Ralph Waldo Emerson
“In the business world, everyone is always at legitimate cross-purposes, governed by self-interest.”
Harold Geneen, CEO, ITT, “Managing” (1984)
“In business, the competition will bite you if you keep running; if you stand still, they will swallow you.”
William S. Knudsen, 1939
On the eve of the Michigan primary, we are reminded of Mitt Romney’s roots, and sometime Michiganders like me (1974-91) recall his father’s car company, American Motors, and their horrid little cars like the Gremlin and the Pacer.
At least John DeLorean had a commendably cool car to market against the Big Three. AMC never did, it seemed. (It’s hard to believe that there were once hundreds of automakers in the US, but mass marketing and economies of scale helped consolidate the industry.)
I worked for a while at AMC’s Southfield MI headquarters, which had been leased out to other companies, including my employer, Michigan Bell.
One word
As I recall, one word doomed Mitt’s father’s 1968 Presidential candidacy: brainwashed. George Romney said he’d been brainwashed on Vietnam, in other words, told the government’s version, not the truth about how the war was going. He plummeted in the polls, and his candidacy disappeared.
I don’t see that Romney had anything to be ashamed of. We now have plenty of accounts of what it was really like in Vietnam. Maybe Romney didn’t back in '68. He wasn’t especially gullible. He was first lied to by his government, then found out the truth. What was the BFD?
Seven billion! Anyway, we’re on the eve of the Michigan primary, and General Motors, my former employer (1984-91), is posting record profits of seven BILLION. When I was there, four billion was considered a damn good year.
People in Michigan are happy. I doubt that the Flint MI -- the middle-class, clean, smiley-faced paradise of Michael Moore’s youth -- will ever return, but GM is back.
It’s hard to believe that GM once owned so much of the North American vehicle market that there was talk of breaking it up. When I was there, market share was accelerating on a slippery downward slope – but was still in the low 40’s. I predicted that Oldsmobile would go out of business. I didn’t see much of a future for Pontiac. And Saturn was a fine car but simply a decade too late.
How they screwed up
They got where they did by consistently underestimating the competition and taking their customers for granted. As late as the 1990s, GM executives had to be reminded, in internal speeches, that a returning car purchaser could tribute hundreds of thousands to the corporate coffers in purchasing and finance fees.
They failed to adopt Japanese quality methods, which – this was really radical – involved treating workers with respect; everything flowed from there: stopping the production line, treating parts carefully during assembly, consistent improvement, and much more.
Of supreme irony is the fact that an American quality engineer named W. Edwards Deming propounded these same truths. He said quality was 85% management’s responsibility. He was rebuffed by the postwar automakers, who couldn’t build cars fast enough to meet the pent-up demand.
Deming went to Japan, where the auto industry, rising from the ashes of WWII, listened to him, built quality cars (even, later, on American soil, with American workers!), and relieved Americans of those annoying trips to the dealership for one repair after another (one of my friends joked that he had his own coveralls with his name embroidered on the chest).
Labor problems
As for the labor problems created by shitty militaristic management, they had unions, contracts, elaborate grievance procedures, everything carefully negotiated between these two antagonists, who really had to work together to build better cars, faster; that was the essence of many management speeches I wrote.
Michael Moore just celebrated the 75th anniversary of one of an early Occupy action – the Flint sit-down of 1937. A really low point, from a humanistic point of view. Nothing to celebrate. The two sides fought like children for decades.
“What future?”
GM was late in adopting Deming’s methods. I remember one management seminar where the old codger was asked what he thought of the future of American management. He waited a beat, then said with a sneer, “What future?” He foresaw a lot of downsizing and outsourcing, a lot of job loss by workers and managers alike.
I soon realized why. I actually visited a union-management retreat, where no one knew who was who till the end. It was an enlightening exercise. I hope it helped a little.
In culture, GM remained counterproductively military, including the buddy/old-boy system and relentless boss-ocracy. The #2 man in the company, for whom I wrote speeches, referred reverently to the one person whose authority exceeded his as “my boss.”
Much incompetence rose to the top. Empty suits. Non-performers could flourish if they were nice, go-along guys.
White bread
Demographically, the company was relentlessly Midwestern, Protestant, and white bread. They built cars that they and people like them would like. Big, roomy, for family vacations Up North. Good heaters and A/C for the Michigan climate.
But they blew it. Top of the ninth, 10-run lead, and they blew it. Sort of like the Steve Bartman Cubs (Chicago in-joke). Let’s count the ways.
They refused to believe they could make money on small cars.
They didn’t provide for the aging and death of Cadillac’s core clientele.
They saddled themselves with impossibly expensive labor costs, including heath care and retirement. These commitments remain part of the cost structure, as far as I know.
Worst of all, in the interest of immediate cost-cutting, they made all the brands look alike. This despite the fact that each had been prospering on its distinctiveness and brand image, according to the aspirational ladder that Alfred Sloan had so craftily built: you started with a Chevvy and, per the American Dream, worked your way up to the Caddy.
I was aghast. Even a lowly PR staffer like me knew it was a dreadful error to trash all those generations of brand image and equity. Fortune magazine published a front cover with the lookalike cars.
This was the height of the “they’ll buy anything we build” arrogance. No, they won’t buy a Chevy with leather and called a Cadillac.
Starting from scratch
So GH had to start from scratch. Cadillac has done a magnificent job. Elegantly angled, jewel-like cars. And expensive! Just right for the investment banker, black rapper or other aspiring plutocrat. Buick has receded as a brand, preferring to emphasize its various models. Chevrolet continues to successfully pursue its link with patriotism and America, a truly appalling piece of marketing flimflam worth of Edward Bernays himself, but it works.
And the cars are much better. RIP, Pontiac, Oldsmobile, Saturn.
I remember writing a speech for the 80th anniversary of Olds, in 1983. The banks of the Grand River, in Grand Rapids MI -- that most American of American towns -- were lined with lovingly restored, glistening Oldsmobiles from every era. Will these people still continue to bond over Oldsmobiles? Maybe more than ever. They’ll never build another 442.
Creative destruction - NOT
The creative destruction of capitalism continues, but retarded and reversed by the heavy hand of Obama socialism. Was GM too big to fail? I don’t see it that way. Many of their operations were viable and could have been sold off. They could pay off the remaining workers and dealers the same way they presumably paid off the workers and dealers of the brands that disappeared.
As for Flint, I have some sympathy, but it’s limited. They allowed all their milk to come from one teat, which was fine as long as it kept flowing. No one had the foresight to diversify the economy and invite other businesses in when Flint was prospering.
So Michael Moore’s paradise turned to a toxic slum, and it was supposedly all GM’s fault. I don’t think so.
First of all, Moore has the timing wrong. It was AFTER the recession of the early 80s that GM started moving jobs south of the border.
More important: Flint paid the price for depending on one company and has only itself to blame for what happened.
Roger and Me
BTW, the Roger whom Moore kept trying to meet in his movie, CEO Roger Smith, was the Roger that I wrote speeches for. A very nice, smart guy who tried a lot of things to shake up GM’s culture of dependency, bossocracy and cronyism -- H. Ross Perot (a story in itself), legal luminary Elmer Johnson, Superstar economist Marina Whitman.
Nothing worked.
At the same time, the government was closing in with impossible fuel-economy requirements (30 years later, we’re still just as dependent on foreign oil), making it necessary for the company to lose money on small cars in order to sell enough of them.
It was still taking way too long to get new products to market. And the trashing of brand equity was a fatal error, guaranteeing the death of one or more brands.
The great irony was that GM was recklessly proliferating parts that the customer could NOT see. Nine different air conditioner hoses where one would do. Repeat that error a few thousand times and you have a major cost burden.
A car just for you
Add to that the customization that GM promised but found extremely expensive to deliver. I recall a presentation at which it was explained that a Toyota Corolla came in 32 variations. With the equivalent car, a Chevy Cavalier, the number of possible cars, because of the plethora of options, was in the tens of millions.
One of the things Roger tried and was almost successful at…was Saturn. I also wrote the executive speech delivered to the first group of Saturn dealers.
Sigh. These auto entrepreneurs, already successful, had put their money on the line for Saturn. And GM failed them. They had a car culture going there for a while, driven by the gravel voice and homey commercials of Hal Riney, but they couldn‘t sustain it.
They started building Saturns at other plants, although the Spring Hill, Tennessee facility itself, state-of-the art and environmental to a fault, had been part of the Saturn culture. And, as mentioned, they were ten years too late.
Doing what they’re supposed to do So GM’s back, doing what capitalism is supposed to do: generating wealth for the senior executives and the shareholders, especially the large pension funds. They’re once again building cars that people want to buy.
Now it’s time to PAY back. I have not heard or read one thing about that. A portion of the annual revenue must go back to the American people, who, trusting business-whore Obama’s judgment, allowed GM and Chrysler to survive. Payment every year, whether they make money or not, until every cent is paid back.
I don‘t wonder that execs who are now back in Fat City (there’s no beating the corporate jet for travel comfort) lose no sleep over not paying back the Americans who rescued them. That’s what they’re paid to do.
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