From the Publisher: GM Needs Long-Term Strategy

August 1, 2005
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At a recent meeting, the talk turned to the news coming from General Motors (GM) about Chairman Richard Wagoner's decision to cut 25,000 jobs by 2008. With some GM employees at the meeting, there was concern about how Wagoner's decision would play out. There is good cause for such worry, because any strategy for long-term GM success that rests solely on plant closings is short-sighted.

Wagoner claims that the health benefits he must pay-he has often quoted $1,500 per car-is the reason GM is losing market share and has suffered $1.1 billion in loss during the first quarter of 2005. If Wagoner wants GM to remain competitive, he needs to look beyond cutting jobs, closing plants and moving jobs to Brazil. Giving "employee discounts" to every customer to spur auto sales is not a sound strategy either. That is a short-term marketing gimmick that also contributes to losses on a per car sales basis.

GM would do well to look at what its competitors are doing. Toyota Motor Co. has steadily been cutting into GM's market share the past few years and continues to exceed the 2% to 3% profit margins of most automakers with numbers approaching 7%. More Toyota insignias are found on the road than GM logos, despite the fact that GM carries several more brands than Toyota.

Toyota management and its employees work together with a shared vision of their company and its place in the market. Their vision and goals are reinforced daily, in both word and deed. Toyota continues to increase productivity through attention to long-term strategies such as lean manufacturing and increased vehicle quality. Detroit tried kaizen and couldn't sustain it. Because of constant outsourcing, downsizing and re-engineering, workers have been put at odds with management. Workers are reluctant to embrace any new ideas that management tries, because they have seen their willingness to do so in the past come back to haunt them. Saturn is a perfect example of short-term thinking.

After the first few years of Saturn successfully operating with its management-worker partnership, which lead to innovative, quality, low-cost cars, GM took the plant back under central authority and the products have since suffered.

Wagoner can resolve GM's sagging sales. It will take some time to reverse course and achieve sustained growth. The long process of rebuilding trust with workers begins by honestly developing a shared ideal of their common goals, which will require compromise on the part of both workers and management. Then and only then, will authentic efforts in manufacturing, quality, marketing and customer improvements be able to work and will GM be able to turn the tide.

United Auto Workers' Vice President Richard Shoemaker says he is not convinced that GM can "shrink" its way out of its current problems; I agree.

What do you think it will take for GM to be successful again? Tell me.

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