Friday, May 29, 2009

GM: The bailout amounts go up, and up, and … yes, they will go up further!
Not long ago we learned about a $39billion tax write off, out of the blue? – These losses were accumulated and it was well known to GM that this will hit the bottom line. Now we are in the bailout bidding process, and it feels like being on an auction.

The reason lies in the fact that currently no one has any idea about the TRUE situation of GM. But from my perspective we will learn pretty soon about what really happens behind the financial GM scenes.

Pretty soon – probably next week - GM will file for bankruptcy protection and a few days later the public will be told about the true GM situation. We better take a comfortable seat and enjoy the bumpy ride, since these numbers won’t be even funny anymore and my best guess is that they will at least double the currently publicized financial situation of GM.

Filing for Bankruptcy protection is inevitable, and always was!

Around one year ago I was part of a discussion with senior automotive executives, government representatives and other experts. The common view was pretty stunning. Almost all of us clearly expressed the opinion that GM will file for bankruptcy protection no later than within the next 12 months – and here we are right now.


Let’s look at one other player out there: Toyota. While Toyota also lost money the first time in history this year, still Toyota has become the number one in global care production. Both, Toyota and GM are experts in state of the art assembly technology and in implementing Lean Manufacturing process improvement initiatives – one the expert in theory & practice and one the expert in only in theory.

Toyota has developed a unique and extremely successful enterprise philosophy over the last 50+! years. This so called “Toyota Production System TPS” is primarily based on Lean Manufacturing principals but most importantly TPS manages to address the “Human Factor” – we call it the Human Side of Lean - and consequently the company culture in a remarkable way. TPS flawlessly combines business and process improvement with engaging and truly respecting their employees leading to continuous improvement and more importantly to sustainability in every improvement step they take.

As Stephen Hawking ones said:
Intelligence is the ability to adapt to change.”

It’s all about change and the speed in which companies can mobilize their workforce to adjust to the ever faster changing world, environment and customer demands. The time of economy of scale is coming to an end, small lot sizes, fast response times and highly dynamic and innovative companies will make the race of the future. In short, it’s all about Leadership and Company Culture to sustainable infiltrate the required change in a fast and dynamic enough way.

Unfortunately, GM will not be one of them … because it’s too late now!

A change in GM top AND middle management was avoided for far too long. Under everybody’s eyes, management was allowed to drive GM completely in to the ground which now makes it very difficult to find a shuffle long enough to dig them back out.

GM missed the chance to find a way to re-brand itself in order for their employees to even being willing to mentally join in. GM missed the chance to change its company environment since a culture cannot be changed directly! The culture will follow if the environment in which people work is changed first. The people will make the change to the new culture – if only somebody would have gotten them involved.

The sad part: Nobody listened to all the dedicated and hard working employees at GM and their great ideas and willingness to help. So stop blaming the employees and unions and legacy cost and high health obligations for the GM mess!

These are just consequences and effects of the root cause: Management. It is the fault of management and the fault of the system of how management is brought in and how management’s incentive system is set up (to name only a few). In the 50’s Dr. Edward Deming (you might remember this guy who taught the Japanese quality since nobody in North America wanted to listen to him)brought up “The System of Profound Knowledge” that already at that time highlighted the need to understand psychology and working with your people instead of against them.

Let’s keep one think in mind: Ford that was in a worse financial shape than GM. There is one difference: Alan Mulally, a true leader with his head at the right place. Since he came in as president and CEO things did start to change to the good. As prior executive and president for The Boeing Company, Mulally follows the Toyota Way and he knows how crucial a healthy company culture really is. He started to align and engage the minds and hearts of his team nicely and Ford is the only D-Three automaker at this time not asking for bailout money.

Dr. Juergen Boenisch, Ph.D., CMC
JBeeline Consulting, Toronto Canada

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