When still in college and minority partner (he gave me 3% to keep me)...boss assigned
me to a large contract (we were 2nd or 3rd...can't remember now) to automate
a Ford Factory
We were the controls and the prime did the mechanical stuff
In presenting to Ford's GM of that factory...my business class kicked in with
the issues and risks section
During that section...the Ford GM leaned over to his #1...asking 'what is ROI' ??
Amazing...but kept going
The GM then asked the prime if they agreed with that...the prime said maybe not
the 4-5 years he said...more like 2-3 (trying to recoup). GM said why the difference
and I responded that it depended on sales and numbers shipped.
He got up and walked out and heard him tell #1 to "kill this"...even though he
authorized the ~$50M seed money for this venture
Learned during my 'royal chewing out' by the Prime...that GM's raise/promotion
and the biggie...his BONUS was based on quarterly performance
He was NOT going to risk his quarterly and yearly bonus, as he would NOT get
any bonuses for a few years.
BAD decision for the corporation, but a GREAT one for himself
Been watching, reading, etc ever since. As Detroit got their lunches eaten
and sadly...we too, as we lost out the Japanese and German controls corporations
during that decade
Not just automotive, but everything. Ditto all that during the decades after
that both in the industrial controls market and my last at Sun Microsystems
as an acquisitions manager....to continue to see that to this day in retirement
and consulting
Got tossed out of executive staff strategy meetings (my group was the
'strategy and planning'...the old M&A moniker) because spoke up saying outsourcing
was okay for the assembly (still said not a good idea...bottom line mentality)
but worse if they outsourced engineering and our crown jewels
They continued and foresaw how 'we' paid 'them' to become our peers and competitors
with 'our' money and 'IP'...
Common thread for those who understand the big picture, but lost to those with
'bottom line' mentality and vision.
This article says it on a one pager, where it takes me several, but smack on
topic and has mention of Detroit being one the ground ZERO for the change from
'managing their product' to 'managing their bottom line'. Huge arguments with
my last boss (he finally laid me off after being save by CEO and other GMs)
He became the CEO and ran a $17Billon per year corporation into the ground
where Oracle scooped it up for a song. He also made the #1 spot on the Wallstreet
listing of the worst CEO's in American history
He did NOT understand, nor cared to manage the corporations 'product'
but always referred to managing to the stock price (bottom line
or as the below article refers to...'financial management' instead
of 'product management'
Will say that have noticed that some of the Japanese corporations now
also manage to their bottom line. The Toyota throttle issue is a prime
example of that. That is part of the 'lean' methodology that is now
the rage in the US...as was 'just in time'...all miss the mark as
they only took a 'component' of the whole...it is more a culture of
HOW2 manage...sorry, will get off the soapbox, as on this topic can
go on for hours...
The Big Picture- Street Smarts
Who else should be blamed for the decline of America's two remaining automakers?Text:
MotorTrend wrote:
Wall Street hasn't done Detroit any favors over the years. The Street is supposed to be the hard-nosed arbiter of success for corporate America, the white-hot cauldron of capitalism that's made this country's economy the most powerful in the world, the place where the money talks and you-know-what walks. (Though having allowed Enron to happen, Wall Street seems no longer to see the difference.) And, yes, Detroit has hardly covered itself in glory over the past 30 years. But I can't help wonder whether Wall Street should share some of the blame for the decline of America's two remaining automakers.
Let's be absolutely clear up front: Few people buy stock in a company for any reason other than they expect a return on their investment, and stockholders in auto companies are no exception. But in an era where screen jockeys zap billions of dollars a day through the ether at the touch of a computer keyboard, Wall Street's institutionalized ADD has resulted in a feverish short-term view of a business whose lengthy product cycles and huge investment costs are just too damned difficult to deal with.
Maybe that's why many of today's most successful automakers--Toyota, BMW, Porsche, to name three--are those who've never had to sweat a quarterly earnings call with a posse of skeptical Wall Street analysts looking for an opportunity to make a fast buck and ready to trash the stock price when they can't see one. To these companies, the concept of shareholder value has a very different meaning: "I don't watch {the stock price}," Dr. Shoichiro Toyoda once told Toyota North America president Jim Press. "I'm not going to sell my stock. If I worried about that, the decisions that I make wouldn't reflect the fact my name is on the back of every car."
Most Wall Street analysts will tell you Toyota, famously stingy with dividends, doesn't treat its shareholders well. But its stock is worth roughly four times that of General Motors. Go figure.
As Pulitzer Prize-winning author and journalist David Halberstam records in his book, "The Fifties," Bunkie Knudsen, who ran Pontiac and Chevrolet in the 1950s and 1960s, reckoned it all started to go wrong for Detroit when Fred Donner became president of GM in 1958. Knudsen was outraged that Donner would insist on talking about GM's stock price, and what the analysts on Wall Street thought about it, at his daily meeting with the heads of GM's divisions. Before Donner, those meetings were mostly about making cars.
Financial engineering quickly replaced product engineering as Detroit's primary business. GM and Ford essentially morphed into highly profitable finance companies with an auto business attached. That meant you could easily get a great deal on a new car. Only problem was, that new car wasn't always so great anymore. But the fat earnings on the loans and lease deals made the business look good and that kept the stock price pumped.
It's a sign of how entrenched this view of Detroit's business model has become that GM's decision to unload a majority share of its finance company, GMAC, earlier this year was treated by many as something akin to selling the family farm. But the sale is good news, because it means GM is shifting its focus back to its real business: designing and engineering cars and trucks. Meanwhile, over at troubled Ford, there are rumors the company may buy back its stock, now worth barely 15 percent what it was in 1999, and become privately owned. I hope the rumors are true, because Ford will then be free to concentrate on what it needs to do best: make cars and trucks.
Bunkie Knudsen, David Halberstam writes, believed in a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock. If only it were still true...