Big 3: They just don’t get it
We are all familiar with the sad tale of GM, Chrysler, and to a lesser extent, Ford and their crying and complaining about how they need money (now up to $34 Billion) to remain viable and to save 13 million jobs. So they come back to Washington (after only three weeks) with a “plan” to show Washington how they are going to be competitive and turn the company around. What did they come up with? Nothing innovative that’s for sure. Lawmakers have been pretty forceful in their requests for more information on how the automakers are going to survive and repay these government “loans”. I’m going to address an extremely sore point first and then I’ll get to the total lack of vision these companies have.
So the UAW (United Auto Workers) union has said that they will make some concessions by giving up an interest payment to the UAW-run trust fund for retirees medical care and to suspend the jobs banks for laid-off workers. The jobs banks is a total crock of you know what. Here is where you can get laid off from a job at either automaker and sit on your fat, lazy ass and get 95% of your pay. What? Isn’t that what we all pay unemployment insurance for? The UAW is taking this position like “this should be interpreted as a meaningful and a painful sacrifice”. Give me a fu%(&^ing break would ya? You haven’t sacrificied a damn thing. Ok, enough of my rant about that. Let’s cover how there is no vision in this “plan” the CEOs have brought to Washington this time.
So the CEOs have said that they will layoff 21K to 30K people and close 11 of 40+ plants. I feel for those people that will get laid off, but I see it as they are going to be getting 95% of their pay anyway. They will reduce their dealerships. Tell me how this is the start on rearchitecting their antiquated business model? You are just shutting down your over-capacity and not addressing the key underlying issues, your companies aren’t innovating.
One way (and it’s a real tough one to swallow) to get competitive would be to let the companies declare bankruptcy, break the union contracts (and hopfully the back of the UAW) and get to a point where they can deploy workers where needed. By using the “labor arbitrage” strategy they can get rid of the wasted time that electricians and mechanics sit idle. Something that happens a lot when you have workers only doing a very narrow task.
Another way is to further streamline your manufacturing processes. It takes GM 32.4 hours to build a car (that is down from 46), but Toyota builds it in 29.9. One example that I heard of around streamlining manufacturing was that when the economy started turning south, Hyundai made the decision to make more of their fuel-efficient Sonata sedans rather than their Santa Fe model. That move right there saved making some serious production cuts. Now if GM, Ford, or Chrysler tried to do that it would take weeks to do.
The Big 3 are not agile nor flexible. They are still in the “business as usual” mindset (obviously if they took their private jets to Washington three weeks ago..idiots). They are completely oblivious to the change that is happening all around them. It is all about operating successfully in a dynamic state where change is the norm, not the exception.
The company that can respond rapidly to new opportunities and threats, that can introduce goods and services at a pace that a changing market demands, that can move nimbly into new markets and geographies will outperform the enterprise that cannot adapt as quickly. We see this with Toyota, Honda, BMW, etc vs. GM, Ford, and Chrysler. We are seeing that the companies that cannot adapt quickly (GM, Ford, and Chrysler) face significant penalties.
To thrive in a world where business as usual is all about change requires a new kind of enterprise, one designed to evolve quickly and easily, to respond to or, indeed, to foster change. Big 3 this is you. You need to evolve and adapt, or you to will go the way of the other extinct species in the business world.
Explore posts in the same categories: Business Innovation, Business Strategy, ManagementTags: adaptability, business model, business processes, change, Innovation
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December 5, 2008 at 5:24 am
I agree with you in that the Big 3 automakers, along with most businesses who can not turn a profit, should be allowed to fail so the wheels of free enterprise can continue to turn. However, I’ve heard a few arguments and points in the past few days that have made me revisit my normally non-sympathetic attitude toward the American auto makers.
1) The Big 3 have been building cars that Americans want – big, safe SUV’s. Their value proposition has been the SUV. As you know, I drive an import SUV for a couple reasons. 1) Quality. I’ve had it for more than 4 years and it drives like I just pulled it off the lot and will probably do so for many years to come and 2) Because I’m not driving my kids around in a tuna can that won’t stand a chance against the other SUVs in our area. We don’t get great gas mileage, but to me it’s worth the price. SUVs have been the top selling vehicles for years because gas was affordable. Not until gas got to around $4.50 per gallon did most of us consider trading in the rolling living rooms for a more “green” ride. Now that gas is on it’s way to $1.50, I’m sure the rush to buy the latest, and more expensive, Hybrid will cool.
2) The tax code for American businesses is in a word – ridiculous. If our government wants to help let’s start with helping American businesses compete.
3) 1 out of 10 American jobs is somehow linked to the automobile industry whether it’s advertising, factory worker, tire manufacturer, truck driver, salesman, mechanic, etc… I think if the Big 3 were allowed to fail most of these jobs would be ok as what is left will be purchased and manufacturing will continue under other companies.
4) Let’s get off the CEOs for traveling in private jets. All CEOs do it for multiple reasons…. Efficiency, safety and depending on the aircraft, it can be relatively the same cost as commercial first class tickets if you have multiple executives traveling. Let’s have Nancy Pelosi get rid of her jet!
5) Yes, Hyundai is capable of shifting production in a matter of hours vs. days, but their plants are much, much newer than most of GM, Ford or Chrysler’s. They simply have newer technology.
6) The Japanese and European car makers have been building cars built for city driving and shorter commutes with an average engine size of 1.5 liters. They have been facing gas prices of $5-$10 per gallon for close to a decade. The average engine size of the American automobile is over 3 liters. We simply have not had the need, or frankly the desire for small, weak engines built for commutes. We want our comfort, power and to go fast. Unfortunately, for the Big 3, the tide may have turned too fast.
Now, having said all this. I still feel that if the government were to get involved would be a disaster. At what cost will we save all the failing companies? I heard a commentator say today that our parents and grandparents sacrificed so their children and grandchildren could have a better life. We, however, are sacrificing our children and grandchildren’s futures so we can have a better life. Unfortunately, I think this is true. We are going to be paying for this for a long time.
In addition, Union labor must go! Where is the incentive? Get a job, wake me up in 30 years, and oh yea, pay for my retirement from all the years I showed up.