Former GM Vice Chair Blames ‘Management Incompetence’ – Not UAW – for Detroit’s Demise

My grandfather worked at GM. He was neither Union nor management, but worked in the design department. His viewpoint of GM's demise was that the people at the top cared about making profitable vehicles while the people at the bottom cared about jobs. The people in the middle (engineers, designers, researchers) had to struggle with upper-level management who disliked any costs whatsoever; this was unrealistic since innovative products sometimes need to have a lot of money invested initially like Toyota did when they engineered their extremely successful Lexus LS400 model. The people at the bottom didn't care so much as long as jobs were preserved or even added a couple in the process. Also, the union fought continually with management because management persistently tried to eliminate union members from the business. This created enmity among the workers towards management and vice versa. My grandfather said this sapped the energy from the business because management simply cared about the bottom-line, the shareholders, and their bonus whereas the union fought for the financial considerations of its members. This detracted from the business, which was to make great vehicles. To say that GM failed simply because of the Unions is an extreme oversimplification and arguments based solely on these grounds are unrealistic. Yes, unions caused part of the problem because they focused only on pay and benefits for its members, but didn't tie these incentives into quality. However, management was also to blame. Lutz said it best, which was that management cared about numbers. They were always trying to find ways of cutting cost, which is good, except when it comes to worker safety, customer safety, customer service, product reliability, and reasonable benefits for workers.

Lastly, my father worked a summer job for Ford Motor Co. while he was in college from 1968 to 1971. He said the unionized assembly-line workers were paid close to $100,000 a year. Yet, although they were paid a high wage, Ford was still able to sell vehicles at a competitive price. Moreover, many of the union workers owned two Fords themselves and bought another for their kids or other family members too. Thus, they were loyal to the brand. But Ford suffered the same problems that GM had, which was the constant battle between management and unions. On a side note, my father's 89-day (because 90-days meant he would have had to join the Union) summer job covered his entire expenses for college including rent, books, tuition, fees, clothing, and medical care for the entire school year. Why was he paid well? Because Ford didn't want him to be in a union. Therefore, the existence of unions raised the wages of non-union workers as well. The benefit was that my father didn't need money from the government or from his parents; he was able to be independent and stand on his own two feet.

Passion- Look at the Japaneze & Germans. They care about what they make. Our business model makes the unions fight management and no one cares what they make. Healthcare for me has nearly tripled in 10 years and I switched my provider and coverage. What has Detroit made lately? Mustang, Charger, Silverado.....they made those 40 years ago. What is R&D doing? nothing. When R&D goes the whole company goes because you have no new products. I learned that the hard way. B school people should be forced into factory floors and learn from the ground up.
Back to passion.- another business. Music. Read a book about any "rockstar" and how they
made it. 99% of them made no money. It took them decades to get a living out of it, How did they do it? Passion, they loved what they did and that is what carried them along. You can't teach that in B school.

Then why did he not do something about it when he could.
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Engineers understand how to make things work and focus on making great products, where management's focus is on maximizing this quarter's profits by cutting costs. Too often cutting costs results in cheap, non-durable components being used in products, high warranty costs, and annoyed consumers that won't ever be a repeat buyer, yet the CEO and upper management still get their huge bonuses. When business decreases, the first place cut is R&D, and the engineers who designed a great product that ended up being mediocre after all of management's cost cutting was implemented are laid off. If management would regularly listen to their engineers (and their skilled laborers) and share an equitable share of the profits with them, their products would be much better, consumers would be happier, and sales would increase. As it is now, too many products and components are made by slave-labor migrants in China solely because of cost, and in most cases it really shows.

You are so right Mr.Lutz. Look at the junky looks and shabby build of the GM cars during those B days.

People continue to miss the point in the comments posted. The point is simple, make a product that people will want to buy. Do not go around in circles with management this and union that, it's pointless.

I think he nailed it. And it applies across the entire business spectrum, not just automobiles. He completely described the American public view of Wall St. and business management.

THANK YOU!

Management walks around like a bunch of Zombies thinking they DESERVE a raise regardless of their management of a company, and take from the workers if they(THE GENIUS) can't get it right.

If you can't manage a business then GET OUT, there are plenty of workers that can come up with ideas to manage the companies without you! YOUR NOT WORTH YOUR PAY!

Here some of you keep blaming unions. While some of them made $50K - $60K ,none were making $10s of millions. You blame unions, for wanting raises, when they were doing the actual work. While not saying anything about the management wage increases. Why shouldn't the workers expect a decent raise, if the managers are getting $10s of thousands in raises? It must mean the company has plenty of money. They always talked about the labor rate, but didn't they realize their wages were part of the labor rate. Management payroll didn't just materialize out of thin air. Plus they had an over abundant group of managers.

The big question: Is management still incompetent?
I still see GM recalls
I see the return to high risk finance
I see an over supply of gas guzzlers vehicles.
I still see GM hiding behind Daewoo and Opel as "Made in America"
And the UAW still lives in a world of entitlement.

Bankruptcy only fixed the balance sheet. Old GM is alive and well.

What exactly is a Masters of Business Administration, "MBA" anyway? The fact you can get a "masters" degree without a bachelor's degree in the subject area should tell you something. Again, you are a master of what?

fala

It don't take a rocket scientist to understand this problem. I waited 10 years for GM to outdo the Toyota Prius. They never did. The Volt at $40,000.00 plus is not competitive with the Prius at $23,000.00. The Japanese auto worker is better paid than an American. So the difference has to be in executive compensation.

Finally got a thinker rather than a parrot.

"Management incompetence" - never should have agreed to the lavish union benefits.

I like Bob Lutz, and I agree with him that management incompetence was the primary driver of the past failures of the U.S. car industry. They did lose their passion, to design and build the most innovative and highest quality vehicles in the world. Lee Iacocca single handedly drove Ford into a ditch with his relentless cost cutting. I.e. Pinto gas tanks and using substandard parts to save a nickel.

However, it is overly simplistic to portray this as solely a battle between the car guys, and the bean counters. This falls at the feet of senior management who should have been anticipating paradigm shifts such as the 70s oil embargo that allowed Japanese manufacturers to steal market share with their fuel efficient vehicles. It is also senior management���s responsibility to be hands on in managing the conflicting demands of producing high quality products at a price people will pay.

Apple���s mission statement is ���Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.��� By delivering the best, most innovative products, you can earn above market returns and provide funds to generously pay your employees and investors will want to buy your stock. However, don���t for a moment believe that Steve Jobs does not care about the cost to produce an iPad. He knows exactly how much he can sell his product for, and manages engineering, and production to deliver on that target.

GM, Ford, and Chrysler of the 1970���s looked nothing like Apple Computer. They were an oligopoly with a near monopoly on the domestic market. They were used to being able to produce products that were neither innovative or high quality, and achieve a good return doing so. This changed with the oil crises and the introduction of global competition. Senior management kept going back to the same play book which was obsolete. It is easy to blame the ���Bean Counters���, but the real culprit was the monopolistic environment that the domestic auto industry enjoyed prior to the mid-70s that caused them to completely lose their edge.

"Management incompetence"
Well, duh. Foreign manufacturers have unions too and did just fine. The idea that the problem was ever blue collar workers getting enough to join the middle class should have been ludicrous on its face.

Bob Lutz, is right on. It is what is taught in the MBA programs that have led to the demise of America with too much focus on the bottom line. Good job.

2000 jobs for Detroit, 2,000,000 jobs for China!
Lutz of luck!

I'm suprised he didn't blame George Bush.

Unfortunately the described environment still exists across the industry. Automotive engineers trained and experienced in solving problems (challenges) come up with innovative solutions (sometimes earning patents), but often get shouted down by Program Managers who are only interested in finding the cheapest possible way to build a car that just barely meets (or perhaps falls slightly short) of the stated requirements, while using existing competitive vehicles as a benchmark. God help the Engineer that overachieves, advancing the state of the art, and blows the competitive model out of the water - that is an unnecessary expense for the bean-counters. It creates an environment of hostility against thinking and innovating "outside of the box" as "too risky" and too expensive.

Folks look at the Chevy Volt as a remarkable achievement. The fact of the matter is, Aerospace Engineering pioneer Burt Rutan, a close friend of Alan Mulally, openly discussed his vision of a compact-sized electric vehicle, with a small internal combustion engine-powered electric generator in series with the battery, to extend the range of an EV after the main battery was nearly depleted, published back in the May 2006 issue of Automobile magazine. GM, to their credit, simply took Burt's idea and ran with it. Ford was so focused and determined on optimizing development the parallel hybrid system (similar to Toyota's) that the series hybrid approach slipped by Ford's with little more than a sniff. Ford engineers would have loved to produce that serial hybrid system, but the Program Management teams chose the other parallel hybrid path exclusively.

Not that there is anything wrong with Ford's parallel system - it significantly improved on Toyota's designs. But ignoring and shooting down "the other way" has placed limitations on Ford's options in the electrified vehicle arena. Chances are Ford would have to license GM's patents in order to develop and sell something similar.