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“They’re on you day and night. Their oversight is just too extreme. That’s why our 10-year loan, we paid it back in three years. We couldn’t stand the government. The bureaucracy kills you.”
Lee Iacocca in the Detroit Free Press.
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Because the Detroit Three automakers, of course, have no bureaucracy at all, and are dynamic profit machines in the absence of government loans.
Iaccocca was from a different generation of Americans – he was appalled at the prospect of Chrysler not being self-reliant, and therefore wanted out as soon as possible.
American business today is run by the baby-boomer generation – they are perfectly content to live under socialism, as it allows them to draw large salaries and not have to really earn them. Whether they build or create any wealth to leave to the next generation is of no concern to them.
American business wants to hide behind the skirt of government protection – simple as that.
tech 98: So two bureaocracies are more efficient than 1? You have to admit that Lee built a pretty nimble company, as large car manufacturers go, that was the envy of the entire industry by the mid-late 90s.
The same article was printed in my local paper. In it, Lee said that he would invest in Chrysler again, if he could. GM? No way, their problems are bigger and deeper.
The bureaucracy of the Detroit 3 is a freckle compared to the District of Control. Under certain circumstances, the Detroit 3 have made large profits. For example, Chrysler (yes, Chrysler) was very profitable about 10 years ago. And Chrysler was being run by none other than Robert J Lutz – Robert Eaton (chairman of the board of Chrysler) was the figurehead leader. They had something like $6B in the bank (which Diamler took during the merger of “equals” that Eaton engineered).
Chrysler in 1980 got one loan period and was told sink or swim with it, not quarterly handouts like today’s GM and Chrysler with a pay us if and when you can attitude.
“District of Control”; I like that. Precise and descriptive!
FloorIt
No government money was used. The government guaranteed privately made loans (totalling $1.2 Billion). I will keep saying it until the entire B&B can repeat this fact in unison: The government did not spend one dime in the 1980 Chrysler rescue!
We now return to regular programming.
Very important point, JP
I can identify Roger Smith, President Reagan, Lee Iacocca, and I think that’s Reagan’s Attorney General, Ed Meese, next to Iacocca. The only one I’m not sure about is Ford’s guy, which could have been Phil Caldwell or Don Petersen, but I have no clue what they look like.
I’m a bit surprised that Roger Smith doesn’t get more attention on TTAC. While he’s responsible for many of the things that helped squander brand equity, the modernization he shepherded at GM made it a modern manufacturing company and gave it a prayer of surviving in the face of Japanese competition.
Frankly, Smith would make a great subject for a serious documentary, not the caricature created by Michael Moore. I regard him as a tragic figure, almost Shakespearean. He was a physically small man who tried to do very big things and reshape the world’s biggest manufacturing company. Grand plans like the Hughes aerospace acquisitions, eliminating the divisions in favor of big and small car groups, GM’s move into robotics and computer based design.
The day will come soon when everybody in the RenCen will come to regret not filing Ch. 11 before getting to the point of needing federal aid.
The scariest words anyone could ever hear-“We’re the government and we’re here to help.”
Ronnie…. it’s Phil Caldwell
Ronnie,
That’s Phil Caldwell.
Roger Smith: the architect of the final decline of GM. Pretty much everything he did ended up a disaster. But I admit, Michael Moore didn’t get it right; he was only dealing with the effect, not the cause of GM’s plant closures.
Whut, the government’s deadlines cut into the golfing schedule I guess?
Chrysler could repay in 1980. They obviously had the ability as they were way ahead of schedule. Chrysler and GM today couldnt pay back one tenth of what they have been given, they know it, Obama knows it, and we know it. Oh, and we have to pay for it, almost forgot that.
I regard him as a tragic figure, almost Shakespearean.
Well, yes, especially in the karmic retribution sense that’s so common in tragedy.
He was a physically small man who tried to do very big things and reshape the world’s biggest manufacturing company. Grand plans like the Hughes aerospace acquisitions, eliminating the divisions in favor of big and small car groups, GM’s move into robotics and computer based design.
I think that was his problem: he thought big and bold, not incremental, and like a lot of big and bold thinkers, didn’t really appreciate that big and bold also means painful, expensive and prone to failure. GM needed Kaizen-type improvements, and Roger Smith was not a Kaizen kind of guy.
I like Smith, too, for the reason that he actually saw that GM had problems better than anyone before or since, possibly excluding Sloan. But Perot had him dead to rights in that instead of fixing the problems, Smith would go off on a tangent (robots, Saturn, the GM10) instead of making incremental fixes.
I supposed you could argue that it wasn’t possible to make incremental improvements at GM, or that Smith couldn’t make them, but I think that implies he was the wrong person for the job.
Iaccoca, though, gets far too much credit. Chrysler was still producing products with awful quality, and was still being wretched about warranty and customer service during and after his tenure.
Pretty much everything he did ended up a disaster.
Like I said, not everything was a failure. If Smith hadn’t promoted robotics and computers, the company might not have survived into the 21st century. Smith closed a bunch of old, obsolete and low productivity plants and built Orion and Poletown. While the GM-Fanuc j/v may not have been a profitable business venture, it helped modernize the automaker. Also, I’m pretty sure that it was under Smith that GM implemented CAD and other IT. GM owns more computers than any other company in the world. They have not one but three Cray supercomputers in the Tech Center. Much of this is attributable to Smith’s initiatives.
Of course, the times he screwed the pooch are manifold.
I supposed you could argue that it wasn’t possible to make incremental improvements at GM, or that Smith couldn’t make them, but I think that implies he was the wrong person for the job.
I suppose the best companies combine incremental improvements with game changers or black swans. It was not Kaizen that made Honda into a great company, it was some pretty bold thinking.
As I mentioned, I worked for DuPont for a long time and watched as the company switched from going for technological home runs (nylon, teflon, kevlar, Imron) to a mindset of “process, not products”. As a result, the company has made fewer game changing products, which is a shame. Almost all the best known DuPont brands and trademarks are at least 10 or 15 years old. The engineers and chemists at DuPont, like their counterparts at GM, are smart and talented, but they do what their bosses tell them to do.
The scariest words a person could ever hear: “Yer doin’ a heck of a job, Brownie.”
GM owns more computers than any other company in the world. They have not one but three Cray supercomputers in the Tech Center. Much of this is attributable to Smith’s initiatives.
GM owns more computers than any other company in the world? I was in a Google data center last week, no way GM owns more computers than the Big G. Perhaps you mean non-IT companies? I used to work for EDS, got a lot of exposure to the GM-verse through them.
GM’s IT topology reflects the Balkanized mess that is the company writ large. They may have lots computers, but they’ve got a lot of networks that can’t talk to each other, data-sets that are not portable amongst their platforms, and their inventory supply system (at least back in 2002 when I was in the loop) was in the Darkness of AS400-AIX land with some Novel pain thrown in. Just a mess.
As I mentioned, I worked for DuPont for a long time and watched as the company switched from going for technological home runs (nylon, teflon, kevlar, Imron) to a mindset of “process, not products”. As a result, the company has made fewer game changing products, which is a shame. Almost all the best known DuPont brands and trademarks are at least 10 or 15 years old.
I used to work for HP…ditto. Six Sigma sucks the life out of innovation like few other things.
I have no illusion that government intervention will do anything to help GM (other than give it more of my money to throw away until everyone agrees it is hopeless). But you have to acknowledge that the captains of free enterprise flew it right into the ground too.
I worked for DuPont for a long time and watched as the company switched from going for technological home runs (nylon, teflon, kevlar, Imron) to a mindset of “process, not products”.
There’s a difference between organizations that practive operational excellence and those that follow “process, not products”. I’ve worked for both, and neither are that glamorous, but at least the first was fulfilling and positive every day; the latter drove me to quit.
Large companies, though, usually tend to the latter. it’s very hard to institutionalize continuous improvement on a grand scale, especially in western business culture, because it means straying from the process continually, empowering the rank-and-file (in fact, trying to not even think in terms of rank-and-file), motivating the traditionally unmotivated, a loss of glory and, this can be a killer, a glacial and very public decision-making process that’s anathema to the traditional corporatist model.
jpcavanaugh, the guarantee of a loan has a definite risk, and as such a definite value.
Chrysler couldn’t get a loan without it, and couldn’t get a cosigner or a backer. If a commercial backer was available tremendous interest would have been charged; the insurer would have made money and hopefully not been left hanging.
The giveaways today (we can no longer call them bailouts, because they do not stop the sinkage) of course are unbelievable in comparison. Because of course the auto companies are just the primary receivers- the real receivers of this largesse are the debt holders of these companies. Read, banks.
The loan backing giveaway to Chrysler was most certainly not free nor did it reflect the true cost to the people of the USA. But boy, it looks almost innocent today in comparison.
Yeah, having the federal government as a partner is going to suck. But that’s the price to pay for the government’s money. Management at GM and Chrysler are going to whine, moan, and bitch constantly from now on about dealing with that bureauracy, conveniently ignoring the fact that without the same bureaucracy’s funds, the companies they work for would have ceased to exist.
CarnotCycle :Six Sigma sucks the life out of innovation like few other things.`
I couldn’t agree more! Six sigma is fine tool for analyzing production – but “six sigma for design” is a mind numbing paperwork generating waste, that serves no new purpose except to create endless meetings and unrealistic decision matrix that spineless middle mangers can hide behind while doing whatever is cheapest and easiest.
I don’t think Obama or the Bush administration ever expected GM or Chrysler to repay the money anytime soon, if at all. They felt that allowing them to go into an uncontrolled bankruptcy during the end of 08 or beginning of 09 would be too devastating for the economy, and in that respect, they succeeded in what they set out to do. Whether it was worth the money is another debate.
Why does it seem like the older auto leaders were more blunt? Lido Iiacocca told it like it was….so did Hank the Deuce. Why can’t the current leaders in the automotive industry tell it like it is rather than skirt around every issue?
Obama and Dem Soc’s aren’t interested in payback of loans. Control is the objective. In recognition of GM and Chrysler GSE status, put them all on Federal Civil Service pay grades.
“They have not one but three Cray supercomputers in the Tech Center.”
If true, that is part of the problem. Cray’s were outdated, underpowered and too expensive a decade ago. They do make an amazing museum piece though!
http://www.digibarn.com/friends/jamescurry/