Detroit Pandering: A lesson to be learned
Today's Financial News - Posted December 2, 2008
Detroit is down to its final road trip to Washington. If General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler cannot get their bailout this time, trouble lies ahead. Instead of relying on outdated business-school theories, it is time to get innovative.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Business schools must be having a ball with Detroit’s woes. Professors have real-time access to one of the most complicated case studies ever formulated.
I can hear them asking their question. “As business students, what should Detroit’s latest business plan look like?”
What they want to hear are answers about increasing efficiency, decreasing waste, strong marketing plans, Six Sigma, the increased use of technology and, of course, net present value calculations.
But if getting General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler out of hot water were as simple as deciphering some business-school theories, Detroit would have been saved a long time ago.
New economy, new techniques
The nation’s automakers have problems that go far beyond basic business principles. Instead of traditional subjects, they need to concentrate on bankruptcy laws, public politics and corporate restructuring.
Could there be any better subjects during this economic turmoil? The only thing that comes to mind is Bailouts101.
The only way Detroit should see any money is if the automakers engage in monumental restructuring. When Toyota has just 1,600 franchises throughout the nation, why in the world does General Motors need 14,000?
And how about all those brands? The Big Three produce vehicles through 15 brands (I dare you to name all of them). Worst of all, many of those brands like Ford and Mercury produce nearly identical models.
If domestic automakers are to find success, they had better figure a way to significantly reduce the number of trademarks in their portfolio. Unfortunately, there is no textbook in the world that will get even close to explaining how to best go about unloading unwanted brands.
When all the world’s automakers are experiencing financial pain, nobody will be willing to pay a fair price for low-market-share makes like Saturn, Buick, Volvo, or Saab. If consumers will not buy the cars, why would another automaker want them?
Maybe the Treasury will enter the car manufacturing business. After all, it owns the banks that could finance their cars.
Sadly, General Motors does not have the cash it needs to simply eradicate its least-desirable brands. It would take billions of dollars to buy out dealer contracts, shuffle employees and deal with union contingencies.
School of hard knocks
Really, it is not the automaker executives that need to take a few b-school classes. After all, union leaders had more to do with this crisis than any jet-setting CEO.
UAW officials should be hitting the books, digging into subjects like resume writing, international labor and negotiations. Auditing a psychology class and learning how to admit guilt would be time well spent. These guys have done nothing but selfishly con themselves out of a job over the past few decades.
It is too easy to sit back and say what went wrong or who should have done something differently. That kind of finger pointing and bantering does no good and ultimately makes the situation worse.
Instead of re-reading our old business-school texts, it is time to start re-writing them. This is a new economy and old skills and techniques will not necessarily work. As the economy changes, so should our management techniques.
No matter what kind of jalopy Wagoner, Mulally and Nardelli drive to Washington, their last-minute concessions will not be enough to get their companies out of trouble. They must be given a harsh lesson from the school of hard knocks.
Next Article: Financial rescues: The blind leading the blind
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