About 30 years ago I was in business school studying Japanese business practices. As the country transitioned from the 1970s to the 1980s, Americans were scared to death that Japan was going to take over America economically. The Japanese auto invasion was in full swing, and American auto company leaders were begging for government help to stem the tide of the onslaught from Japan. It wasn't just car companies begging for help, the steel companies were in line as well. It seemed all American manufacturers were claiming the needed support from predatory offshore pricing by Japanese manufactureres. Many Americans, still remembering WWII, were sure this was Japan's second attack on the USA way of life.
As I studied Japanese practices, I asked my father about the country. He was a WWII Navy vet, serving on a battleship in the Pacific, and his opinion was that Japanese would do anything to win. He spoke with reverance about how Japanese would sacrifice their lives as Kamikaze in an effort to win the war. And as I learned about Japanese business leaders, I learned that they felt so compelled to succeed that when things went wrong they felt compelled to commit suicide – often using a form called hari kari. I learned that cultural pressure to do the right thing for Japan was so strong that Japanese leaders would kill themselves to "do the right thing" by societal standard.
It was crystal clear then, as it is now, that America and Japan had very different standards for its leaders. Today, America's auto companies are of no economic value. To survive they are demanding help from the American government (read article here.) But none of the leaders are committing suicide, or even appear close to considering it, for the demise of their companies and the difficulties on their employees, suppliers, investors or the American citizens they ask for help. In fact, none have even recommended they may have erred and need to be replaced. They keep their past bonuses, and continue working. What's surprising, is that they even seem to be negotiating for themselves – as now the discussion involves what will happen to them as well as the bondholders and employees —- as if the payroll and bonuses of management is equal to the repayment of bond holders that invested their money 30 years ago in the company!!!
Yet, the American administration seems content to allow this sort of negotiation. There are no cries for the leadership in these companies to resign. In fact, the promised "car czar" that would make sure the industry is really restructured to be competitive has been dropped (read article here). And the car company management keeps negotiating – putting bondholders, equity holders, vendors, the American pension fund guarantee organization (ERISA), the unemployment compensation system and the healthcare systems of Michigan and Ohio at risk. Why management even has a voice in this negotiation is unclear – given they created this crisis. Why they are leading this negotiation is doubly questionable. While some people seemed paranoid about "socialism", is it better to have the fox negotiatiing access to the hen house? As mentioned earlier, in other societies it would be questioned why they are still alive. (I am not recommending that the auto leaders should commit suicide nor that their lives be threatened – but isn't it surprising that these leaders which led these companeis to the brink of failure are still employed in these positions? Shouldn't forced resignation for failure be part of this discussion?)
Few Americans would disagree with the desire to maintain a viable and strong American auto industry. The costs of failure – to health care, to unemployment compensation and to pension costs – would be economically devastating in the midst of a return to the Great Depression. But why are these leaders being asked to create the solution? If they could not create viable and strong companies when times were relatively good, why would we expect them to save the industry now?????
America's auto leaders have Locked-in to an industry model that does not work. They have allowed offshore competitors to grow and succeed despite considerable government assistance with measures to protect their pricing. Even with government help, and a lower valued dollar to help American manufacturing, these leaders could not develop a Success Formula that was viable. Meanwhile, Japanese manuracturers came to America and opened plants which made products Americans wanted, and at prices Americans would pay. Clearly the Success Formula the American auto leaders kept trying to Defend & Extend was not viable. Yet, we are asking them to develop a solution for the future – and one that puts management's compensation on the table as part of the discussion?
America once led the world in shipbuilding. Liberty Ships were a big part of winning WWII. But today there is only one shipbuildinger left on shore, and it survives only via economic protection. If we allow leaders who failed to control the negotiation, we cannot expect a viable new solution to emerge. These leaders have been blaming the old problems for 4 decades, but unwilling to Disrupt and implement White Space for just as long. If we are to build a viable industry, doesn't it make sense we will take a different leadership team to negotiate the solution as well as implement it. If you won't ask these leaders to hold your wallet – if you won't lend them more money to bail out their problems – why are we allowing them to lead the negotiation to develop a new industry? Isn't it time to find someone who can replace them with a new solutoion?