Remember car maker Saturn’s slogan? A Different Kind of Car Company. The sad Saturn story is key to understanding the real but often overlooked problem with the North American auto sector. It’s not just about cash. It’s about the culture.
In the 1970s, products made in Japan were the object of derision, including their cars. The early imports from Toyota and Datsun were pretty lame. But they had one thing going for them: they were small. Had it not been for the oil crisis, Japanese automakers may never have established a beachhead in the US.
Detroit famously underestimated their asian competitors, whose quality improvements are now legendary. The “Energy Crisis” soon blew over and Detroit’s foray into the small car market lost steam. Despite the emerging threat from Japan, Detroit was resistant to change. But why?
For a host of reasons that are the subject of myriad scholarly papers and erudite business books, large, well established organizations have great difficulty changing, even when faced with their own demise. Endless “innovate or die” sermons fail to inspire the needed change.
Saturn was a ground breaking attempt by GM to avoid the “die” part of the sermon. Recognizing that rapid and radical change within GM was unlikely, they created an entirely new company, a different kind of car company, Saturn.
And the innovations came fast and furious. Plastic car bodies that never rust and resist dents. “Haggle-Free” pricing overcame show-room phobia. This new “user friendly” car buying experience was particularly attractive to women, whom Saturn wisely recognized was an untapped market.
Inside Saturn, managers tried to “flatten” the organizational structure, eliminating stifling hierarchies, promoting cross-functional teams and a “family” atmosphere. Saturn was a visionary experiment aimed at building a company of people who cared as much about making better cars as their Japanese counterparts.
Sadly, it didn’t work, and the failure of Saturn provides a metaphor for the failure of GM. Saturn could not match the Japanese on quality and therefor could not demand premium pricing. Smaller economies of scale for Saturn meant higher per unit costs, further hurting the bottom line. To make it, they had to sell for more, not less. But why could they not squeeze out the quality?
Japanese corporate giants have a long standing compact with their employees: give us your life and we will employ you for the whole of that life. Sacrifice everything for and you will never have to worry again. You do not work for Toyota, you are Toyota. From top to bottom, from mechanic to manager, personal goals and aspirations are interwoven with those of the firm.
In the North American corporate behemoth, by contrast, worker is pitted against management in an epic struggle for control. Company-wide egalitarianism and fair play are regarded as a delusional fantasy. Vast and excessive hierarchies fuel dysfunction in a Dilbertesque world where the incompetent lead the unmotivated. It’s a corporate culture that breeds failure.
Such is the plight of GM. It wants to change, it wants to innovate, it wants to compete, but it can’t, at least not to the degree it needed to to survive. It can’t change because it’s culture is hard-wired to resist it.
The current economic crisis cannot be blamed for the demise of GM. A company with GM’s resources and assets should have been able to weather this storm.
The solution? First of all, the focus on corporate culture needs to step out of the halls of academia and into the mainstream. Understanding organizational behavior can no longer be relegated to the status of a passing management fad. It’s real. And it’s serious.
GM should teach us that we need to rethink how human, intellectual and financial capital interact in the context of the large corporation. Smaller, entrepreneurial companies already get it. Ultra Mega Corps try to mimic the “entrepreneurial culture” of the start-up, but it’s often just gloss and showmanship. It plays well in the annual report.
Practically speaking, the reinvention of GM will need to do away with the concept of the labor union. Workers and management can no longer afford to be on opposite sides of the table. Workers will need to be company builders, not just car builders, and they will need to be rewarded like company builders, through a stake in the equity and decision making.
The CEO and top brass will need to embrace and practice a flattened management structure committed to knowledge sharing and innovation. The CEO and key managers will need to have come from within the company and enjoy the trust of all sides. A new mission and vision will need to be created, and not just some BS fluff that no one cares about. It has to be real and serious.
For GM 2.0 to succeed, it will need to be as innovative in reshaping it’s culture as it is reshaping its cars. I predict that it will. It’s do or die, again.
Two days after I posted the above reflections, Saturn was sold:
GM to sell Saturn to Penske
Penske Automotive Group, owned by racecar legend Roger Penske, will buy GM’s castoff brand.