New ebook - The Fall of GM

Of all the companies that typified America's rise as an industrial superpower, none was more successful than General Motors.

What happened? Why has it fallen so far? GM at its biggest boasted some 600,000 well-paid employees. It will be left with something like 60,000 after it emerges from bankruptcy. How did that happen? Why did its stock price tumble from $96 per share at its height to 80 cents recently? Why did its market share shrink from one out of every two cars sold to less than one in five last quarter?

And thus begins the new ebook about the fall of GM.  In 1,000 words this ebook covers the source of GM's success - as well as what led to its failure.  And what GM could have done differently - as well as why it didn't do these things.  Read it, and share it.  Let folks know about it via Twitter.  Post to your Facebook page and groups, as well as your Linked-in groups.  As markets are shifting the fate of GM threatens all businesses.  Even those that are following the best practices that used to make money.  Let's use the story of GM -- and the costs its bankruptcy have had on employees, investors, vendors and the support organizations around the industry as well as government bodies -- as a rallying cry to help turn around this recession and get our businesses growing again!

Download thefallofgm_adam_hartung.pdf (569.3K)

http://www.thephoenixprinciple.com/ebooks/thefallofgm_adam_hartung.pdf
or
http://tinyurl.com/nap8w8

Comments

[Don]

GMC, or Government Motors as it is now sometimes called, was a symbol of American might and power as much as anything, and to see this colossus stumble and fall from such dizzying heights is truly heart breaking to say the least.

Sadly, it's just the tip of the proverbial iceberg as many other great American institutions are seemingly headed down the same path. Even more sadly, others have already fallen, such as the various investment banks and now as even some commercial banks, like Citi and the Bank of America, seem to be also heading.

Truly we, in the English speaking countries, are obviously at some type of historical turning point, and one that I"m not to keen on seeing take place.

[Steve Dean]

GM has had a quite a few disruptors on board in its history, but GM always ran them off.

Ross Perot was given a seat on the board of GM following the purchase of EDS. The board of GM and CEO Smith were soo upset with his ideas that bucked the status quo that they quickly paid him almost a billion dollars to go away.

John Delorean setup repair shops at the end of Pontiac assembly lines to fix all of the problems with the newly built cars. This incurred the wrath of other GM VPs and he was forced out for attempting to increase quality.

[Ron Beebe]

Adam,

As a supplier to the auto industry that has lived through the life span of GM you so accurately reflect in your new ebook, "The Fall of GM", I can only say, Right On! We have used your teachings at Euclid Industries and continue to re-invent ourselves. It is a pleasure to report to you, that since hearing your stump speech at TEC, reading your book, and having you speak with the Euclid Management Team, our manufacturing company, which was 90% OEM automotive is now less than 20%, at near full capacity, with substantial new business prospects and highly profitable. Not bad, considering the current economic conditions and that manufacturing in the US is supposed to be dead.

I am passing on your ebook to our team and others.

Ronald W. Beebe
Chairman and CEO
Euclid Industries, Inc.
1655 Tech Drive
Bay City, MI 48706

[RN]

In an organic world, rise and fall of institutions are to be expected. Fall of GM is not the end of American Auto industry's lustre but the beginning of a new era with innovation and adjustement to changing world. GM's time was up long time ago, when it failed to adapt to smaller, more fuel-efficient cars built with quality. Not to mention its internal hubris and management and union's dispassionate existence. Its called natural selection and it wont stop from happening again.

Next up - Airline industry

[Spencer Maus]

Your story on GM is an outstanding example of the lack of inner perspective and willingness to change afflicting many American industries.

Once the dominant force in the world industrial complex, American industry has lapsed into a world of service industries and creating capital, not products.

Your insights into an unwillingness to disrupt to service should be read by all corporate executives who have any hopes of surviving in today's new, global economy - not before we are invaded by a foreign nation, but simply foreclosed by our debt holders.

[Thomas Koulopoulos]

Adam, VERY nice job on this!

[Jose Ricardo Moran]

1.Very interesting and nice condensed write-up that reads like a quick paced novel, not a long drawn out dissertation that would drag and not have one read it to completion!;

2.One should never get complacent in one’s “space” most especially at the height of success;

3.“The higher on goes the harder the fall”;

4.There is always someone or some company out there that will be better than you in some way for sure, knowing that, accepting that and then doing something proactive about it is what will enable change and innovation;

5.The client is always right as the age old adage, but one must always know that the client base grows, styles changes, desires change, clients ages change and demographics should show the way for what one has to consider in innovation. It’s like music or even more recently cellphones or electronic gadgets generations change and products change so quickly for the later two items especially that if one is not a step ahead then one falls five steps behind. If one thinks that they attained a level based on a certain client base and desire and that will hold true and through forever, well no one lives forever. Meaning clients do age and move on or pass on, so relying on a client base and practice that will surely move on and ‘die’ means one is setting up to die along with that if one does not innovate and change knowing that and accepting that.

6.This may sound really corny but, “the only sure thing is change”.

[Gurdon Blackwell]

I read your eBook and I agree with your assessment. What I have found in company after company is that they are tied to their biases, and their biases are tied to their systems. What is lacking is the ability to see thing the way they are because most systems are focused on what is supposed to be. The problem is that language is non-dimensional and incapable of seeing both sides of the reality coin.

I was particularly interested in your discussion around Roger Smith and his purchase of EDS. You may or may not know that I was hired by EDS at that moment in time to design two of their systems, one of which was finally implemented call BARS. This is the system that does billing for all GM car divisions and produces that sticker you see on the window of a new car. I was there during that time and was witness to the locked 14th floor. I can tell you lots of war stories about GM that bears on your point. I was proud of that system simply because it was so large and proved that there are ways to neutralize size.

[Jacques Chevron]

Re: The Fall Of GM

If GM had become irrelevant simply by continuing to manufacture big gas guzzlers at the time when gas prices were going up and by over paying its workforce, then Mercedes would have gone under long ago.

I have not done the analysis, but I would be surprised if GM workers were paid much more that Mercedes’. US bosses always complain about high health care costs and legacy costs… Those are high in Germany (and in other civilized countries, such as France).

It used to be that, when I was a little boy, US made cars had a reputation of quasi indestructibility. I do not know if the “planned obsolescence” strategy of the 70’s really included making cars that would fall apart after a few years, but fact is they did. And they lost their reputation… A Chrysler executive once told me that what they wanted was for their cars to have a distinctive oomph, something in their design that’d make them stand apart. I argued that consumers wanted reliability. I lost the argument. Now, they are associated with Fiat. Go figure.

US car manufacturers also lost their own strategic bearings. Buying several car-manufacturing outfits as GM did so as to cover all possible market niches makes sense in the short term. But good brand management would dictate that you continue to provide each car brand with a solid reason for being in the face of all your other offerings and of changing markets and consumer tastes.

So, at one time, Oldsmobile was known for being technically advanced, Chevrolet for being no-nonsense family transportation, Buick for offering affordable luxury, Pontiac for its sporty ness….

GM simply did not manage that aspect of its offering. The same mechanic was sold with different brands. Olds became no more innovative than Pontiac, which was no sportier than the Buick driven by a little lady with blue hair.

GM has had for much too long a dismal brand/line strategy. Because the nameplates do not have a rational justification for their existence, they end up competing with each other. In the process they stand for nothing. And it is very costly too.

Sure, it is much more comforting to put the blame on oil prices and other outside influences. The real culprit is their management’s inept brand strategy.

[Mark Chussil]

You make great points, Adam. There were many junctures along the way where GM could have changed, except they decided to be locked in.

The question is, why would they do that. No one gets up in the morning and decides to be locked in. Rather, people get up in the morning and take actions they think are good, and it turns out that those actions lock them in.

Even under the best of circumstances -- and when have we ever said it's the best of circumstances? -- it hard to want to disrupt. Disruption may be necessary, especially in retrospect, but it's not easy to get it going. Even Chairman Smith wasn't able to disrupt GM sufficiently. Why? Part of the reason is that the tools we use and the analyses we perform are unintentionally biased against disruption. So are deeply held and rarely questioned beliefs such as not cannibalizing our existing products, wanting to "recover" (as though there is a normal state to which we can return), and doing whatever it takes to hit our numbers.

(This paragraph is from an essay I wrote called "Suffering Was Optional" http://whatifyourstrategy.com/2008/07/25/suffering-was-optional/.) I’ve met some of Detroit’s finest. They are smart, experienced, and motivated. They work hard and they do their best. They want to keep their jobs and help their companies prosper. However, being human they are susceptible to the same decision-making traps as the rest of us: groupthink, overconfidence, denial, and more. Being strategists their tools are susceptible to the same decision-making distortions we see elsewhere: discounting competitors, relying excessively on history, starting from an accounting paradigm, and more.

Thanks, Adam. Good stuff.

[Greg Stromberg]

I remember reading a book called "Egonomics and what it cost companies a year. I happen to think that this arrogance plays a role and could be considered an achilles heel in many companies. Not listening to the voice of the customer or understanding market drivers/trends/changing conditions can easily lead to potential problems. Too big is also and adverse condition. No one can control anything that is too big. Last is that when the formula of value given for value received is out of balance with any stakeholder it should be just like an alarm light going off in the cockpit of a 737.