So Fair An Opportunity

by BILL WADDELL

In 1864 some Union soldiers with mining experience dug a long tunnel and placed a huge cache of dynamite under the Confederate lines in front of Petersburg, Virginia, blew it up, and created a crater - and a hole in the Confederate entrenchment - a half mile wide.  For an hour the road to Richmond and the end of the Civil War was wide open, but the northern leadership fouled things up, the Confederates recovered, and the Civil War went on for another nine months with tens of thousands of additional causalities.  US Grant wrote of the incident, "so fair an opportunity will probably never occur again ...". 

I am reminded of those words because they so accurately describe this moment in American manufacturing history.  We are at a unique crossroads with the automobile industry, and automotive sets the tone for all of American manufacturing.  For a few weeks or months GM and Chrysler are in the hands of the UAW and the federal government's automotive task force.  They will own fully 89% of GM.  They have all of the authority to compel those companies to adopt a Toyota-like model.  They can do anything with it they want, and the management that has so stubbornly refused to change, and has so myopically focused on Wall Street's voracious appetite for short term results, can be compelled to take manufacturing seriously, and to look at their business holistically for the first time.

The union can look to Toyota's lifetime employment and empowerment philosophies and use their new found power to compel GM to emulate it.  The government can look to Toyota's financial results and demand that GM put in place similar business, engineering and factory operating processes.  They can pack GM's board and management team with experts from Toyota, Honda and the lean community.  They can base GM's compensation and loan repayment terms on achieving benchmarks drawn from a detailed study of successful lean companies. 

Or those with power can use that authority for their narrow interests.  The UAW can revert to and entrench archaic work rules, and the Obama minions can turn the car companies into engines for their environmental agenda without regard for customers and value.

The hope is for the former - that the new powers foresake their own genius and drive GM and Chrysler to imitate Toyota and Honda.  The best thing they can do would be to acknowledgethat they know little or nothing about cars or manufacturing, and that their wisest course would be to imitate the successful companies. 

I am afraid, however, that the UAW and the automotive task force will be so focused on their own ideas, giddy with power the government and the union have never enjoyed, that they will leave all of the management processes in place that led to the current crisis, and will focus on products that fit their own idea of what customers should want, instead of on products customers do want.  Mr. Obama has already sent ominous signs, saying that the problems with the car companies are the result of a failure to build fuel-efficient and low-emission cars.  That is hardly the root of GM's failure.

Time will tell, of course, but it is hard to imagine that an opportunity like this will come along again.  This is not the first time the government has seized ownership of a major industrial enterprise.  We the people used to be the owners of Conrail - the residual of the old Pennsylvania and New York Central Railroads and the Erie Lackawanna.  Rather than see it fail and cause thousands of railroad employees to lose their jobs, the government bought it, owned it, and mismanaged it for 23 years.  Finally, tired of subsidizing a losing proposition, Congress broke it up and parceled it off - some to CSX, some to the Norfolk Southern, and some to the scrap heap.

If the new owners of GM don't make the right call, they are not likely to get another chance.  Years of government subsidy followed by a Conrail-style break up are the most probable future for GM if it does not get lean now.

Let's hope for the best.

Comments

[Tony]

I can guarantee that this Democratic administration and the UAW will screw things up -- when has the UAW shown any interest in lean?

The best hope for Chrysler & GM is for a normal bankruptcy and new leadership resulting from that.

And, no, I don't think US (GM, Chrysler, Ford) automotive mfg sets the tone for US manufacturing - I know it doesn't where I work, and based on my limited experiences, I hope it stays that way.

[Mike]

I can see President Obama in the role of General Burnside, but there are many, many candidates for the role of General Ledlie who "...failed to brief the men on what was expected of them and was reported during the battle to be drunk, well behind the lines, and providing no leadership."

[Andy Wagner]

Bill,
Some of the US auto industry's problems are due to the fact that they've failed to respond to what their customers value. They've put disproportionate resources into SUVs, not because people want them, but because they have high margins. They've largely abandoned making small cars, not because people don't want them, but because they "can't" make them profitably.
Of course, Toyota and Honda make small cars profitably by eliminating waste. They respond to what customers value by making a full line of vehicles: small cars, fuel efficient cars, SUVs, and trucks.
It would be a shame to see government subsidy of small American cars squash the innovation of competition between all manufacturers.

[Jason Yip]

Hope is not an effective strategy and neither is pessimism so I wonder what can be done to influence this situation for the better.

[Rick Bohan]

Tony-I can introduce you to UAW members and leaders who have a great interest in and knowledge of lean.

And if the same senior management leaders are left in charge, then we truly will have missed a chance to make any real changes. I can guarantee that those senior managers will screw things up...again.

[Bill Waddell]

Rick,

History doesn't support your assertion that the UAW is going to advocate true lean philosophies, or much of anything else constructive. I hope you are right, but anyone who thinks the union is all right and management is all wrong - or vice versa - is not seeing things very objectively.

That said, I know that some UAW leaders 'get it'. The UAW's former Director of Education was very helpful and supportive of my book, "Rebirth of American Industry", and she wrote a very nice endorsement of it. Too bad very few others in the UAW leadership circles even bothered to read it.

[Rick Bohan]

Bill,
History doesn't support the notion that either union OR management will, in general, advocate true lean philosophies. After all, many (maybe most) manufacturing companies aren't even attempting to implement lean and the majority of those that do, fail. The many cases of management and leadership failure in this very blog are consistent with this datum. Tony said, "I can guarantee that this Democratic administration and the UAW will screw things up -- when has the UAW shown any interest in lean?", clearly implying that those two organizations were to blame for GM's woes.

I'm not a member of the UAW (or any other union, for that matter) and assume that they can speak for themselves. But many commenters on this blog have focused on the UAW's supposed role in GM's demise forgetting that the UAW doesn't set strategy. Of course, in GM's case, neither, apparently, does management.

[Bill Waddell]

Rick,

A little objectivity is in order here, my friend. 80% of my writing in Evolving Excellence is critical of management, with an occasional shot across the bow of the unions and whichever political party is in running things in Washington. If you looked into it, you would find that I wrote an entire book, "Rebirth of American Industry" that is highly critical of General Motors management, and foretold their current problems. Prior to publication, the book was read and approved by the Director of Education Programs at the UAW. You ought to read it some time.

You, on the other hand, have an unblemished record in these pages of rushing to the defense of the UAW.

[Kevin Carson]

One way the auto industry needs to get leaner is to eliminate planned obsolescence and downsize a lot of the current bloated industrial capacity.

Planned obsolescence is one of the most pathological aspects of Sloanist mass-production. Amory Lovins, in Natural Capitalism, echoes you and Norman Bodek in describing the Sloanist approach as optimizing the output of individual machines while pessimizing the entire production process.

All the eddies and whorls from producing for inventory are indeed important examples of the waste entailed in mass production and push distribution. But the mountains of crystalized labor sitting in the landfills, made up of cars and appliances that could have been kept in use at a fraction of the cost if designed on a modular basis for ease of repair, are an even bigger example. And they result from the sheer scale of overbuilt industrial capacity, and the need to keep it running at any cost.

As I vaguely recall the figures, annual auto industry output in the U.S. has fallen from around 18 million to around 10 million. And the 18 mil was only achieved in a general environment where everyone maxed out their credit cards and tapped into home equity to replace everything they owned every five years. No sane society should ever want to go back to 18 million cars a year. That idle capacity should just go to rust IMO.

And in the overall economy, a proper application of lean principles means that the heaviest industry like cars should be downsized as a percentage of the total economy. As amazing as Toyota's applications of lean production ideas are internally, and as much of an improvment as they are on Sloanism, applying lean ideas in a giant transnational corporation of any kind is still a bit like putting new wine in old bottles. The whole "warehouses on wheels/in container ships" model of distribution just amounts to sweeping inventory under the rug, shifting it into the distribution chain. But it's still just inventory by another name, even if it's moving down the road.

I agree with the author of your Preface, H. Thomas Johnson, that lean ideas are ideally suited to decentralized small-scale production for local markets, with short supply chains, on a model somewhat like that of Emilia-Romagna.

[Tony]

Rick,

I wasn't commenting on who's to blame (and you obviously missed the bit about "new leadership"), just noting that I have no faith in the government's "rescue" plan.