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Alfred Sloan; transformed GM‟s operations; Multidivisional structure, characteristic of the company today; divided into five automaking

divisions, Chevrolet, Pontiac, oldmobile, buick, and Cadillac. Aimed at different markets “a car for every purse and purpose” General Motors: What Went Wrong? Thanks to Sloan‟s legacy, car was to reflect the progression in a person‟s life. Charlie Wilson GM President 1952 „What‟s good for the country is good for General Motors, and what is good for General Motors is good for the country.‟ Captures the ARROGANCE 1972; GM 4rth largest company in the world in 1992 40th largest company in the world; decline can be shown in December 1991-> CEO Robert Stempel announced huge downsizing. 6 plants were going to be closed and 15 more for in 1995. „Corporate Dinosaur‟, success breeds failure, arrogance and failure to adapt. The GM Culture: An American Institution-> problem managed like one, highly risk-averse, chronically slow to change, endlessly bureaucratic, and contemptuous of competition. Employees expected to be „team players‟ therefore NO questioning of decisions (breakdown of communication) 1988 Gm executive “our culture discourages frank and open debate. The rank and file of GM personnel perceive that management does not receive bad news well.” Issues got shuttered up the hierarchy; therefore no one was made accountable. Problem also on making numbers more than cars; due to dominance of the financial wing and „bean counters‟ management. Also market dominance not only gave no incentive for innovation dn quality but also antitrust regulators meant that profit could not be derived from more sales, therefore lessen the production cost (at the expense of quality) GM quality: Quality poor, just send it back also news didn‟t travel far in the corporation. The ‘forteenth floor’: Separation of the executives from reality discussing minor details and provoking huge inefficiencies. Corvair Nader and Campaign GM: Corvair built in 1959 had many safety issues, pointed out most prominently by Ralph Nadar. Change duw to public pressure did occur but onlu when Campaign GM took place 11 years after the launch of the corvair and 7 years after the book detailed the cars defects. It took this long to bow to public pressures and realize that GM was accountable to the market. New Trends: efficiency, quality, safety, the Japanese: 1970’s is a time when GM needed to adapt but failed to do so: 1) ever-improving Japanese quality and design 2) two oil crises, drove up the price of gas 3) federal regulation demanding better fuel efficiency and safety standards Honda and Toyota responded very quickly to the oil crises‟ and adapted to the market; sensed a market for smaller cars; focus on quality efficiency and reliability, late 1981 toyota could produce a car for 1800$ less than GM. Loyalty (through employement for life) created quality as well as being efficient and lean. Cars will built right the first time. GM continued to underestimate the threat despite Japanese car manufacturers growing market share, to 20 % in the 80s. Not only so but instead to adapt they lobbying. Passing of CAFE corporate average fuel economy in 1975 -> better for smaller cars as the act was becoming weaker and weaker (approving loophole after loophole by congress); half-hearted competition; VEGA, X cars and J cars, disatourous (failed to re-engineer).

5$ billion in loss. 1) reforming GM‟s bureaucracy 2) purchasing advanced technology 3) attempting to instill an entrepreneurial spirit in the company Organizational Reform: GM had become more centralized. Production line wasn‟t quick nor adaptable enough. sheer size made it expensive. Creation of ChevroletPontiac-Canada (COP) and Buick-oldmobile-cadillac (BOC)-> restructuring.000 workers= 300.000 workers. building plants in mainland U.S. 500.. £5 billion.2$ billion for hughes aircraft. 1983 -5. Purchase of new technology: Smith. GM Saturn plant. . in the entire year.S> 1990. 3. later on it produced it for more than the other two. Sloan‟s view of centralized policy and decentralized administration eroded. Deteriorating Results: GM became less competitive where before it could produce a car for less. opportunity not fully wasted on Ford and Chrysler due to their near death experience but was on GM.000 pontiac looked similar to a $25. 1985 Desire to respond top niche markets as they appeared. opportuni9ty to catch up and improve efficfency. The Smith era: Smith view saw the car industry as a electromechanical one. robots and such throughout the 80s 90$ billion GM spent reforming. The trio lobbyed for protection against the Japanese. as old structures dismantled with nothing to replace it. 500. 50$ billion on new technology -japanese robot manufacturer Fujitsu-Funac 1991 -saturn built in new plants with new technology.000 cars was the goal more than Nissan madde in the U. fisher body.00 cars. $600 million. resulted in record profit. keep them out rather than compete. Japan roars back: Circumvented import restrictions. All cars made by a single division. 6. 1983 -NUMMI New United Manufacuring Inc. disastorous for GM‟s luxuray line.000).00 compared with Toyota‟s 40. Needed huge volumes of sales to make developments profitable (100. japan voluntarily limited caqrs it would ship to the U. resulted in huge inefficiencies GM-10: Flop due to reorganization created chaos/ havoc with management: -responsibilities shifted and were left undefined -program manager was replaced -needed to change car design so as not to resemble the ford Taurus Look-alikes: Line of identical looking cars so that a $9.The 1980s: 1979: ford recorded 1. ten year tenure as CEO. Japanese management. creatred Chaoes. 1981.00o Cadillac. usually the most profitable of its business‟. They did accept that chane was needed. Smiths strategy had three main themes. enough to bankrupt them. even worse for Chrysler. Saturn: hugely ambitious.000 cars. Profit margins were not as high as the other two.s. 1981 new CEO Roger Smith. Honda‟s US factories. 8 Japanese manufacturing plants in the US.

Superior management rather than technology that made them superior. smith treated the labor badly. GM at the time did not appreciate criticism WALL street Journal states board meetings “were like ceremonial events. paled in comparison to the prestige associated with sitting on the GM board. Smith kept loyalists on key committees. GM traditionally progressed hierarchaly. Tried to solve problems without addressing their underlying causes. Also attacked board and reminded the directors of their duties to the stockholders stated that “is the board a rubber stamp for Roger? . yet no personal wealth commited to GM 1988 Prat owned 100 GM shares despite being on the board for 11 years-> prestige of serving on board and too much to gain and too little to lose to shake things up.” Failure of leadership. where was the board?. Toyota= 5 layers of management. Keller commented “acquiring EDS and Hughes was like a four-hundred pound woman coloring her hair and doing her nails. Agreement seemed paradoxical-> GM would pay 2. managed by EDS executives setting its own compensation practices and answerable only to Roger Smith and the GM board. Smith saw the payout as obscene. Non-executives paid $45.Targeted luxurary market. Among the 11. cold reception. nationaon‟s premier corporation. Hjad gone to a GM dealership. due to limitations on export would result in greater profit margin. how would they pursue his vision if it ultimately meant that they would be sacked. It wasn‟t tackling the real problem. board became ratifying council for the committees.000 GM employees to EDS. yet EDS would remain independent inside the parent company.55 billion for EDS. cars were hard to sell as they were riddled with defects. whu get a space-age engineering company when GM couldn‟t even build cars-> throwing money at the problem would not help. represented everything that was wrong with GM-> big thoughtless appending with no regard for the company‟s most basic problems. -Also EDS saw major inefficiency and money wasting in GM but were not allowed to help. 3 members of the board reported directly to smith. not results orientated” where business matters that should take minutes took days or weeks.. Relationship became more contrained. GM= 14.” Smith exerted control via board committees. GM dragged its feet in the lavish stock bonuses offered in the merger agreement. if not to replace management.8% of stock) guaranteed EDS business that was 33 times EDS‟ current earnings. important moment is shown with the acquiring of hughes aircraft for 5. the realization that its greatest asset was the people. Problem of corporate governance. where senior management was seen to be isolated from the people. transfer of 10. with no real information. GM didn‟t take advantage of its profits to re-invent towards the Japanese standards. where GM data-processing department thought they should be getting discounts.. board‟s job to see that management has adopted sound strategy and executes it competently. Dramatic speech stated that GM was “procedures orientated. Perot became GM‟s largest individual shareholder (0. Due to be given in 1984. -issues on compensation. in a very short time-> Perot‟s love of performance based incentives. yet EDS charged premium prices for new technological equipment.000 a year and received a new GMK every quarter. 4 had no business expertise.2 billion. delayed cause. where the board played on. 1980s difficult decade. General Motors and Ross Perot: By buying EDS „Electronic Data System‟ smith hoped that which made it successful (efficiency) would rub off on GM. Issues arose already from the beginning. EDS executives amassed huge bonuses. -GM used to bully suppliers.

90 for his $33 shares. Robinson. it was as much to blame of the downfull if not more than smith and Stempel. ran so low on cash the stock rating threatened to downgrade. Jack smith new CEO and john smale as chairman. Behind the boards activism was Ira Millstein.Hell no. Though despite the celebration of the boards activism. What the board had learnt is that no company can remain unaccountable to the market forever. Downsizing thus occurred. Baton should not be goven to another finance man where the old CEO keeps a chair on the board. where the traditional approach was seen as troublesome. Sate of Wisconsin Investment Board (SWIB) angered at all these dealing dn complained but one call to governor to stop projects in the state stopped protest. First time that the chairman did not get his way. Post-Perot board: Feelings did change with the disillusioned board members retired such as James D. been busy going to meetings with board members and investors. Pressures increased from board that started to pyublicly/ symbolically put pressure on him -demoted from post as chairman of the executive committee -lloyd Reuss stempel‟s right hand man. GM wanted to buy hime out offereing 742.perot was shocked. Smithn failure became clear as in the boom years losses were made so that when the bad years came there were very few savings left. This points were raised by California Public Employees retirement System (CalPERS) and teh New York State Retirement sustem (NYS). yet Stempel was a reluctant revolutionary and was not radical enough for the board that perceived that major changes were required. we‟d have to upgrade it to a rubber stamp” telling business week “revitalizing General Motors is like teaching an elephant to tap dance. Increase in downsizing to accomadate its decreasing market share. no space for freshness.8 million for his stake in GM offered $61. On October 26th 1992 Stempel resigned as CEO and Chairman.. lost his job running North American operations and replaced by Jack smith who had run the European operations. This was such a surprise for a company that was usually financially rock solid. GM‟s outside counsel. When stempel went to Japan with Bush theyu all met in private ( a rebellion that would have never occurred under Smith. It has sworn that such complacency will not re-occur with GM‟s chairman outlining eight rules for building a better board . Lost this round but won others Nonetheless Robert Stempel took over in 1990 and was an engineer smith kept a place on the board. continued conservatism. More controversies appeared with the nearing of the end of Smith‟s tenure. chance to assert independence in 1988 when smith wanted to add 3 more officers to the board and was rebuffed. Another factor growing activism of GM‟s shareholders. chairman of American Express or GM‟s general counsel Elmer Johnson.” Infuriation with Perot. 3-year straight losses. therefore power of shareholders were also lessened. It took five years since the 1988 smith rebuttal for the board to summon the courage to do its duty. Even the pension funds were suffering.