As I wrote of GM's obsession with the same wrong issues nearly six years ago, "unless lightning strikes the Ren Center in Detroit, sparking a miraculous enlightenment, this move is just one more giant step backwards in what can only be the eventual demise of the company..."
Predicting their eventual bankruptcy, and that government relief of legacy costs would not save them was no great feat of prognostication. It was clear to see then – just as clear to see now. Lightning hasn't struck and it is painfully obvious the bailout did not save GM – it merely prolonged their inevitable, slow, painful death.
The word came out that GM has 122 days worth of trucks on dealer lots, compared to a 'normal' figure of 78 days, and 79 days worth of Ford inventory. It is deja vu all over again.
"We're managing the business to match production with demand in the marketplace. Nothing in the last few months that we have done would indicate any different," said Don Johnson, GM vice president of U.S. sales. Don – no you are not. Don't be stupid … and stop assuming the rest of the world is. If production were matched to demand you would have stopped inflating your sales number by pushing trucks on dealers a month or more sooner. There is no demand pull in GM's thinking – at least none strong enough to overcome GM's obsession with short term financial results.
GM's problem has long been its financial obsession, and the utter failure of management to see themselves as a manufacturing enterprise that will live or die on the basis of its manufacturing management. While Ford turned itself around with the leadership of an operations guy, and Toyota and Honda keep forging ahead under strong operations leadership, GM has gone from bad to worse. A Wall Street focused management team has been replaced with a Wall Street obsessed management team of the government's choosing.
GM is led by a chairman who made his bones – and a lot of money for himself, as well as his cronies on the Street - by growing the top line of telecom companies to staggering heights – but those companies never turned a profit under his leadership. A master of numbers games, but not of of creating anything of lasting value. The Obama administration put a team comprised from top to bottom of financial people over GM – not a manufacturing leader among them. The people in Washington never understood – GM's problem wasn't a lack of clever financial management – it was too much of it. Sending even more clever accountants to Detroit was the last thing needed.
Kevin wrote of GM's obsession with the sales number, regardless of its impact on the profit number or sustainability in August of 2009 … and he referred back to his criticism of them for exactly the same thing in January of 2007 … long before the bankruptcy and bailout.
The most telling part of the story is the explanation for the higher truck inventory – they "require more inventory than the industry standard of about 60 days in order to meet demand for different combinations of weight classes, cab types, engines and trim levels." Small lot sizes, quick changeovers, flexibility and cycle time excellence – are the fundamental lessons for manufacturing Toyota taught more than 30 years ago; lessons lost on the money and marketing men running GM then … and now.
In November of 2005 Obama was less than a year into his senate term, Bush was early in his second term, and the notion of the government taking over GM to get them out from under their legacy costs was beyond anyone's wildest imagination; I wrote, "it would be less frustrating to be one of those Detroiters or Wall Street types who honestly believe that all GM needs to get back on top is a hot new car design or for the government to somehow take them off the hook for the legacy costs. While such dreamers are hopelessly naive, at least they have hope."
Apparently hope is running out in New York, as the Wall Street Cheat Sheet described GM's inventory as "stacking future earnings onto balance sheets this year, in a desperate effort to sustain the belief that their companies are on the rebound."Few outside of Detroit, New York City or Washington DC believe GM is any different now, after all those billions of taxpayer dollars spent to give them a second chance, than it was ten years ago.
S Hodg says
Bill,
Your blog style seems to be more “take no prisoners” now than it was in 2005. No insult intended – I read the blog religiously for its blunt honesty.
I hate to toot Toyota’s horn because they get enough of that from other blogs, but there does seem to be a quiet confidence to their management that you don’t always see in other companies. This little write up from TTAC about a Cherry tree is kind of an interesting insight. The writer (Bertel Schmitt who is fantasic)notes that this is a very private, hidden from view little tree and not a big publicity stunt.
http://www.thetruthaboutcars.com/2011/07/at-home-with-the-toyodas-%e2%80%93-and-a-mysterious-cherry-tree/#more-401616
On the note about small lot sizes and quick changeovers – GM used to make trucks not far from where I live – in Oshawa, Ontario. They made them for years and won quality awards to boot. They shut that down a couple years ago. All GM trucks now come from Mexico. So many jammed on the dealer lots they have to leave some on the edge of the park where we walk our dog. Ford has the same number of combinations of trucks – and way more engines to choose from now. Why don’t they have that problem? Ford has taken quick changeovers to heart in many of their cars and plants now.
I guess only time will tell. Posters over at some GM sites believe this is the time that GM will be strong and mighty and the days of Japan’s leadership in cars is over. Only time will tell.
Bill Waddell says
Steve,
I’m sure your observation about my style is accurate. In 2005 and 2006 companies were struggling to grasp lean, but a lot of water has gone over the dam since then. After six Lean Accounting Summits, dozens of excellent books explaining how to succeed in the American manufacturing climate, thousands of manufacturers bankrupt, and 9%+ unemployment, I no longer have the patience or inclination to try to understand companies like GM. Their leadership has seen everything I have, and made a conscience decision to operate the destructive way they do – and your grandchildren and mine, and a lot of good, hard working people will pay a stiff price for it.
Louis Renault says
One of the first video training aids I used to help teach Lean and CI concepts was put out by the Automotive Industry Action Group (does the AIG still exist?) in 1983. Two people–one from Ford and one from GM presented four hours of Japanese manufacturing techniques they had learned from months of interaction with Japanese manufacturers, plant tours, lectures, etc. Concepts such as OEE, SMED, etc. were explored in some depth in these videos. So, 28 years ago GM was in the same learning curve as Ford. What did they do with the knowledge? For that matter, what did the rest of the AIG members (OEMs and suppliers) do with it? Precious little by the evidence.
And please, don’t give Ford too much credit for adopting lean practices, because they have not really done so in any real depth.
Paul Todd says
I would feel better if the GM sales chief had just said, “We gambled that truck sales would be higher by now. We missed it, and we’ll adjust production going forward.” Instead he maintained that all is well and that having a higher inventory than Ford is perfectly normal. Time will tell if this is just spin or actual corporate strategy.
Incidentally for Steve – GM trucks are now built in Michigan, Indiana, and Mexico.