News from Business Advisors Network

Strategy GM's strategy has been a muddle since the oil-price shock in the 70's. To respond to market pressures GM began to produce smaller cars, poorly designed and badly put together, not because of a new strategy for the future, but to make money quickly to support its own enormous infrastructure. After a couple of decades, GM finally caught on to the fact that quality is a necessity, yet the car giant never made quality a core strategy.

The electric car was another missed opportunity. Instead of cementing the lead it gained during its California large scale all-electric car experiment, GM chose to destroy its test vehicles as soon as California relaxed its future emissions standards. Without the incentive of regulation the payback timeframe was no longer certain and the investment numbers no longer worked. Although GM viewed itself as a technology leader, it did not act like one and surrendered its once superior position to Toyota, which was already gearing up R&D for hybrid technology.

GM instead chose to invest in light trucks and Hummers. Not a real strategy so much as a money-making tactic using a loophole in the regulation of fleet fuel efficiency. Quality was not in the picture either. In spite of its hefty price the Hummer ranked, year in year out, as the worst vehicle made in the US. Let's not even mention fuel consumption. For all the short-term profit GM's light trucks yielded, they left GM with no advantage in quality or efficiency to face future competition.

Leadership GM management has been much reviled. Where they failed most was in their propensity to manage the next crisis for short-term recovery, but not to move the company beyond the current state of play. GM's executives were managers not leaders with an inspiring vision. In spite of their failures, they subscribed readily to the belief that no one could do it better than GM. This "no one knows better" arrogance also played out internally. Labor relations remained conflictual till the very end without any attempt to create a new dynamic. Contract negotiations never constituted much more than managing the decline. Management wanted labor concessions to make the numbers work and that goal was perfectly matched by the stubbornness of unions.

Culture Old GM's dominant culture was one of distrust. Labor had no respect for management and did not trust it to take care of them. On the other hand, management viewed labor as a spoilt child wanting more without realizing things had changed. The tragedy was that GM continued to manage from within this culture, never confronting the reality that the culture itself was slowly killing the company. How much time was wasted? Years? No. Decades, spent hatching plans that were dead on arrival because each party did not believe the other would honor its commitments.

Process Everyone focuses on Process. It is the first place people look at when performance fails. How are things getting done? In truth it often requires attention. Yet even when procedures break down processes into basic steps, improvements do not stick unless issues in the other 3 areas are dealt with at the same time. The road to better quality was a convoluted one for GM. As noted before quality was never an all-encompassing strategy. While it was creating yet one more brand, Saturn, it was also selling expensive poorly assembled Hummers to its premium customers, all the while spending millions in advertising taunting its new devotion to quality.

The public did not buy it; I doubt employees believed in it either. In spite of the quality improvements it did achieve, GM was not able to break away from its image of shabby engineering. There were always too much conflicting news around quality. Brand equity was depleted.