at the oil crisis of ‘73 • Robot automation

14. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

15. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

16. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

17. Sequel: Fuel Cell 9/2006 Due 2010 • “Leapfrog the Japanese” • “A Game Changer”

18. Volt: Electric Car 12/2006 • “A game changer” • “Beat the Japanese at their own game”

19. Now • Lost 72 billion in last 4 years – no heads rolled • Bob Lutz to save the day – global product development • Tom Stephens, who runs the company's power-train unit • Carl-Peter Forster London, Germany and Greece BMW, Opel • Market Cap November 2008 • GM = 1.2 Billion • Toyota + Honda = $146.3 Billion

20. Ask Rick Wagoner why GM isn’t more like Toyota. (69/70) • “We’re playing our own game – taking advantage of our own unique heritage and strengths.”

21. Does Bureaucracy Materialize Out of Nowhere?

22. Critical Thinking In Action Entrepreneur Bureaucrat • Adapt & Change - Status quo and rules • Risk taker - Status quo and rules • Contrarian - Follow the herd • Focus on what matters - Doing my job • Bias toward action - Keep your head down • Customer focus - Internal focus • Problem solver - Problems?? What problems ? • Emphasis on big picture - Doing my job • Start at the end • Spread the wealth - Conserve the wealth • Big pie thinking • Lead with personality - Lead with position & policy • Benefits of conflict - Avoid conflict play politics END

23. Fighting the Status Quo Easiest Things To Do in Business • Witch hunts • Cut costs • Beat up dealers/suppliers • Have meetings • Protect turf • Avoid mistakes by avoiding action • Random acts of management

24. Fighting the Status Quo Bad Rules • Rules do not create ethical organizations • Salary limitations • No raises over 10% • Can’t go above pay grade 16 without supervising people • $40,000 commission dispute • The new inventory stickers • Minimum order $100 • Across the board budget cuts • Approve capital purchases • Control vs. incentives

25. Risk Taking • Total US Stock Market • 1982 value = $1.2 Trillion • Return 1982 to 2007 13.3% • Theoretical 2007 value $28.2 Trillion • Actual value $18.7 Trillion • Lost to market timing $9.5 Trillion • NASDAQ • 9.6% Return 1973 – 2002 • 4.3% Actual average return to NASDAQ investor • Zweig, Jason, Money Magazine, December 2007, page 76

26. Contrarian • Michael Bloomberg • “Luck is preparation meeting opportunity.” • “To a contrarian like me, constant advice not to do something almost always starts me down the risky unpopular path.”

27. Focus On What Matters • In 1998 Daimler bought Chrysler for $36 Billion • Nine years later they paid $680 Million for some one to take it

28. Focus On What MattersBias Toward Action • Daimler concentrated on cost cutting and production • Daimler • Committees, meetings, and binders • Competing kingdoms • Overlapping models • Long lead times • Dealers pitted against Chrysler and each other • Too much cost cutting

29. Focus On What MattersBias Toward Action • Private equity takes over Chrysler • Private equity concentrated on marketing and quality • CEO reviews cars and barks out orders — no more binders or meetings • 7 days to fix quality problems • Old CEO took a demotion to stay • Attracted talent from Lexus and Toyota • Cut 4th quarter 2007 production by 14% • 100,000 fewer vehicles • $1 billion lost cash flow • 7 minute phone call with the owners

30. Focus On What MattersBias Toward Action • Private equity takes over Chrysler • Customer focus • Hired “Chief Customer Officer” • Dealer is customer too • Stopped pitting dealer against dealer • Tripled goodwill allowance to dealers • Lexus dealers are the most profitable

31. Focus on What MattersCreate Value • HR, Internal audit, Purchasing– evaluated by external clients

32. Emphasis on Big Picture

33. Lead With Personality • Influence Skills • “It doesn’t matter what you say– it matters how you make people feel.” • Message needs to motivate– change thought and behavior • “Our mission is to unlock shareholder value.” • Cranium: CHIFF, Clever, High-quality, Innovative, Friendly & Fun • BP: “No dry holes.”

34. Lead With Personality De-motivation • Lou Holtz at Notre Dame, “It’s not my job to motivate my players…” • Should you treat everyone equally?

35. Conflict Is Underrated • “Where all think alike, no one thinks very much.” • Walter Lipman • Need for diversity • Run off renegades

36. Create Wealth vs. Maintain Wealth

37. Applications • Learn to start with the end in mind and work backward to ensure that all efforts are productively applied. • Rage against bureaucracy and the status quo. • Examine decisions and analysis from the contrarian point of view. • Make work fun. • Facilitate creativity. • Ensure a “share the wealth” organizational attitude. • END

38. ApplicationsJack Welch Bureaucracy Busting • Leader sets the tone • Problems • Processes • Titles • Avoid conflict • Presentations– one-way communication • Unsafe to take a chance

39. ApplicationsJack Welch Bureaucracy Busting • Be relentless and outrageous • Celebrate impassioned boundaryless people • Love the people who hate meetings • Encourage managers swing for the fences • Create a culture of excitement • END