It can be very tempting to look upon the GM debacle with detachment – as some grand, distant auto/political thing that may be interesting, but has no bearing on us personally (unless we happen to work for GM or one of their suppliers, of course). But there are a number of lessons about lean – and GM's arrogant ignorance of it – to be learned. And you will not learn any of those lessons from the mainstream business press.
Start with the following quiz:
Which is the Chevy and which is the Pontiac? (no fair blowing up the picture to get a look at the nameplate)
Popping the hood wouldn't help. In 1977 GM got caught slipping Chevy engines into Oldsmobiles. Since then they have abandoned any pretense of differentiation and both cars come with identical GM Powertrain engines. The transmissions? Same there too. Workmanship? Same folks at the same plant at Lordstown make both of them. So what's the difference? About a thousand bucks give or take depending on where and when you buy it. The Pontiac, of course, costs a bit more because it is higher up the GM scale than the lowly Chevy.
This strategy – eliminating just about every meaningful difference in the value of the various GM division's products, except Cadillac – and relying on marketing, hype, smoke and mirrors to command higher prices for one division's products over another traces itself back to the watershed regime of one Mr. Thomas Murphy. He killed Pontiac. He eliminated the difference and he eliminated the value, and he sent GM on a one way trip to their current state.
Henry Ford was a car guy, and the head of Ford today is a car guy. The folks running Toyota and Honda are car guys. Murphy, on the other hand, is the antithesis of a car guy who once said, "General Motors is not in the business of making cars. It is in the business of making money." Every one of his successors has followed his lead and has followed this mantra. Murphy spent all but the last 8 years of 42 year career at GM in accounting. I do not believe he worked one day of those 42 years in a factory. The accountants who have run GM since never figured out that if you do not believe you are in the business of making cars than you will not make any money. Henry Ford said that "Profit is the inevitable conclusion of work well done". GM never figured that out. They are killing off Pontiac 30 years after they dealt it a fatal blow only because they have to - even though they still seem to think it is about numbers and money and not about product value and customers.
GM and its proponents hammered me hard a few years ago when I roasted them for Looking Lean instead of actually Being Lean. They have done all of the lean looking things in the factories, but the biggest waste is elsewhere in the value chain. Once they made Pontiacs and Chevrolets the same in terms of value to the customer, every dime spent at every Pontiac dealer was waste. Every nickel spent on Pontiac sales and marketing was waste. Every penny spent on advertising to try to convince us that Pontiacs were more exciting than Chevrolets in order to command a higher price was waste. Anything spent on a separate Pontiac accounting effort was waste. None of it added a shred of value to the customers.
GM has better than 6,300 dealers – four and half times as many as Toyota and they are selling fewer cars. That is 4.5X the cost of non-value adding balloons and tents (not to mention the cost of dealer buildings, office staff, energy and property tax) built into the price the customer must cover. All of this is waste on a collosal scale – especially in light of the fact that the Pontiac dealer is selling nearly the exact same product as the Chevy dealer down the street.
The anti-lean law for which Mr. Murphy deserves credit is that the day you think that you are there to make money instead of products – the day you begin to think that you can understand and optimize your business with standard costs, balance sheets and income statements instead of with superior products and a myopic focus on eliminating all of the waste in the value chain – is the day your business will begin to die. Marketing and accounting may be necessary but they are not value adding endeavors, and GM was woefully wrong when they decided to make money through those functions while cutting the money spent on the product.
So the lean lesson? Do not fall into the Murphy trap. Trying to create a distinction without a real difference is waste. Lean is about eliminating waste everywhere in the value chain, and relatively little of the waste can be found in the factory. There is a very good reason why Toyota sells more cars with two brands – Toyota and Lexus – than GM sells with their menagerie of overlapping brands. Buick should be the next to go, and Ford aleady knows that Mercury has to hit the scrap heap.
And the quiz? The white one's the Pontiac. You might ask what difference does it make? 21,000 people are about to lose their jobs as a result of Mr. Murphy deciding to turn Pontiac from the division that gave us the GTO into a Chevrolet with an image. Many more than that have been and will be hurt. Just think of where they would be had Mr. Murphy either focused all of those minds, hearts and souls on the Chevrolet and killed off Pontiac way back then. How great would that yellow car on the left be with all of that behind it? Or where they would be had he focused them on continuing to create a distinctive Pontiac one that truly offered unique value to the customers? Those 21,000 people are victims of the outrageous notion that GM "is not in the business of making cars," but "in the business of making money."
Andy Wagner says
One of your best pieces ever, Bill.
When you tell a Detroit “car guy” (my father) that Alan Mulally is a car guy, he grumbles and rants. Mulally didn’t grow up memorizing the difference between V-8 and inline 6 exhaust notes. He can’t tell a Hupmobile from a Hudson and he probably doesn’t even know what a slant six is.
Alan Mulally is a *product* guy.
It doesn’t matter if he’s producing airliners or cars, laundry detergent or lemonade. He knows that profit is the result of people, product, and process… in that order.
I gotta agree with ya here Bill.
My dad’s first car was a Pontiac Tempest, and he always talked about how the Pontiac’s of his day stood above the ones today. Not because of better technology or higher volume of production, but just the image that Pontiac had value and standing over others. That perception made them great. People wanted to have a Pontiac BECAUSE it was one, not a Chevy, and its sad to see the line go down.
Its silly that you compared the two cars, a lot of people wouldn’t pick up the signature grill on the Pontiac, even though GM has significantly watered it down from generation to generation.
Another fairly well known Ford quote “A business that makes nothing but money is a poor kind of business” Sounds like GM fit that mold. I think GM might be well on its way to becoming “United States Motors” or “Auto Company of the People.”
Dan Markovitz says
A couple of weeks ago, the WSJ pointed out that a Chevy Silverado and a GMC Silverado are EXACTLY the same truck, although the latter has a higher price and resale value. But as with the Pontiac and Chevy in your post, the distinction was marketing, not metal.
And now GMC is likely to go bye-bye.