“Bob Lutz, former vice chairman of product development at General Motors, has an new book coming out this week called Car Guys vs. Bean Counters: The Battle for the Soul of American Business,” Mark Gongloff blogs for The Wall Street Journal. “In it he says that GM, and American business generally, has lost its way by focusing too much on making the numbers rather than on making products consumers want to buy.”
He holds up Apple as the example American business should be following, telling The Atlantic’s Alexis Madrigal: ‘In all of these industries where you are playing with the psyche of the consumer and her perceptual capability, you must have people who understand that industry, understand those consumers, who can put new things in front of the consumer and come up with the next big idea the way that Steve Jobs does with the iPhone, iPod, iPad, iPad 2, and who knows what next. Just pick up an iPhone. It’s an object of beauty. And so is an iPad. You want to own it even if you don’t have a clue what it does. It’s much the same way with cars.'”
“It’s certainly tempting to compare GM to Apple. One’s a failure in the market’s eyes, forced to accept a government bailout. The other has an almost worshipful following on Wall Street, the media and the general public,” Gongloff reports. “They’re the Goofus and Gallant of Corporate America.”
Full article here.
[Thanks to MacDailyNews Reader “Dow C.” and “GetMeOnTop” for the heads up.]
What did the five fingers say to GM’s face? SLAP!!!!!
Cold Blooded!!
Internet memes are a troublesome thing. They seem to stick around long after they’ve served their purpose.
Prior to the 2008 crash, GM was doing a much better job with product design under the guidance of Bob Lutz.
In some ways, the 2008 crash was a big help to GM because it enabled GM to get out from under onerous union contracts. Since the restructuring, GM is making its best products in decades and it’s making money. GM has even recently paid back the lion’s share of the government bailout money.
GM is making really good products these days and deserves the attention of the American consumer.
Paid back the bulk of the loan? That’s laughable. Do a little research to see how little they have paid back. GM and Gov’t press releases are total BS. GM products may be better, but they still aren’t great. And when they cost close to the same as a better built foreign brand, but will have a lousy resale 4-5 years down the road, they still have problems.
More info
http://www.washingtonpost.com/blogs/fact-checker/post/president-obamas-phony-accounting-on-the-auto-industry-bailout/2011/06/06/AG3nefKH_blog.html
The talk of ‘re-sale value’ has always irked me a bit. I typically buy for the duration.
Last I read, the bailout cost us about $14B, which doesn’t include the opportunity cost of that money, since we were the lender of last resort. For a risk that big, the government could have charged 20% interest like the credit companies do. Instead we don’t even get our principal back. If GM is making money, why didn’t the gov’t get all its money back plus interest?
Onerous union contracts?
Which ones, specifically?
well for one, the “jobs bank”
http://www.cbsnews.com/stories/2008/11/12/politics/otherpeoplesmoney/main4595068.shtml
“A beneficiary of that program was someone named Jerry Mellon, who worked for GM until his division merged with another in 2000 and he was no longer needed. Except for a brief period in 2001, Mellon received his full salary for not working, which reached $64,500 a year by 2006. Include benefits, and the annual cost to GM exceeds $100,000.
To earn his pay, Mellon was given the formidable task of showing up in a windowless shed, sitting at a table, and doing nothing for eight hours a day for six years, according to a profile in the Wall Street Journal. Jobs Bank employees have the option of attending classes teaching such important manufacturing skills as dealing blackjack and poker. Mellon spent part of his time reading Reader’s Digest, learning how to play Trivial Pursuit, napping on a makeshift bed of chairs pushed together, or simply staring at the wall for hours at a time.”
6 years, FULL salary… and you did nothing?….
Wait, where can i find a job like that?
it was one of the stipulations of taking the bailout, it had to end. it was KILLING GM…
The new CEO of the newly independent Chrysler will be none other than ousted Home Depot CEO Bob Nardelli — the same guy who took $210 million with him when he left Home Depot.
Yeah, right, the $100,000 a year is what was killing GM, when shits like Nardelli cost $210 million to get rid of!
100k a year multiplied by as many employee’s you “laid off” multiplied for all those years.
the home depot guy, NEGOTIATED his contract with home depot prior to him even being hired. If home deport agreed to that money… thats their issue. not Bob’s.
They didn’t have a “you sucked, so you get nothing” clause.
Just look at sports, 5 year contracts.. teams decide to trade or break a contract… and the guy gets a ton of money after playing just 2 years.. Team loses a ton of money.
you have to understand, the CEO’s… get paid WHAT THE BOARD AGREED TO PAY THEM. I agree I wouldn’t pay them that much.. but just try and break that contract you signed… Take GM above with the job bank. Can you imagine the walkouts and lawsuits that would destroy them if they just said “you’re laid off, go get unemployment”
The Unions would go nuts for them breaking the contract. accused of union busting etc.
Granted GM was dumb as hell to agree to the job bank in the first place…
FTB, the UAW also NEGOTIATED its contract. So what’s your point, that two stupid contracts even out? Management is just as out of touch as the UAW, and both are equally to blame for the fiscal mismanagement at US automakers.
Just as no union rep is willing to axe the dead wood in his ranks, no corporate board is independent or intelligent enough to halt the self-ratcheting compensation mechanisms that the rich bastard network created for itself. Corruption breeds corruption no matter what color your collar.
GM dug its grave back when it owned more than 50% of the market and built cars that people wanted and were built well. Then American car got taken over by the bean counters and sales guys, not car guys, and everything became about how to squeeze another dollar out of a product by slapping another badge on it and calling it an Oldsmobile or Buick or whatever.
GM also gave ridiculous pensions and health care benefits (among others) to its employees, with profit predictions based on its then situation. Unfortunately for GM, those predictions were vastly wrong and did not take into account what would happen to those pension/health care obligations if GM’s profit or market share ever dropped, because no one believed it could happen (“Titanic Syndrome”).
Ford went through much of the same thing, which is why we had exploding Pintos – once Ford found out about the problem, the bean counters decided it was more costly to recall and fix the problem than to pay for the damages for a few accidents. Problem with that is they didn’t factor in punitive damages, which is what the jury awarded and Ford took it in the shorts (rightly so).
The bottom line is that when, in any industry, you let guys get control who don’t know what people want, who don’t care about anything except the bottom line, you set the stage for downfall.
See Steve Ballmer for a crash in progress.
GM under restructuring was split into 2 companies. The operating company “The ‘New’ GM has none of the liabilities of the predecessor, none of the debt and was loaned a truckload of money. The other company, essentially a shell, contains all the liabilities, obligations and shuttered plants of the original company.
The operating company has paid back it’s loans more through accounting tricks than profit. The shell holding company is larded with debts and obligations that will likely never be repaid in full.
GMAC, the credit arm of GM, dropped $65 Billion on the taxpayers backs and reorganized as Ally Bank to allow it access to TARP money and the Federal Reserve’s discount window. One can only speculate the total cost of the GMAC bailout.
The bailout of Government Motorssaved tens of thousands of jobs, but at a phenomenal cost. The taxpayers got screwed royally on the bailout and restructuring of the bankrupt company.
GM should have been liquidated.
Don’t forget Microsoft and their continued domination of 90% marketshare. Their W95 and forward complete ripoff of the Mac.
Once Apple runs out of consumer device markets to dominate, look out auto industry!
With the electrification of cars and trucks they are basically becoming large consumer electronic devices.
I have my doubts that electric cars will be any more than niche player. The technology needed to make it viable just isn’t there yet. Probably the best scheme is coming form Better Place, and even that I expect won’t succeed as some hope. And I for one don’t want to trade dependency on OPEC for dependency on China which today dominates the market in rare earth materials needed for much of today’s “green” technology.
I agree the tech is not there yet for electric cars (and where on earth is all that electricity going to come from!!!), but when it does, it’s almost guaranteed that Apple will have timed it perfectly to tap the market! Wonder if they have bought iCar.com yet?
Apple today reminds me of the auto industry’s glory days. Back in the 50s, cars would be significantly upgraded each year, and the whole thing was cloaked in secrecy…dealerships would cover their windows to hide the new models until the unveiling. The intense curiosity stoked publicity and demand.
People are amazed Apple uses secrecy about its product roadmap so adroitly but its not a new idea.
“In all of these industries where you are playing with the psyche of the consumer and her perceptual capability…”
He needs to learn proper english. The universal is the male form, “he” and “his”, not “she” and “hers”. It’s PROPER.
It’s 2011. You can do away with the effete, limp-wristed, politically correct crapola.
I like the cut of your jib, sir.
One big difference between GM and Apple is that GM has to cope with a union and the mentality of union workers.
Unions!!!
have no say in product design.
I’ve been to far too many conferences where the speaker urges companies to be more innovative and there is only one company that gets mentioned as a good example across all industries and that company is Apple.
The trouble is that the speaker often goes on to say that companies should innovate by copying Apple’s way of doing things. Personally I have a problem with the concept of innovating by copying. Only the first company is the innovator.
Large corporations tend to forget who the customer is. They think it’s the stockholders, and make decisions based on pleasing them. They forget that the customer is the person whose money they want in exchange for their products. Please them, and everything else will follow, as long as the executives run the business tightly.
Too many corporations think along the lines of, “gee, if we make this just a little bit uglier, and substitute some crappy plastic for the nice glass, we can knock two dollars off the mfg cost and make our numbers.”
Apple could easily knock a few dollars off their parts and assembly costs, for every product they make. Just make the stuff a little tiny bit less nice. They don’t. Apple wants to surprise and delight (Jobs’s words) the people who buy their stuff. That’s part of what makes Jobs smart – he knows who the customer is.
Once you start paying executives and leaders with stock options they start worrying about the stock price and forgetting about the product’s end user.
Once the stock price takes a nose dive they start abandoning ship.
I wish there was some way of changing obligation for running a public corporation: maximizing the money for stockholders. That leads to the immoral (but not unethical) decisions, like letting people die and paying lawsuits, rather than issue recalls or improve safety.
The whole reason to get more money is to improve quality of life, but the bean counters are peddling crap to save money.
In most companies there’s way too much dependence on “research” Apple has a focus group consisting of only one person. MBA bean counters are no match for one man’s passion & vision.
As far as Bob Lutz goes, the guy was great at GM.
but him and the guy that ran GM’s “Toy Box” (can’t think of his name…)
those two should have had more say in the production of the cars at GM.
the Toy Box guy, had a AWD truck built from GM off the shelf parts….(except the AWD system is from their Pike’s Peak race trucks. GM has no True AWD system in the states, nor does Chrysler or Ford for that matter) that could Smoke a viper in 1/4 mile, and on the track.. and still get like 15MPG (which is better than the viper) and this was 10 years ago. It was axed cause it could also beat the Vette…
Lutz had visions, GM said no. or i should say the bean counters said no..
Once upon a time Apple (on death’s door) had to accept a bailout from Microsoft. And that was quite a few years after their own ‘think different’ campaign. The difference between success and failure takes the right people, the right place, and the right time and a good bit of luck. And sometimes failure is what it takes to get back on the road to success. Apple did it; GM is turning it around (albeit slowly). It will be interesting to see if Microsoft can do the same, since they are now off the path and careening toward disaster.