In 1864 some Union soldiers with mining experience dug a long tunnel and placed a huge cache of dynamite under the Confederate lines in front of Petersburg, Virginia, blew it up, and created a crater – and a hole in the Confederate entrenchment – a half mile wide. For an hour the road to Richmond and the end of the Civil War was wide open, but the northern leadership fouled things up, the Confederates recovered, and the Civil War went on for another nine months with tens of thousands of additional causalities. US Grant wrote of the incident, "so fair an opportunity will probably never occur again …".
I am reminded of those words because they so accurately describe this moment in American manufacturing history. We are at a unique crossroads with the automobile industry, and automotive sets the tone for all of American manufacturing. For a few weeks or months GM and Chrysler are in the hands of the UAW and the federal government's automotive task force. They will own fully 89% of GM. They have all of the authority to compel those companies to adopt a Toyota-like model. They can do anything with it they want, and the management that has so stubbornly refused to change, and has so myopically focused on Wall Street's voracious appetite for short term results, can be compelled to take manufacturing seriously, and to look at their business holistically for the first time.
The union can look to Toyota's lifetime employment and empowerment philosophies and use their new found power to compel GM to emulate it. The government can look to Toyota's financial results and demand that GM put in place similar business, engineering and factory operating processes. They can pack GM's board and management team with experts from Toyota, Honda and the lean community. They can base GM's compensation and loan repayment terms on achieving benchmarks drawn from a detailed study of successful lean companies.
Or those with power can use that authority for their narrow interests. The UAW can revert to and entrench archaic work rules, and the Obama minions can turn the car companies into engines for their environmental agenda without regard for customers and value.
The hope is for the former – that the new powers foresake their own genius and drive GM and Chrysler to imitate Toyota and Honda. The best thing they can do would be to acknowledgethat they know little or nothing about cars or manufacturing, and that their wisest course would be to imitate the successful companies.
I am afraid, however, that the UAW and the automotive task force will be so focused on their own ideas, giddy with power the government and the union have never enjoyed, that they will leave all of the management processes in place that led to the current crisis, and will focus on products that fit their own idea of what customers should want, instead of on products customers do want. Mr. Obama has already sent ominous signs, saying that the problems with the car companies are the result of a failure to build fuel-efficient and low-emission cars. That is hardly the root of GM's failure.
Time will tell, of course, but it is hard to imagine that an opportunity like this will come along again. This is not the first time the government has seized ownership of a major industrial enterprise. We the people used to be the owners of Conrail – the residual of the old Pennsylvania and New York Central Railroads and the Erie Lackawanna. Rather than see it fail and cause thousands of railroad employees to lose their jobs, the government bought it, owned it, and mismanaged it for 23 years. Finally, tired of subsidizing a losing proposition, Congress broke it up and parceled it off – some to CSX, some to the Norfolk Southern, and some to the scrap heap.
If the new owners of GM don't make the right call, they are not likely to get another chance. Years of government subsidy followed by a Conrail-style break up are the most probable future for GM if it does not get lean now.
Let's hope for the best.