GM’s Singularity

I am going to break my self-imposed rule against further comment on the automotive industry in general, even though it is more commentary about current events than it has to do with the Toyota Production System.

In physics, a black hole is a singularity – a point where time and space are collapsed to a zero-dimensional point. Any singularity in space has, at some distance, an “event horizon.” This is a point of no return. Once anything crosses the event horizon, it cannot escape. Not even light. Everything will end up being sucked into the singularity… eventually. Thus, no information about what is inside the event horizon can ever be known outside it. Because of this information blackout, the term “singularity” has a meaning in general language to define a point in time through which the past cannot be extrapolated to a prediction of the future. Such is Monday, June 1, 2009 for General Motors.

I don’t think there was any doubt to anyone some months ago (except, perhaps, Rick Wagoner and the board of directors) that Monday’s events were inevitable – the “event horizon” had been crossed.

The question is: When was the point when there is nothing they could have done?

I am asking because I look at Jim Collins’ model of collapse, and it is clear to me that GM followed the model, but it took decades, not just a few years.

This article in Business Week Online, How Rick Wagoner Lost GM is pretty damming of several CEOs, back to Roger Smith, and perhaps further. But Rick Wagoner is particularly called out. In the end:

Wagoner continually went before the American public and Congress unprepared and angry, demanding taxpayer support without ever being able to articulate why he wanted $25 billion, how the company would use the money, and what GM’s vision was for a future viable enterprise.

But the last few months’ theatrics aside, up to what point could they have pulled it out?

While our “lean” community has been busy comparing GM to Toyota, I want to suggest a different, more comparable, model: Ford.

Both companies dealt with exactly the same political landscape, the same union issues, the same cost structures. Their range of products was comparable, and by and large, over the years, they made many of the same mistakes.

But right now, Ford continues. Sure, they are hurting, but they don’t seem to be mortally wounded.  When did Ford say “Hey! This isn’t working anymore” or more precisely “Hey! If this continues, we are going to be out of business!” In other words, when did Ford get off the Denial track? And more importantly, are they beginning to develop a fact-based learning culture? It’s too early to tell, to be sure, how all of this is going to play out.

However, I predict that it will be no easier for Barak Obama to get-in-get-it-done-and-get-out of GM than it was for George W. Bush to do so in Iraq. Both jumped based on rationalized emotional justifications, with inadequate resources and no clear exit strategy . (And there, to be sure, the parallels end.)

The political quagmire is only just beginning. Whether anyone likes it or not, because “the people” are majority shareholders, the U.S. Congress is the de-facto board of directors. No matter what the President wishes about maintaining “hands off” management, that isn’t going to happen once the corporate constituents realize they can use all of their lobbying tools to influence corporate decisions. I hope I’m wrong about all of that.

3 Replies to “GM’s Singularity”

  1. When I was in the Navy I was on a diesel driven destroyer escort. We were sent out whenever they needed a ship that could get underway quickly (2 hours) and a ship that was nimble and able to maneuver easily. Larger steam driven destroyers took 24 to 36 hours to get underway.

    I’m wondering, can a company be too big to change. Can a large company (Toyota, Ford or GM) change quick enough to respond to a consumer marketplace. Can there be too many things that can’t be changed quick enough to make a difference. i.e. union contracts, government regulations, many different models of cars using some of the same parts, etc.

    I’m thinking that the current situation is a wake-up call to large companies. I’m thinking they had better break up and run several smaller more nimble companies that can respond to changes.

    Right now where I work we are doing a Kaizen event. It’s supposed to take one week. It will make a big change in our shipping process. What effect would a one week Kaizen event have on a company the size of GM?

  2. There is certainly is more than enough blame to go around for the mistakes that led GM to this point including GM Management, the UAW and the Government who now feels the need to bail them out. However, the continual praise of Ford as a different company who is doing all the right things needs closer examination. I’m not convinced Ford got off the denial track as much as took a fortunate last ditch effort to stay afloat. Ford is the company that completely mortgaged everything they own right down to the blue oval trademark and they did it out of necessity before everyone else tanked. That bit of good timing fortune allowed them to have cash on hand and seeing the onerous rules the government plays by, they are avoiding their help any way possible. However, Ford continues to burn cash and in this case, it is also borrowed cash. What happens when that well runs dry or the banker comes calling?

  3. Norm –
    Good point. Clearly Ford is at the bottom of a very deep hole. I guess my question is “Have they recognized that fact and stopped digging?”

    Only time will tell. And it is really the entire U.S. automobile industry, not just Ford, that is at a “singularity” moment.

    I will add, in all honesty, that part of my bias is simply that GM played the role of victim for all it was worth, and Ford has at least stepped up to the point of saying “We’ll handle it,” whatever their motivations for doing it themselves. But, again, I fully agree that they (Ford) have a long way to go before their survival is certain, much less their future prosperity.

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