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Quality Transformation With David Schwinn

Quality Insider

Leading and Learning: Where Did General Motors Go Awry?

Bankruptcy? General Motors? Are you kidding?

Published: Tuesday, July 28, 2009 - 05:00

When I started at General Motors (GM) in the 1960s, we were the biggest and best company in the United States and most of the world. As a matter of fact, I believe that only a couple of state industries in Russia surpassed the number of people that GM employed. Many of us, observing the poor quality of work done in the factories as we first entered them, found it hard to believe that GM could be so good. One of my friends and colleagues, Mark Horvath, captured the situation insightfully: "We [GM] can depend on the stupidity of our competition."

As time went on and we became more a part of the GM culture, we began to think of Mark’s observation in a different way. We began to unconsciously believe that the reason we were so large, powerful, and successful was that we really were smart. As a matter of fact, in those days, one of the criteria we used for making decisions was "Will this enhance our market position so much that the antitrust guys will try to break us up?" We thought we had to be careful not to be too good. So what happened to this most omnipotent company?

Many industry insiders simply think that its downfall was caused by the recent worldwide economic collapse. Other insiders tend to think it was the legacy costs because of all the baby boomers starting to retire. Others think that GM's products didn’t keep pace with customer demand. Still others talk about the influx of overseas competition. And, of course, many others simply blame the union. Although I think there may be some truth to all of those causes, I think we can simplify say that the world changed while GM didn’t.

Let’s explore this a little more deeply using a set of functions I am proposing for a new generation of managers: "Listen, Lead, and Learn."

General Motors was listening in the 1920s. Ford had revolutionized the auto industry in 1908 by introducing the Model T, a "sturdy, powerful, and inexpensive" new car, as Paul S. Boyer wrote in the "Automotive Industry" article from The Oxford Companion to United States History (Oxford University Press, 2001). Ford made the automobile affordable for many Americans who previously couldn't consider buying a car. He made price the name of the game. By the late 1920s, GM had noticed that consumers wanted more. They were looking for style and prestige. General Motors listened and gave it to them.

By the early 1930s, GM had taken the leadership role in the industry. They introduced styling, features, and choice. Alfred Sloan, president, CEO, and chairman of GM in those days was considered by many a management genius. He led, for example, the introduction of separate car divisions, each targeted to a unique consumer segment, annual styling changes, and financial management of those divisions from the corporate perspective. Those changes and others helped GM overtake Ford as the industry leader by the early 1930s. General Motors held that position for the next 70 years. That’s the company I entered in 1962. We were the leader and we knew it. Let’s move on to learning.

Listening and leading are really two basic steps of learning. Learning, in a more complete way, is:

  • Asking the right questions
  • Gathering the expected and unexpected data
  • Analyzing all the data
  • Responding to the analysis

 

Sometimes we lead as a result of the analysis. Other times, perhaps more frequently, we just try to keep up. GM was an example of learning at its best in its early years, but the quality of its learning waned.

There is a myth about those of us in higher education that is too often true. We tend to teach rather than encourage learning, and we tend to be learned rather than learning. When you are learned, it is difficult to learn. When you are the best, it is hard to see anyone who is challenging that leadership.

One game change that GM was slow to see was quality. By the late 1970s, a few Japanese automakers were seriously challenging the domestic auto industry based on the superior quality of their products. I was at Ford’s corporate quality office at the time. I don’t know what was going on at GM, but at Ford, we already had the fundamental data, but we weren’t looking at it because GM wasn’t looking at it. We, too, knew that GM was the leader. Because we at Ford were getting so close to bankruptcy in those days, we began to look seriously at the data, ask even more questions, and play catch up in the new game of quality. Because I still had many friends at GM, I know that it took GM a little longer to feel the pain and, therefore, a little longer to begin playing this new game. When you’re the best, it’s more difficult to learn.

Even though late to the game, GM conducted a couple of potentially excellent experiments. They created NUMMI, a partnership with Toyota in California, and Saturn, a new division allowed to stray from the traditional GM rules and regulations. Both experiments were successful, but the learning that occurred at both was not embraced by GM’s core.

Interestingly, Saturn is currently on the sales block... it doesn’t fit the GM culture. Culture is hard to change. When you have a 70-year history of being the best, it is hard to see data that tells you that cultural change is essential.

As I write this, I have come to believe that, perhaps, Peter Senge got it right when he articulated the idea of a "learning organization" in The Fifth Discipline (Doubleday Business, 1994). Maybe GM just forgot to keep learning.

Having spent most of my adult life in and around the auto industry and considering the importance of that industry to the well-being of our country and the world, I would really encourage your comments. I’m at support@pqsystems.com. Please be sure to leave your comments in the "comments" section below, as well, so that others can share.

Discuss

About The Author

Quality Transformation With David Schwinn’s picture

Quality Transformation With David Schwinn

David Schwinn, an associate of PQ Systems, is a full-time professor of management at Lansing Community College and a part-time consultant in the college’s Small Business and Technology Development Center. He is also a consultant in systems and organizational development with InGenius and INTERACT Associates.

Schwinn worked at Ford’s corporate quality office and worked with W. Edwards Deming beginning in the early 1980s until Deming’s death.  Schwinn is a professional engineer with an MBA from Wright State University. You can reach him at support@pqsystems.com.  

 

Comments

My perception of automotive quality

As I read the comments above, I thought I would share some of my views on automotive quality. When I was at Ford WHQ in the late 70's and early 80's, quality was important because we were losing significant market share, mostly to Toyota, because auto customers somehow intuitively knew that Toyota's quality was 4 times better than the quality of any of the domestics. To oversimplify an extrememely complex subject, that meant that a customer could expect to have 4 repairs on a domestic auto during the warraty period. If they bought a Toyota, they could expect less than one repair. that's a big difference. That difference changed the game. It made quality important. I've come to believe over the years that customers notice big differences in quality not subtle differences.
I also believe that the quality of domestic autos has improved drastically since then. Since that belief is based on my own personal experience with Ford and Toyota vehicles and what my friends and colleagues in the auto industry tell me, I thought I should check it out before asserting that belief here. When I was at Ford we understood quality very well because we had plenty of hard data. Most of it was proprietary. Since I no longer have access to that data, my research is limited to two stories.
The first is that for the first time in 28 years, Ford is the best carmaker in terms of things gone wrong in the first 3 months of ownership according to the Global Research System study by the RDA Group. Toyota, as you can imagine was number two, but the difference was so small that it was probably statistically insignificant. This study was based on 2009 model year vehicles. Although it is only one of many studies, things gone wrong in the first 3 months of ownership is a very important leading indicator.
The second study I found is from Consumer Reports. It is a predicted reliability rankiing of 34 carmakers conducted, I believe, near the end of 2008. When I was at Ford, we certainly paid attention to Consumer Reports, but always validated their studies with other data. I assume this study was based on the 2006-8 calendar year experience of customers based on up to three years of quality experience with models that would be produced in the 2009 model year. The study shows Ford to be in the upper half of carmakers, GM to be in the lower half, and Chrysler to be toward the bottom in terms of reliability. Reliability is, of course, another important indicator of overall quality but, obviously, a lagging one.
Based on what I've written here, I believe the domestic auto makers are closing the quality gap. They may even be on the verge of catching up or surpassing the quality leaders, but it may not be enough. God knows, I wish them well.

The Learning Process

Mr. Schwinn,
Your concept of Listen-Lead-Learn can and should be incorporated into all sectors of American industry, not just the auto industry. Too often people & companies try to lead based on their own ideas or wants without listening to what the end-user wants or needs. This may work for awhile, but unless the right ears are listening, nothing is learned. Failure of a company to learn is a failure of management to listen. The Listen-Lead-Learn is a sub-culture of Change. The ability of a company to change (or not change) is directly related to both their ability to Listen-Lead-Learn and to their company's culture, which itself is difficult to change unless change is incorporated into the company culture.

A standard process for quality systems is Plan-Do-Check-Act. Wouldn't it make sense to have Listen-Lead-Learn applied within each phase of PDCA? As a manager of both Operations & Quality, I have the ability to promote & incorporate change within ourcompany but I too must first start by Listening. Thank you for the idea!!

Lack of Discipline and Process Improvement philosophy in America

I believe that it is the attitude of the North American World that we thought we had it all without considering process design improvements etc. I worked in the Pharmaceutrical /Biopharmaceutical industries for about 17 years and once worked in South Korea for about 1.5 years( 2005-6). The North American world just doesn't get it over here, due the the lack of discipline and quality improvement philosophy. I was told by the Koreans that they had no choice but to work hard while capturing process design improvements or else they would be forced (figure of speech) to eat either rice or have a couple of great dishes etc. The Korean's would work about 14-18 hours per day 6 days of week for the most part. I've witnessed what it would take in America to perform in 2 weeks of work including a few deviations from the process, the Koreans were able to complete the assigned work in 1 week with no deviations. In fact t one of South Korean's largest Biotechnology plant (Celltrion) experienced no FDA 483's( Food and Drug Adminstration Warning letters) as a start-up company. Japan experience the same hard-working and process improvement philosophy post-war, as exemplified by great quality cars from Honda/Toyota.

Allan Marinelli
Project Manager/Senior Lead Validation Engineer

Missing the Boat

I was recently in Spain and France. Since I work in an industry that has been impacted by the down turn in car sales I started looking out of the bus window at the types of cars on the road. It struck me that about every 10th to 12th car on the highways in France and Spain were Ford products. Very few GM or Chrysler products. Is it possible that these companies (GM and Chrysler ) were short sighted as to how important the off shore market could be to help keep them afloat?

Another Angle

Dear Mr. Schwinn,

Funny that your name is Schwinn, because I have suggested that some of these mega-dealerships convert into bicycle shops, as the green generation is here... I think you make a tremendous amount of sense. As a former district manager of mine used to say, "If you're not growing, you're dead." I think what he really meant was, "If you're not learning, you're dead!"

Having worked around the automotive industry from another vantage point and at a much lower level, strictly from a sales perspective, learning is key. I have sold cars, and I've sold automotive advertising for a living. How the advent of the Internet affected the sales process of a dealership is tremendous. The orderly, structured, dealer controlled method of operation became obsolete, yet today many dealers still try to operate under the old guise.

When dealerships were not only side by side on dealership row, but also side by side on the Internet, exposing all of their inventory online, with pricing, the game changed, but their methods of operation did not. The consumer is more educated than ever before and the sales process was basically designed for an ignorant buyer. Short of the Internet shutting down, and going back to the old days, sales practices must be modified, and it is no surprise that GM put Saturn on the chopping block as their mode of operation has always been a "hassle free" experience.

In a Saturn dealership, which is not a typical dealership, you can go in and buy a car in an hour, or not much longer. In a typical dealership it may take hours as the game is played. This failure to change has also been to the detriment of GM, in my humble opinion, and with limited perspective. The age of "pull the wool over their eyes selling" is gone. It is the age of the consumer. If corporations refuse to embrace that, then flip the switch and cut the Internet off. Otherwise, they should tighten their belts just like everyone they serve!

another angle

Thank you for sharing your experience. The "game" can take weeks, and research has shown that the price of a vehicle can vary depending on gender, race, and other factors, as well as the dealership.

Since everyone has a story about different manufacturers and dealerships, I believe that what it will boil down to in the end is how the customer is treated. If he pays more for the same car as his neighbor, or if he has trouble with his car that the dealership/manufacturer won't take care of, then it really doesn't matter what the brand is. The customer's perception of quality has been compromised and it's over. That customer will never come back.

US Autos

Mr. Schwinn,

I'm a fan of the Japanese car. When I met my husband, he was die-hard GM. Now he's Honda's biggest fan and wouldn't even consider purchasing an American car. He does all the work on our cars, from oil changes to rebuilds, so what he says counts in our house.

One thing that American car manufacturers do is that they discount the vehicles so much, that if you pay full price for one then you're a schmuck because in 2 months, the price on the car that you just bought has dropped $5000. And there goes your resale, as well. That's why foreign cars hold their value - because in August that Honda Civic will be the same price that it was in March, so a used one is still desireable.

Also, we see the issues that our friends and family have with their American cars. Rust is common. We own three Japanese cars - a 2000 Honda, a 2003 Nissan, and a 1995 Hyundai. There is no rust on any of them (we live in upstate NY). Our friends with American cars the same age have rust issues. My mother was "stuck" with GM products for years and had some electronic/dashboard issue with most of them. Now she owns a Hyundai.

When was the last time that you heard of a Japanese car being recalled because it burst into flames when rear-ended or was parked in the garage? What about getting a flat tire and rolling over? Ford and GM have had so many recalls for front-end and brake issues I can't help but be nervous about owning one.

Now, having said all of that, my 2003 Nissan Murano is my second Nissan and also my last. The cost of the parts for this car (133K miles) have bankrupted me. It is currently sitting in the driveway waiting for my husband to replace the burnt valve, which is a 22 hour job. So far we have had to replace a broken exhaust manifold, an exhaust pipe, and two of the three catalytic converters. But it's paid for, so we fix it because buying another car just isn't in the budget right now. I think that I should have bought American, because while I would have had just as many problems, at least I could afford the parts!

I hope that Detroit can get it together!

US Autos

You are discussing cars made many years ago. Have you looked at a car recently? I have a friend who has a 2008 Honda Hybrid. So far it has cost him $900 in one year of ownership in engine system repair costs. Honda will not cover the warranty. Maybe you should update your information.

US Autos

I don't consider a 2000 and a 2003 as having been made "many years ago," so I see no reason to "update my information." I'm not the consumer who trades in a car after 2 years. I put too many miles on them and after 2 years I'm upside down in the resale market. Therefore, I try to purchase cars that I can drive into the ground. The manufacturer who can build the most reliable vehicle will get my money.

I'm sorry that your friend is having a problem with his Honda. My husband owns a 2000 Insight hybrid and hasn't had any problems with it, except for the battery which was replaced (under warranty) at 140k. However, he's not impressed with the service that he gets at the dealership, and that counts for something.

To answer your question, I have looked at the new Insight, but since it only got a few miles per gallon more than my 95 Hyundai which is paid for, I didn't see any cost-benefit in purchasing it. The same story goes for every other car on the market, so until one of my cars is totally dead, there's no reason for me to go through the nightmare of buying another one.

Maybe what happened to GM will happen to Honda. If they continue to sit back and not take care of their customers as in the case of your friend, I'm sure that the market will take care of them as well.