When I was a kid – way too long ago – a comedic television show named Get Smart featured a mock spy who was terrible at lying. When he would get caught telling a fib he would immediately try to change his story, and his first line was always "Would you believe?". It was clear that you couldn’t believe, or trust, this guy.
General Motors (see chart here) has apparently reached a new agreement with the UAW. And the headlines screamed "Deal Gives GM Grip On Costs" (see article here.) The Chicago Tribune article goes on to quote several industry analysts/gurus making claims that GM has now resolved the issues that caused them to fear bankruptcy just 2 years ago. For example, the chairman of the Center for Automotive Research said "I think they’re competitive on cost now. There are no excuses after this." The consensus is that GM can now refocus on products, and regain lost share.
Would you believe……. ? Does anyone remember the auto company’s situation back in the 1970s and ’80s? They all cried "foul" that they could not compete effectively with Japanese competitors who had the benefit of a very favorable Yen exchange rate. Because the dollar was stronger than the Yen, the auto companies claimed they could not compete. Well, it was only a few years before the dollar fell more than 30% against the yen. And now, following a long decline, the dollar is at an all-time low versus the Yen, which is extremely cost favorable for GM. But do we hear any auto executive saying that their competitiveness versus the Japanese has improved? Rather, attention has shifted to labor contracts.
Companies in the Swamp and Whirlpool leap from disaster to disaster. Their Success Formulas are broken, and Lock-in keeps them producing poorly. They blame poor performance on factors outside their control, because they hope the world will return to conditions which will allow their Success Formula to produce better. They want the world to evolve toward their needs, rather than they evolve toward meeting market Challenges. Good luck with that approach.
GM has seen its market share steadily erode for 3 decades. And a look at the company’s stock price chart shows that long term investors would have received no value (other than dividends) over that same long period. Shifting its health care charges under a new labor contract does not change GM’s competitiveness. GM does not design, manufacture, market and sell its products as well as its competitors. And it has not developed any new businesses with higher growth and better profits. Most of GM’s competitors now make a large percentage of their cars in the U.S. just like GM, even though they are offshore headquartered, and they are growing sales, market share and making more money.
GM needs a Disruption and White Space – like the old Saturn division once was – to design a new Success Formula. GM’s new labor contract merely extended its demise a little longer. Investors, employees and suppliers need to beware of big promises, anticipate business-as-usual, and prepare for more pain.