As an update to our April 14th story on General Motors’ plan to reinvent itself via a strategic shift in the way that it presents its brands. If you remember the posting, or revisit it via the above link, you will remember that we weren’t too impressed with their direction with the exception of believing that in large corporations change is almost always good.

What is most interesting about the strategy however is how it completely ignores the core problems at the company. If Independent Sources were to be hired by GM to do an evaluation of the company one of the exercises we would do with the managers would be to do a “fishbone” diagram to try to get to the root causes of the company’s problems (I know this sounds a little bit too Dilbert, in this case it would make sense.). While it is possible that during this exercise that someone from marketing would propose that brand confusion was at the root of GM’s problems, I think the group would be more inclined to side with the CFO’s contribution to the discussion which would almost certainly include the following:

• GM’s retiree healthcare costs add about $1,500 to every vehicle it sells compared to Toyota’s $300.
• GM’s current 120,000 hourly workers have such a rich benefits that the company could save about $800 million a year by just having them pay the same share of healthcare as the company’s 40,000 salaried workers.
• GM has the manufacturing capacity to supply 35% of the market but is only really positioned to sell 25% of the market.
• The one brand issue really worth discussing is Buick where the average buyer is, get this, 70 years old.
• As gas prices continue to rise, Toyota and Honda has created a buzz with their hybrids; GM on the other hand is rolling out even larger SUVs this year and next.

If we then dig deeper on these, as consultants, we would summarize this as follows:

GM is still stuck in the 70s. Big cars, bigger labor contracts, and an aging consumer base. GM’s problems aren’t going to go away on their own. To make matters worse, the unions and a compliant media will position this as the big bad corporation trying to put down the longtime, loyal hourly worker at the company.

It will be tempting for management to just buy off the unions again, and that is what will likely happen. Current management has too much incentive to postpone the crisis, cash in their stock options and leave it for the next guy. That strategy has worked since the 70’s so you can bet they’ll be tempted to try it just one more time.

This entry was posted on Wednesday, May 11th, 2005 at 9:06 pm by Insider and is filed under Brilliant, but uncategorizable, How Not To Succeed In Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.