Nearly everyone who follows business in America has an opinion about what needs to be done with automotive industry, specifically with General Motors.
I am questioning whether or not this formally great organization can be saved from itself. From poor leadership. From poor management. From employees who refuse to understand the dire situation the company faces.
While it is true that the company has been losing massive amounts of money, product lines have been trimmed because they were not profitable and thousands of jobs have disappeared, all of this has been happening for years.
Back in 2005 the company lost $10.6 billion and Jerry York, one of the leaders, announced at that time he had a plan to “turn things around.” That was four years ago and the company is still singing the “balance sheet blues”.
York’s plan started with the idea that everyone involved with the company having an understanding of what the situation really is. In the best selling book “Good to Great” author Jim Collins would call this ‘facing the brutal facts.’
Apparently there are still thousands of folks who are in denial about the situation at GM.
One of the keys to getting people to actually grasp what is taking place is an education of, and understanding of, the fact that there are legacy costs that can no longer be part of the survival plan, and that current wages and benefits of those working in the company are beyond the ability of the company to maintain into the immediate future.
The sad part of this is two truths. The first truth is that what was in the past, what happened in the past, cannot continue in the future. Things change, and that is the evolutionary process of life and business.
The second is that many employees no longer have trust in the management of the company. There is simply so much negative history, baggage if you will, between employee and employer that the employees no longer believe what management says.
Employees could be told that the “sky is falling” and they will believe it as much as they will the statement that “we can’t make payroll this week.” Only the later might be true.
GM lacks alignment. This means that the marketing department with multi million dollar advertising budgets is not out trying to gain market share by dropping prices and offering low cost financing at the current time. This means that company personnel understand that asking for a raise is not a great idea at this time. People have to get their collective heads out of the sand and wakeup to the fact that they are operating in a world that is far different than it was just a few years ago. This needs to be translated into a very simple phrase that everyone can understand: stabilize sales and stop the bleeding. Pennies, every one of them, count.
This is not easy to do in a large organization filled with squabbles about turf and budgets when hundreds of thousands of jobs are on the line, not just at the company but with vendors and dealers. But it is required for survival. But will it happen? It’s doubtful.
This is a company that went to Congress in December 2008 and again in February 2009 for billions of dollars. Do they even have a handle on their cash flow needs?
Like most companies, GM should have done this analysis a long time ago. Too many companies never take the time to do this kind of review; they look at the gross revenue (sales) and then never look to see how much is actually being contributed to the profit line on the income statement.
At GM, the final step, if they make it that far, should be to take out a clean piece of paper and start fresh. Those in charge will most not likely use a “no sacred cows” approach to determine the future course of the company when it is required. Despite a possible visit to bankruptcy, when the company exits, it is likely to be more of the same.
Does GM have what it takes to get tough to avoid falling back into the same old company with the same bad habits? It will require a new discipline, new habits and reinventing a culture focused on the future not caught up in the past.
Such is the fate of many companies who fail to change when the world around them changes.
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