Poor Leadership slammed at Ford and GM

Leadership at Ford and General Motors has been identified as a key factor in their decline against Toyota and other competitors. As Ford plugs its innovative link with Bill Gates, industry experts predict a further decline in its fortunes. It is possible that the industry has developed mechanisms that are protecting it from acknowledging the extent of its decline.

In a recent post we asked whether Toyotaoism is replacing Fordism. The debate following that post has continued. This week’s news from the US Motor Show is accompanied by further press reports on the competitive challenges facing US car manufacturing, that bell-weather of the economy. The battle for commercial success seems to be favouring the more philosophical arguments for Toyotaoism.

BBC reporter Steve Schifferes was at Detroit for the motor show. He interviewed its North American head Mark Fields, but interestingly, the Company’s new overall leader, Alan Mulally is not giving press interviews at the Show. The company has retained its high profile stance at the show, emphasizing its continued innovation, majoring on a link with Bill Gates and Microsoft which will produce a new in-car audio system (‘Sync’) in an exclusive one-year tie up.

Industry insiders remain unconvinced

Industry insiders remain unconvinced of Ford’s prospects. Ford lost $ 17 Billion last year and its factories are in hock to its $20 Billion bank borrowings. Its voluntary redundancy plans are proceeding apace.

Professor James Levinsohn of the University of Michigan said the US companies have only themselves to blame.

Ford and GM regularly round up the usual suspects when searching for a reason for their troubles but the real culprit is the obvious one. These firms are not making products that people want to buy. The responsibility for that lies with what passes for leadership at these firms.”

Blanking out the bad news

Levinsohn claims that he has been unable to find a placing for his analysis in auto-industry publications. He believes that the publishers are concerned that such the magazines are worried that such bad news stories would put a magazine under pressure from its advertisers.

State of denial

It is not unknown for academics to claim that their work has been rejected on non-academic grounds. Independent evidence to assess such a claim is hard to obtain. However, the brave face of the industry at Detroit is itself some evidence of the industry’s need to talk itself up. Yet, Ford’s main claim for innovation as the Microsoft link seems peripheral to its commercial problems. We may be witnessing what Chris Argyris has called covering up the cover-up. That is to say, a state of denial

Tundra vanilla with cherries?
The show also signalled the continuing advance of the Totota brand. Its Toyota Tundra is marketed as an American pick-up, designed and manufactured in the good ‘ol US of A.

The Asian automakers have cornered the market on vanilla,” says Global Insight automotive analyst Rebecca Lindland “..Now they’re adding the hot fudge chocolate with cherries on top, which is what they have to do to progress in the US market .. They are going after a new segment with its truck – heartland America, NASCAR drivers, who are more patriotic [and] not Toyota drivers typically”

The story is not completely bleak. The Economist has been following the auto-industry for some years, and commented (January 13th 2007) that prospects for GM ‘have dramatically improved’. Even this more positive view suggests that the company seems to have been galvanized by stake holder Kirk Kerkorian’s decision to pull his 10% stake last year, and that recovery and rationalisation if it works ‘will achieve economies of scale that only Toyota can match’, and that GM’s core North American operations are still only ‘heading in the right direction’.

Questions to ponder

In which case there are further questions to ponder. Are we witnessing leaders operating with a clear vision for the future at Ford and GM? Are the companies putting on a brave face? Or are they operating in a state of denial?

3 Responses to Poor Leadership slammed at Ford and GM

  1. David Howard says:

    It will take well informed industry observers to answer your questions in a way that is acceptable to western economists and the world of Anglo-Saxon business but this observer favours the view expressed on the Lean Blog at http://kanban.blogspot.com/2006/01/toyota-leadership-and-ford-leadership.html The facts presented conform exactly to what you would expect from a company that practices constancy of purpose compared with and a couple that don’t.

    I fail to understand what it is that is so obscure about Toyota’s appraoch to economic-quality since the 1960’s that Ford and GM don’t understand and which drives them to manic serial reorganisations, lack of focussed purpose and the superficial quality nostrums that are so readily adopted by CEO’s lacking the use of theory to guide their practice. And do not think that the Americans did not once understand what was needed before Mammon took centre-stage. It was after all a group of three young American engineers – Frank Polkinghorn, Charles Protzman and Homer Sarasohn – that set out the e-q foundations for Japan’s industrial revival under the MacArthur administration in the mid- to late-forties. See http://www.firstmetre.co.uk/library/documents/493/

    As their acerbic successor ,Edwards Deming (standing in for Walter Shewhart who was ill at the time Sarasohn invited him to give courses on variation to JUSE), so often told me and colleagues at our annual retreats with him at Ashridge in the late eighties: “(In my country) No one gives a damn about profit.” He had been invited to guide Ford in better ways from 1981 (by 1986 Ford overtook but the consequent advantages and progress GM for the first time since the 1920s and continued for a year or two thereafter) but eventually the benefits were wasted by poor leadership that was more concerned with financial results rather than the means by which they could be sustainably improved.

  2. peter says:

    John Beckford, a Prof at Liverpool John Moores, speaks eloquently of managerial failure at “BMC”; the company that became the “nightmare” British Leyland. I find the failure of the British automotive mass producers an interesting distraction. I don’t know much but would like to know more. This is in part because I knew some people at Rover when I was in Warwick.

    Some time ago I noticed bloggers reaching for the Leyland example to paint warnings for GM and Ford. Here’s an example from 2005. I have lost the original source but can find through Google.

    The British press blamed the unions for the hopeless embarrasment of Leyland but, perhaps, hand-in-hand with every hopeless union is a hopeless management.

    I think the blogger is very generous to give GM more than a decade.

    “What have the Corvette and the Mini in common? On first eye, nothing. The first is big, gas guzzling and based on dated hardware. The latter is small, smart and caused a technological revolution. Yet I thought about Mini, when I read that the Corvette no longer would be sold under the Chevrolet brand (in Europe!), but as een make of its own within GM. British Leyland (“BL”) made the same decision in the early seventies as regards the Mini. This cute, tiny car would longer be sold as an Austin or a Morris (BL’s hign-volume makes, or the BL equivalents of Chevrolet), but instead become an independent marque.

    Nowadays – thirty years later – BL does not exist anymore (apart from the very marginal part MG Rover is playing). The company went down due to strikes, debts and wrong models. These factors compare fearfully to those applicable to GM. GM is paying fortunes with respect to pensions and healthcare costs of employees and former employees. They also seem subscribed to the introduction of wrong models. Chevrolet Malibu and SSR, Saturn Ion, Opel Vectra/Signum: all models falling far below forecasted sales numbers. Even the world’s largest auto maker can’t afford so many mistakes. Sooner or later, things must go terribly wrong at GM.

    Maybe it’s hard to imagine, but BM’s bankruptcy may not be imaginary. When established, BL was Britain’s largest auto maker; just as GM is America’s. Yet, BL’s bubble burst. (…)

    GM’s demise will proceed step by step. The Oldsmobile make has been killed, just like its British equivalent Wolseley (from a historic and market positioning perspective). The next phase will be the recycling of old technology, as BL did with the Austin Allegro and the Princess. Opel has been successful with the current Astra, but they may not when Ford and VW introduce their next, further imporved Focus and Golf models. When the water raises to the lips, all crown jewels will be sold off like Jaguar was split off from BL and sold in the early eighties. Currently, Cadillac is GM’s pride, as was Jaguar BL’s. But Jaguar teaches us a lesson that a premium brand can’t save a whole auto conglomerate.”

    So, it’s not imaginary that GM will no longer be among us within twenty or thirty years. Out of the wreckage, competitiors will pick the valuable parts, just like BMW picked Mini. If, for argument’s sake, the scenario becomes reality, wouldn’t the auto makers of the 2030’s be interested in Corvette? I think so. They will, as done to the Mini, equip this icon with a state-of-the-art platform and V8 engine, while continuing the styling cues and design of America’s only sports car. (…)

  3. Tudor says:

    If you spent some time in Warwick you were close to the action in the British Battle for its Auto-industry. There does seem something frightenly Darwinian about the competitiveness and struggles for survival of the dynosaurs and the niche-species …

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