On Car Guys vs Bean Counters

I recently finished reading Cary Guys vs Bean Counters – The Battle for the Soul of American Business – by Former Vice Chairman of General Motors Bob Lutz.

This book is an account of Bob Lutz’s stint at General Motors from 2001 t0 2010. When he joined GM, he did so with the following intent and strategy: “Phase I. Exert my influence to improve products already in the pipeline and use my communication skills and reputation with the media to have them seen in the best possible light. Phase Two. Lead the creation of the future portfolio: cars and trucks of unsurpassed design excellence and characteristics. Cars and trucks so good, so desirable, that customers would pay full price and wait for delivery if necessary. Phase Three. Permanently change the culture of the company, especially around design, planning, and engineering, in such a way that mediocrity (or the dreaded adjective “lackluster,” so frequently applied to new GM cars) would be permanently banished.”

A common theme in the book – and as eluded to in the title – is the role of the over-analytical wave of thinking (primarily driven by MBA’s) which was a contributing factor to the demise of GM. Bob also covers the other factors, that led to the eventual Chapter-11 filing, including rising fuel prices, staggering health insurance costs etc.

A very insightful book on the dynamics of the automobile industry both in the US and globally, as well as on leadership, management and execution. The lessons learned can be easily extended to various other industries – which to varying degrees have or are experiencing similar challenges in their respective domains. A recommended read!

Below are key excerpts from the book that I found particularly insightful:

1- “It’s time to stop the dominance of the number crunchers, living in their perfect, predictable, financially projected world (who fail, time and again), and give the reins to the “product guys” (of either gender), those with vision and passion for the customers and their product or service…With the advice and support of their bean counters, absolutely, but with the final word going to those who live and breathe the customer experience. Passion and drive for excellence will win over the computer-like, dispassionate, analysis-driven philosophy every time.”

2- “When a major competitot has a systemic cost advantage of that magnitude, he can use it in various ways: – increase marketing spending, -underprice his competitor, -add more features, quality, and luxury to his product, -increase profitability, enabling a faster product renewal cycle. The Japanese did it all!”

3- “Health care costs grew and grew, accelerated, as always,by America’s unique “contingent fee” legal system, whereby the penniless victim can see justice done by hiring a lawyer who is willing to help “for free” in exchange for a percentage of a possible settlement. Noble intent, but that’s not how it turned out…These wasteful procedures and their attendant costs are all due to our (unique to America) “contingent fee” legal system, which results in our health care being the most expensive in the world while at the same time not necessarily the best.”

4- “By no means am I suggesting that the media’s reverse chauvinism (loving “foreign” more than “domestic”) was the leading cause of GM’s decline, but together with worker wages and benefits at unaffordable levels, crippling health care costs, and government regulation that caused seismic upheaval in manufacturing and engineering, it created an environment with no margin for error, where only the most astute leadership could prevail. As we have seen, and as the following will abundantly demonstrate, GM’s leaders were not up to this admittedly monumental task.”

5- “The company cared about…minimizing cost and maximizing revenue – but assumed that the customer desire for the product was a given…I maintain that without a passionate focus on great products from the top of the company on down, the “low cost” part will be assured but the “high revenue” part won’t happen, just as it didn’t at GM for so many years.”

6- “Meanwhile, Ford and Chrysler, the poorer cousins, focused on the Japanese model: don’t create new plats unless necessary, automate only where absolutely needed for quality or worker fatigue, seek the optimum blend of humans and machines. It worked, just as decades later it’s working for GM as well as it ever worked for Toyota.”

7- “Without question, the brand management approach works in the world of soap, toothpaste, and cleaning supplies. The error lies in transposing it to cards, which every one of the former consumer products CEOs tried to do. Here’s where it goes awry: a brand manager in the car business can’t do a small test batch. Changing the design or engineering of a car consumes hundred of millions of dollars and three years. And the federal government doesn’t care whether it’s a test batch or not; every car model, regardless of production volume, must be fully certified from an emissions and safety standpoint. Unlike a Crest toothpaste tube, these cars, assuming a negative test outcome, will hang around as worthless orphans for years.”

8- “Strongly held beliefs:

1) The best corporate culture is the one that produces, over time, the best results for shareholders.

2) Product portfolio creation is partly disciplined planning, but partly spontaneous, inspired, all-new thinking.

3) There are no significant, unfilled “Consumer Needs” in the U.S. car and truck market (except in the commercial arena).

4) The VLEs must be the tough gatekeepers on program cost, content, and investment levels.

5) Much of today’s content is useless in terms of triggering purchase decisions.

6) Design’s role needs to be greater.

7) Complexity-reduction is a noble goal, but it is not an overriding corporate goal.

8) We all need to question things that inhibit our drive for exceptional “turn-on” products.

9) It’s better to have Manufacturing lose ground in the Harbour Report, building high net-margin vehicles with many more hours, than bieng best in the world building low-hour vehicles that we take a loss on.

10) Remember the Bob Lutz motto: “Often wrong, but seldom in doubt.”

9- “Product Planning was another area mirrored in a morass of data, attempting to find a quantitative, reliable, repeatable way to come up with hit products. As with everything else at GM, the approach had sterling intellectual credentials, but in a world driven by a whim, fashion, and fluctuating fuel prices, it just didn’t work.”

10- “The company struggled with the concept of global budgets cutting through regional lines…Running a company by region is fine for many industries but no longer optimal for car companies. You have to go global, with the regions reduced to marketing and PR entities, as is the case with the Japanese, Koreans, and Germans in the United States.”

11- “…Of Course, my recipe had called for a gradual rise over time, not an overnight doubling. The gasoline sticker shock (due to the only partially explicable sudden rise in the price of a barrel of crude) had an even more profound effect on our fortunes than the financial crisis, because GM’s buyer group was hit the hardest. With Chevrolet and GMC, we were the nation’s leading producers of full-size pickup trucks…, and the market was imploding. Pickups are the preferred vehicles of tradesmen such as carpenters, plumbers, and electricians, and their work had evaporated along with new housing starts.”

12- “Making GM more open, more human, more accessible, and thus more likeable is the last, great unfinished task.”

13- “…Why did Sir Richard Branson (and others), with no higher education at all, succeed so brilliantly in both the airline and music businesses? The simple answer is: they have a blissful lack of awareness of the analytical science of business. Uninfected by the MBA virus, they simply strive to offer a better product, one that delights the customer. They control costs, of course. And they tolerate a necessary level of bureaucracy. It’s essential. But the focus is on the product or service…thus, the customer. American business needs to throw the intellectuals out and get back to business!”

14- “Astonishingly, in this critical product creation area, where the future of the car company hands in the balance, the much-scorned autocratic style of management works well, and numerous success stories confirm it.The big proviso, of course, is that the autocrat must be so steeped in the car business, and have so much taste, skill, intuition, and sense for the customer, as to be nearly infallible.”

15- “The job of the CEO is, in large part, making sure the company is seen in favorable light. False beliefs and unjust accusations need to be tackled, not left to fester in the files of the media, to be pulled out when another negative story is due. I do not see the media, or media exposure, as a negative. A frank, open, and candid approach, with lots of easy access to the CEO, is a winning strategy.”

16- “In a sense, the decline, failure, and rebirth of General Motors is simply a metaphor for what is happening to the whole United States. The days of absolute industrial and economic dominance that we took for granted and assumed would go on forever are over. They have been over for some time; we just didn’t notice it…As a country, we need to go through this painful collective Chapter 11-like experience. For a time, we need to put the “American Dream” of ever-more, ever-bigger, ever-richer on hold as we grapple with the reality that we are, on balance, far less competitive than we need to be.”

Regards,

Omar Halabieh

Car Guys vs Bean Counters

Car Guys vs Bean Counters

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