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To: dvdw© who wrote (2794)	11/30/2008 8:04:28 AM
From: dvdw©	Read Replies (1) \| Respond to of 3821

The post below is a reply. TH (the author) calls on the automotive industry and registers opinions here on SI. The post below is dedicated to someone i know who recently retired and had to fight all the same fights that are encapsulated below, proving only that, the auto industry does not have a monopoly on inertia....the story remains the same across many industries and applies to many established brands, now merely masquerading as working companies. From the reply pay attention to # 4." Build what the people want before they want it." Innovation is about shaping Supply. Supply creates its own demand. All the while, Time Shapes Capital. Adaptation must be shaped from Input into an entities sensory organs, not contrived from internal systems demand for self preservation. It takes an entreprenuer to know the difference between systemic demand and market demand. To: GST who wrote (99977) 11/28/2008 6:11:08 AM From: TH 11 Recommendations of 100028 Hello GST,( GST asked TH's opinion on the chances of GM survival) Are you going to ask the difficult questions later <G> I'll answer with the following condition. My answer may not be very good, complete, or effective. It is a complex problem and there are systemic and cultural issues that will be difficult to really change. The best answer is the most simple. Burn it down and start again. That may happen in the near future, but the repercussions for the region and the country at large would be significant. The more difficult path is of course to find some way to save the monster. Here are just some brief ideas that would have to be addressed. Notice that I don't actually have any REAL solutions, but rather only an idea of the issues that must be address. 1. UAW must be gone. Job banks are one of the most absurd concessions ever made. That arrangement from the 80's was a death nail. The actual number of members still in the job bank is small, but the damage was done. You can't pay people the majority of the wage for bringing their own couch and tv and doing nothing for weeks and months on end. UAW wages are still out of line with the global labor costs and the quality of the work is poor. I have seen firsthand the absolute decline in worker output and commitment to quality that results after the UAW organizes a plant. I have worked for plants were there was only "US" and after the UAW it became, "US and THEM". There can be no US and Them in a global competitive environment. There can only be US, all united with the purpose of building the very best possible quality at the very lowest price. This is not possible with the paradigm shift in worker and management relations that result after the union enters the picture. 2. Get smaller. Much, much smaller. GM, as well as the other Detroit players, built a model that only pays at maximum capacity. This is an absurd business model, for it is absolute known that the next economic downturn will result in significant pain for the Detroit Three. The real money is made on any vehicle platform when the tooling capacity is reached and then exceeded. That has become an extremely difficult objective to realize when Americans stop buying and you have 52 models (Toyota has 22). GM has to get much smaller and have real strength in each segment. They spent the last 15 years building bigger and bigger trucks, when they should have at least focused on excellence in the smaller vehicle lines. The aggregate sales issue is not unique to GM, but to every American OEM (including the Japanese). I listened to Wilbur Ross speak about six months ago. Ross purchased a number of defunct companies and a part of Lear and formed IAC. IAC is a major player in the interiors segment, but even Ross will bluntly state that if he knew now what he didn't know then, he would not have made a move into US automotive. Ross put up a chart that basically showed that if you exclude those too old or young to drive as well as those that just can't, you already have one car on the road per person in the USA. Thus, ever single automotive sale is for a replacement vehicle in the USA. Contrast that to China or India where 10 out of a thousand own a car and you can clearly see market potential and where you want to put your capital to work. At least GM and Ford are building out China and other emerging market, but will GM follow the same path as before? GM already has 24 models in China. The Japanese are much more focused on common components, so they get the dual benefit of lower tooling across the board (and the resulting improvement to margin and ultimate profit much more quickly per platform) and less engineering for model variations and NEW programs that can use common components. 3. Dealerships. GM has about three or four times as many dealerships as the Japanese. This model demands that a certain volume be maintained, for those dealers have to sell a minimum number of units to remain solvent. Reducing dealerships is extremely difficult, with implications that I absolutely do not understand. My solution would be to kill a brand or two and merge operations and dealer service from the eliminated brand into the surviving brand. This helps right-size the offering to the market and will give us a sales boost for the surviving brand. Achieving this objective will be extremely difficult, for the buy-out of those dealerships WITHOUT a GM BK would be very expensive. I am not sure what arrangements were made for Olds, but something needs to be considered and brands cut and development and service overhead reduced. Someone on the dealership end can offer much more on this topic than I can. I have a good buddy who is a recognized expert in dealership management (he owns a consulting firm now) and I'll ask his opinion of this. 4. Build what the people want before they want it. It sounds so simple it is absurd, but look at what the Japanese and Opel and Ford of Europe had at the ready when gas hit 4 bucks. No one at GM, Ford, or Chrysler in upper management ever had a thought that 2 dollar gas might not last forever? Someone at Honda and Toyota had that thought, and they prepared for it. GM management needs to plan out five and ten years, and not just 36 months. I see no evidence that this is happening even now. I only see a scramble to find a product mix that works for the economic conditions of the day, whatever they may be. 5. Legacy costs, and this is a big one. How do you not pay the pensions and other promised benefits to the workers who did their time and met their end of the contract? I guess you declare BK and start over or just tell them you can't pay it. These costs are thousands of dollar per vehicle and they Japanese just don't have them. With razor thin margins, declines sales that only realize a profit at capacity, and a multi-thousand dollar penalty per vehicle for legacy costs, it is very difficult to compete with the Japanese. Those are just five areas to address, and again, I have no solutions and do not claim my opinion is complete in any way. The honest truth is that I don't know the answer, but I fear a BK and then a rebuild is the only path that will ultimately work. GT TH ps There are a number of cultural issues that I will address some other time. This post is already long and I need a page to explain the internal cultural barriers to building the best products as well as a little insight into how the Japanese do it differently. I get to this some other time perhaps.