The End of an Era
When General Motors filed for bankruptcy yesterday it marked the end of an era. The first truly modern, manage-by-the-numbers corporation, created by Alfred Sloan in the 1920s, was laid to rest as a viable concept. But what comes next?
This is not just a question for GM or large enterprises more generally. Yesterday also marked an end of the lean narrative that has been unfolding for thirty years, ever since GM first began to decline in the recession of 1979. David (in fact a team of Davids) finally felled Goliath just as Goliath was finally paying attention to the lean message. So we need to consider what happens next for the Lean Community as well.
What’s Next For GM?
At the beginning of 2009, GM had three major weaknesses. It had too much legacy debt – bondholders and retirees. It had compensation costs for current employees that were too high to compete with transplant operations in North America. And the money it received for its products in most segments of the market was far below average, partly as a legacy of decades of defective products and partly due to losing the pulse of the public on what the company and its products should mean for customers.
Ironically, GM also had considerable strengths. It had competitive factories in terms of productivity and quality and a competitive product development process when it could focus its energies. (E.g., the new Chevy Malibu.) After failing for 15 years to learn lessons from NUMMI (its California joint venture with Toyota), GM had in recent years developed a competitive and consistent global manufacturing system and rationalized its global product development organization. It had even taken impressive steps to lean its internal business processes. But — as in the case of its cast-off parts supplier Delphi — lean came too late.
The bankruptcy re-sets the trip odometer. The legacy debt has been written down to a manageable level and compensation costs for current employees will now be much more competitive. In addition, the company is dramatically retrenching toward a reasonable portfolio of brands with production capacity appropriate to its realistic share of likely market volumes.
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