My post the other day, "A Plague On Both Your Houses" stirred up a few folks – imagine that – me writing something that riled someone up! The gist of the post was that there is so much blame to be handed out in Detroit that many people are fed up with both management and labor.
A particularly riled up reader by the name of Rick Bohan called me a "right wingnut" for placing any of the responsibility for GM's demise on the union. Ironic that just last week I was being hammered for being against capitalism after having made a few caustic comments about Wall Street. In his comment Mr. Bohan wrote,
"Adult A gets laid off and sent to the job bank. Giant Multi-Gazillion Dollar Corporation B has no plan as to what to do with Adult A and, in effect, says "Sit there". But Adult A is an idiot.
BTW, do we know that Adult A, in fact, just sat there in spite of Corp B's poor planning? Do we know that he or she didn't sign up for courses at the local community college? Do we know he or she didn't use the opportunity to volunteer for something in the community? Do we know that he or she didn't use the time to help another family member with their start-up business? Or does it just suit the right wingnut mind set to assume that all union workers are lazy parasites? I'm thinking it's more the latter than any of the former."
His thoughts get right to the heart of the problem with GM, and with the most widely misunderstood principle of lean. He apparently thinks that it is GM's money that is being spent on the jobs bank, and that GM – the "Giant Multi-Gazillion Dollar Corporation" – should be in support of what many people agree are generally good things. If the Multi-Gazillion Dollar Corporation pays for employees to take courses at a local community college, doing some volunteer work in the community, or helping a relative start up their business, then that is an acceptable use of GM's money, and we should applaud the union for negotiating a deal that has GM spending it thus.
It would be a good thing, except for the salient point that the Multi-Gazillion Dollar Corporation doesn't really have any money and has never had any money, no matter what their balance sheet may have shown. The UAW folks seem to have missed that point, and so has GM's management. The money comes from customers. It is my money (yeah, I drive a Buick) Mr. Bohan – not yours and not GM's. The cost of the jobs bank – no matter what the people in it are doing – is passed on to me and everyone else who buys GM cars.
Please go back and re-read my post. That is my money that you want to take for doing things that do not make my car any more valuable to me. GM management does the same thing when the provide new company cars to 8,000 managers twice a year. They are spending money on things that do not add value – that is the definition of waste. It does not matter whether you or anyone else thinks that going to community college or helping your brother in law get his dog grooming business off the ground is a good thing. You are not getting the money to support these good things from a multi-gazillion dollar corporation – you are taking it from customers without giving anything in return. In terms of the value proposition it is the same thing as taking the money and tossing it in the trash. It is down the drain with no value to the customer to show for it.
When I wrote that the UAW and GM management had spent all of their time bickering over how to split up the pie, I meant exactly this. Mr. Bohan wants to fight with the Multi-Gazillion Dollar Corporation over the money to pay for him to do volunteer work in the community, and GM wants to get new cars for their managers every six months – and neither of them thought to ask the customers whose money it is they want to spend. They have both operated as though they had some birthright to my money. And now that people are no longer willing to send that money to them, they are pointing fingers at each other.
There is no "Giant Multi-Gazillion Dollar Corporation" any more Rick. The UAW and GM management killed it precisely because the union thought the money was theirs to take and management thought it was theirs to give. In the ultimate display of non-value adding waste, Management was so delusional they continued to pay dividends long after they stopped showing a profit – Wall Street apparently forgot whose money it was too. Everyone claimed a birthright to GM's customers' money without spending nearly enoughh time worrying about what the customer was getting in return.
Now Toyota is the Giant Multi-Gazillion Dollar Corporation precisely because they give more of the customers' money back to them in the form of value. They will continue to be a Giant Multi-Gazillion Dollar Corporation as long as they remember whose money they have and they spend it wisely. The day they start giving the customers money to employees for nothing of value to the customer in return, or the day they start doling it out for ridiculous management perks, or the day they start sending too much of it back to Tokyo is the day they will start heading for the same scrap heap upon which GM and the UAW can be found.
… and if you don't understand that, you don't understand lean manufacturing at all.
Mark Graban says
Seems like GM was damned if they did (allow Jobs Bankers to gain new skills) and damned if they didn’t (if Jobs Bankers were forced to come to work and sit idle in the cafeteria, as I saw first-hand).
It wasn’t just “lazy workers,” by the way to Rick, but lazy management who couldn’t be bothered with finding productive work or couldn’t trust them to go to things like community college.
Bill, would you likewise criticize Toyota for taking the “customers’ money” and investing it in their Indiana and Texas employees who don’t have trucks to build right now, due to low demand?
It’s not your money once you hand it over to GM, Bill. It’s theirs (or Toyota’s if you had bought an Avalon) now. They can blow it on Jobs Banks programs or stupid looking Segway/”car” hybrids, as they’re doing today.
As a customer, you decide what car to buy, but don’t think the company owes you anything. It’s their money now.
Mark Graban says
Also, Toyota keeps a damn large amount of “customers’ money” as profits. So good for them, I say.
Kevin says
Sounds remarkably similar to the argument that a significant portion of my income somehow belongs to the government in the first place, to be used to build bridges to nowhere (example of a Republican-inspired wasteful project used on purpose to preempt anyone form calling ME a right wingnut!).
David says
As with Fair Trade Coffee, Ben & Jerry, Newman’s Own and others, some companies advertise goodwill activities as part of their value propositions. Presumably enough people are willing to pay extra to be fair, sustainable, or charitable.
Imagine if GM, in that same vein, had advertised that every for every GM car you buy, you are actually donating $2000 to their employee’s extremely generous health and pension plans.
Before anyone calls me a right-wing anything, let me say that if the Government is going to take money out of our paychecks, then THEY should be paying for generous health and pension plans of all Americans, not employers.
Paul Todd says
Bill, your analogy of the baseball strike is a good one. In declining to intervene in the strike, President Clinton said something like “It’s a few hundred people trying to decide how to divide $2 billion a year – it shouldn’t be that difficult.” Where I think GM and the UAW really went wrong is in failing to admit that the days of dividing up huge profits ended decades ago. The contract squabbles amounted to dividing up money that didn’t exist. If you want something to really keep you up at night, Congress and voters are operating under the same delusion when it comes to Social Security and Medicare. The unravelling of the GM/UAW model is a prelude to the Mother of All Bankruptcies.
Dan Markovitz says
I agree with Mark on this one: it is GM’s money to spend as it wants. If that cost is ultimately transferred to me in the form of higher prices for cars, well then, I have an opportunity to buy from someone else. Or as David suggests, I can choose to pay a higher price because that extra cost is going to a good cause like employee education or community service.
(Oh, and generally speaking, I’m a left-wing nut.)
Bill Waddell says
Of course GM is the legal custodian of the money and they have the authority to do with it as they please within broad limits. They have the authority to spend money on employee perks – hourly or management folks – they can give it to social causes – they can spend it on excess inventory, or on long set-ups or on unneeded floor space. They can throw it into the Detroit River if they please. They can do all sorts of things with that money that do not add value.
Keep in mind, however, that the money came from customers who gave it to them because they believed the spread between what GM charged and the value of the product was reasonable. All of the money for those non-value adding expenses widens that spread. When it gets too far, customers buy Toyotas. That is what happened.
So yes, the money they already have is GM’s. The money they need to stay in business is the customers’. Ben and Jerry can take the money the customers gave them yesterday and spend it however they please, but the day they take customers for granted and assume the customers must give them more money tomorrow – like GM and the UAW have assumed for a very long time – is the day they begin to go out of business.
As far as the social causes go, I live in Sterling, Illinois. I would rather GM charge me less and let me put the difference into my local community needs than give it to GM so they can put it into a Detroit area need. In short, I don’t need GM, the UAW, Ben, Jerry or anyone else to do my giving for me.
If the truth were known, I think you will find that Ben and Jerry do their social giving first and foremost as a marketing schtick. Being the socially committed ice cream peddler works for them. Being the official ice cream peddler to NASCAR works for Klondike. As Michael Corleone pointed out to all of us – it’s not personal, its business.
Rick Bohan says
Hey, honey! I’ve made the bigtime! I’m center stage on Evolving Excellence!
I didn’t actually call *you* a right wingnut. Well, I might have kind of, sort of implied it. My point, of course, was that a number of folks who have “right wingnut” printed on their business cards (various GOP senators, for example) have gotten all purple about the jobs bank, not minding a bit if we all thought it was a diabolical scheme foisted on poor, unsuspecting auto magnates by their nefarious workers. There has been a lot of heat and not much light regarding that issue. And most of that heat has had as its central purpose political gamesmanship rather than an honest effort to seek a positive direction forward for American industry. (I would point to this blog as an honest effort to seek a positive direction forward for American industry…mixed with the occasional goofy post.)
Thanks to you who wrote supportive comments especially those that correctly pointed out that what GM does with its money after I buy a GM car is its (and its shareholders) business.
As to my knowledge of lean methods and concepts, I’ll invite anyone to check out my blog Agile Manufacturing Update at http://agileviews.chagrinriverconsulting.com
to judge for themselves. My clients have told me that such lean as I do know has added value to their businesses.
eiweibpulver says
I think In declining to intervene in the strike, President Clinton said something like “It’s a few hundred people trying to decide how to divide $2 billion a year – it shouldn’t be that difficult.”