Mary Barra’s first job at GM was at a Pontiac factory where she saw constant defects. Since then, she’s spent 33 years immersed in the product and manufacturing, with a brief stint in HR.
As CEO, Barra is inheriting a car company that is only five years removed from bankruptcy and has shed 40% of its share of the US auto market in 29 years.
On his way out, former CEO Dan Akerson warned about pension mistakes and the need to keep labor costs low. But a new paper from NBER points to other areas that crippled GM: bloated manufacturing and a flawed design culture.
These are three areas Barra can tackle to prevent GM’s past mistakes:
High union-related labor and health care costs are frequently blamed for GM’s bankruptcy. But they actually played a relatively small role. Costs rose because the company was bleeding market share due to poor quality, design, and management.
Nearly identical cars from a joint factory with Toyota cost 20% more with the Toyota branding instead of GM’s. In 2000, all GM vehicles sold for $3,000 less than comparable Hondas or Toyotas (pdf. p.4).
Incoming managers reflexively try to cut costs, a move that’s highly visible and relatively quick. Yet this doesn’t work when the real problem is the product. A poor product truly kills a company.
GM’s auto lineup has improved as Barra led its engineering department, but Ford discounts and an ambitious profit margin target will make cuts tempting.
In the late 1980s, GM took nearly twice as long as Japanese competitors like Toyota to develop and build cars. It took 20 years for the company to adopt opponents’ techniques. The company tried to match Toyota by simply copying its factories.
But GM failed to develop the culture that made Toyota’s factories work. At Toyota, goals like teamwork and developing relationships with suppliers were built into the process from the top down. Workers were trained for many jobs, and entrusted with responsibility for improving quality.
In contrast, GM workers and suppliers were treated as replaceable adversaries, and had no incentive to improve production. In an industry where new models take years to develop, and new technology can take a decade, Barra’s GM needs to respond more quickly.
GM replicated conventional technology, but not the “management technology” that was just as important.
The culture issues didn’t stop at the factories. The Pontiac Aztek is remembered as a failure, not one of the first-ever crossover SUVs. It flopped in a way that perfectly illustrates GM’s disastrous design process in the ’80s and ’90s.
The concept version of the Aztek was potentially groundbreaking, but cost-obsessed executives insisted it be built on an existing, too-large platform, with a weak engine, and no changes to major components. It was handicapped before it neared production, it looked strange, and sold poorly.
Under Barra, according to Fortune, the company’s engineering function has been rapidly improved. Management and marketing teams are involved at every level, rather than intermittently giving orders or causing costly restarts, a process she started in earnest in 2011.
GM is still under pressure from losses in Europe and weakness in China but there needn’t be more Azteks.