What went wrong with GM is the exact same thing that went wrong with every other business that has failed. They spent more money than they were making! When the economy was good, GM built new factories to keep up with the market. This investment costed them money. Perhaps they borrowed money to invest in the business for it. At any rate, when the economy sank, and the sales dropped, GM had too many factories for the income that was made on the sales they had. Not quality. Market.

Quality plays some effect in the success of a busineesm, however the bottom line is proift equals income minus expense. It doesn't matter what the quality of the product is as long as that simple equation is satisfied. You can have the best quality of a product in a world hands down, and if it doesn't have "value" where the consumer can purchase it at a reasonable amount, it's not going to make the profit equation add up. Pure and simple economics. You have to make more than you spend. If not, you are destined to fail as a company, as a nation, and as an individual. It may take some time, but what goes up will come down.

It seems to me that the root cause of the failure of GM is the lack of teamwork between Union and Management. Look to the Japanese for examples of success. Their culture prefers that competing teams end their games in a tie. They want the same for all. We in America compete to beat the other guy even if they are on the same team (company). Selfishness is at the core. It is a cultural thing.
Also, the Japanese quality revolution came from the floor of the factories. Are our managers really listening to what is said from the factory floor? Are they asking for advice and valuing it? Why do the workers not feel empowered to question the wisdom of the management? Because the management does not value or trust the workers. Quality is a culture! If we are not converted to believing in quality and empowered to contribute to our companies we will not succeed. Our culture of self is our biggest enemy. Evidence of this is the number of lawyers we have (suing to get our way or to take advantage of others) and the large difference in pay - worker to executive. This divides us. It does not unite us. This must change (as it I'm sure has in many industries).

Loved the article and will look for the book.
Why did GM fail, I can look back at the time when the big push for ISO was started. This was the best idea that could have happened, however focus in my opinion was placed to heavily on the Suppliers to the big three and not on their own facilities. From my perspective, however valid or invalid it may be, the ISO push should have been more focused on first qualifying the big three facilities and ensuring that there was more standardization and less consessions. Then emphisis could have been placed on the suppliers with a lot less confusion then was experienced before TS 16949 (not that this suppliment cured all). I still see huge inconsistancies throughout the Automotive Industries approach on ISO and its numerous spin-offs. These inconsistancies are the hidden gremlins in any quality system that can silently cause abnormalities leading to increased cost of doing business for themselves and for their many tiered suppliers. I guess I'm preaching the keep everyone on the same page approach becuse I feel that our industry has lost it's book mark, not just GM.
Paul

As you said, they were doing the right things, I think two things doomed them to failure. One, they were just too late in making changes. Japanese companies had been making improvements for a long time and GM, while improving, was just too far behind to keep up. The other is the entrenched culture they had to overcome. They were trying to turn a battleship and just couldn't get it done before running it aground.

Hi Jim,

It is nice to see that you are still active. We moved to our lake home three years ago and most of my work is volunteer activity although I am doing a seminar this week in the Twin Cities.

You asked for comments on the demise of General Motors. I have done work with auto manufacturers on three continents. The best one is the Fiat plant in Poland. They not only are the largest Fiat plant but also produce cars for Ford and do work for GM's power train division. As a user, I would say the biggest problem of GM is the image they developed over the years of poor quality and reliability. I used to keep an index card in new US cars that I bought so I would not forget any problems when I took it back to the dealer. Then when I switched to foreign cars I found I did not have to keep such a list because I experience no problems.

But my observations as a consultant revealed a larger problem and that is redundancy in management positions that made it difficult to execute direction or communicate both up and down. At the time I was working with both, Wal-Mart and GM had about the same number of employees. Wal-Mart had four levels of management and GM had eighteen. Wal-Mart could and did make decisions in real time because they were not shielded from the work by layers of management.

As always, I am full of opinions.

Lou

I have a couple of observations. The first relates to the overall approach to quality and how the financial piece may not be a part of the equation, unless an organization is working toward Baldrige criteria or something similar. All the right ingredients might be there, but if profits are mis-managed or poor resource decision continue to be made, all the quality in the world can't pull the organization up from this type of nose dive. Secondly, one thing stood out as I read the management commitment portion of the interview. It appears an option was extended to managers at all levels of demonstrating commitment by "word or action". Is it possible that by replacing single a word ("or" with "and") we could have seen a different outcome?

The problem is not the message it is the fact that manufacturing no longer matters in this country. While the folks at GM said all the right things (I was there at the time, GMAD Tarrytown) they did not walk the walk, and most manufacturers still don't. Why concentrate on cheaper, better, faster here when I can get it overseas now and satisfy the god of the next quarter. The corporate talking heads have no love for manufacturing, it is a means to an end, money. If that means can be found somewhere else, China, Vietnam, whereever, so be it.

I worked at GM in the 1980s and I have since worked for several automotive suppliers. I saw no and still see no quality practiced in the facilities. They make numbers (fraud) to present to customers and the customers do not check the veracity of those numbers. I have not met a quality manager or so-called quality engineers who understand the theory behind the numbers. Many cannot even tell you what a standard deviation means. The companies MUST get an educated workforce if they want to use statistical methods effectively and successfully.

It appears that Major Leage Baseball purchased the GM book on how to operate a business.

1) Submit to a Out of Control Bargaining Unit

2) Use Antiquated Management Practices

3) Have a Work Force who feels they walk on water

4) Supply a crap product and

5) Force your customer to look else where

It seems to me that every opinion has part of the truth, or at least is the effect of the root cause. I have read the articles of both, David Schwinn and Mike Micklewright, on their GM experience, as well as the experience of some other insiders, and I have concluded what is obvious to me, human nature is present at GM as it is present in every company that struggles and starts a quality program: they had to move out of their comfort zone, and they didn't.

In spite of the words of former or current CEO's, the way of doing business at GM is the only way they know and they don't have the leader to motivate and make execute the necessary changes. That is exactly what happens on every company that sets about a new quality strategy. I have seen some companies that begins their quality program with their certificate in mind, and that is the only purpose behind their effort. Other companies seriously try to improve their operation, but their management expects that the strategy "works the miracle" alone, and they move everything wishing the status remains. Of course, the results also remain.

I followed closely the Ross Perot affair at GM, starting with the acquisition of EDS by GM. What surprised me was the decision of Roger Smith to bring Ross Perot into the Board Room. It was an announced crash with the only possible finale, the removal of Perot, after his big mouth declarations critizising the GM way of doing things. Originally, inside the board room, later, outside the board room and, finally, outside GM. Since then, I have been waiting for what already happened to this glorious automotive company.

While poor quality was a significant factor to GM's decline, the actual death blow was management's agreement with the UAW on contractual obligations.
Some blame the UAW for GM's demise, but GM management signed off on every single benefit the UAW rec'd. The management had a fear of a strike's consequences.
Had GM allowed UAW to strike and stay out until the resulting contract was sustainable, GM would still be viable.
In a strike management always has the upper hand, but GM would not play the hand they held. And now it's too late.
The new Gen.Motors Company will be managed by the same batch of insiders that managed the now defunct corp. Why would we expect different results?

Most Schools don't have a "Quality" degree program. You have electrical, mechanical, industrial, etc...
Every quality engineer or supervisor "moved" in to quality from some other area. This "quality afterthought" is persistent through out every company I've worked for, including General Motors. General Motors was great as a new college grad for me, until I began to realize that there was no long-term commitment to really improve, mainly because the acknowledgement of competition in the marketplace was slow, and the internal divisions between the management, employees and union are too wide. As Quality Methodologies are a tool to become competitive and to resolve these divisions, GM's downfall is simply implementation. Everyone knows there is a certain period before any initiative loses steam; most people just wait them out. Union workers, supervisors, mid-level managers, all place side-bets on when this one--"the next big idea"-- will go by the wayside. Even those who understand the tools, who know what benefit these tools could bring, must internalize their passion or fall prey to the condemnation of their peers. These are the most valiant of the quality professionals: My friend Sal, a 20 year veteran, when I had only 2, would pull his id badge which was attached to a retractable lanyard similar to the pull string of an old talking doll and say " I love my job" with all the hollowness that told me I would not last. I quit within the next couple of years.

Yes, I read Part 1 today. Well done. Of course, I like the reference to John Akers and our other "elders".

You hint about the upstream design considerations in Part 1 before you promise to give us the answers in Part 2. Certain Voice of the Customer beyond "big and impressive" probably would have helped. I am curious that there appears to be more than one way to cut the customer segments for vehicles. Japan builds small cars and they sell. GM and Ford build small cars (with the exception of Focus) and they do not sell. I seriously question that GM and Ford have significantly inferior service records. Some of the best selling Japanese cars are built in the US.

My bias looks at cost per vehicle and what the "profit" is used for within the organization. What percentage of the price of a car goes into new design and research? What percentage goes into infrastructure and technology? What percentage into labor, general benefits, pension, executive salaries versus employee salaries, what percentage goes into the overhead of labor relations? I have not done these comparisons. I am certain they have been looked at ad nauseum by others in the industry.

Your intelligence and discipline will ferret out the root cause. I have no doubt. My concern comes with knowing that many who could make a difference in the industry and in the government may not be interested in hearing the global systems view you have to offer.

The problems that faced/face GM are really two-fold and they stem from the growth of the organization and how the pattern of that growth kept GM from correcting issues along the way.

The first issue was/is with product quality. While the design standards of the vehicles/products was always rigorous, the implementation of those "dreams" for lack of a better term was often short-circuited. It didn't matter if the design of a vehicle should take it to 250,000 miles in terms of life cycle, if you had one poorly executed component that failed every 20,000 miles. The idea that small variations within the product build would be smoothed over in the process became a way of life within the system that was built in GM. The thought that every contribution to a vehicle impacted it's overall performance...was lost. When the turn in terms of quality came for the American auto industry...the approach that had allowed sub-par products to come to market was still rooted not only in the production system, but also in the memory of the consumer.

The second area was in the cost of the dealer and servicing structure that was built. We have seen a very dramatic approach to this recently. Multiple dealers in large metropolitan areas are being eliminated, while small rural dealerships are staying. Why? When many of the urban dealers were established, our infrastructure forced us to deal with very local groups. Today, it makes sense to have larger single-point dealerships serve a single metro area and be able to provide a higher level of technician/parts/service, the ability to get there is available and the vehicle quality is such that you do not need service on "every corner". GM's Dealer franchising agreements made it almost impossible to consoldate. We can't judge what was passed on from an earlier time...we just have to deal with it.

Greg Watson, Espoo, Finland
I remember reading some time ago that in the decade of the 1980s GM had invested $80 Billion in advanced manufacturing and automation systems in order to improve its productivity. As Jim's interview shows, they also were doing quality. How effectively were they working? It's hard to say as at the end ofthe decade, they hadn't improved their productivity so the "Return on Capital Employed" was "zero!" Quality of management was not the focus at GM - notice the comments about how proud the CEO was that the "workers" were doing SPC! A better question would be what was the quality of management? Not very good is my opinion based on the observation about ROCE for automated manufacturing investments. Quality could correct that problem also, if only management would define quality as something that they must do themselves, not an action that is just to be delegated to the workers. That form of quality is not really TOTAL quality! Thanks for the thought-provoking article! Looking forward to the next installment in this series!

One has agree with those people who said bankruptcy is caused by spending more money than you make. That, gentlemen, is clearly obvious but the big question is why did GM spend more money than it made?
Perhaps they did have quality issues which caused people in the US to buy Japanese instead but I wouldn't know about that. In South Africa we don't get many American cars from GM but those from Germany (Opel), Australia (Holden but called Chevrolet) and Korea (Daewoo but called Chevrolet) are available.
These cars are all good and have been very popular here.
My opinion regarding the quality commitment at GM is that they spent too much money on their quality systems. Instead of just working with ISO/TS 16949 they insisted that suppliers also gain accreditation to QSB. This costs suppliers money and, guess who pays that bill!
They also have a huge department to administer their quality system which must cost them a fortune. Toyota on the other hand simply asks supliers to provide a quality product and doesn't hassle about QSB, Q1 or any other standard. If you're accredited to ISO 9001 or TS 16949 they're happy. Put simply, quality doesn't depend on how much money you spend on fancy systems and standards but rather how much commitment you have to getting it right the first time and every time.
Syd, South Africa

Wow! Reading through all the comments left me wondering how GM remained afloat as long as it did! We might as well throw a few more evils into the box - the Sloan Method of Accounting and Communication. A consulting friend used to go into companies, walk around and then meet back with the excutives. Many times he'd tell them, "What you have is a failure to communicate" and everyone would say "You're right" how did you know that? I suspect he would have used the same line with GM.

go to: http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2009&mont… and read the article/commentary by Joseph B. White of the Wall Street Journal, in Hillsdale University's Imprimis newsletter, it gives several reasons on why the automotive industry is in trouble, and some specific reasons as to what went wrong at GM.
As several commenters above have said, they spent more than they earned, which, to any of us means either earn more money or cut expenses (if only Congress would heed that--except they want to increase the income by raising taxes--which in turn means more expenditures, not necesarily balancing inflow and out go).