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The Big 3 – Shining Examples of Good Change Management Practices

By now we’ve all seen video gems just like the one above, even if we were trying to go on a media fast. The CEOs of the Big 3 U.S. automakers – General Motors, Ford, and Chrysler – showed up in Washington on November 18 begging for $25 billion and had essentially no plan for how they were going to use that money to make their businesses sustainable. Unsurprisingly, they got a big, fat $0, but now they’re back (but will be arriving in hybrid vehicles, not corporate jets) and have “plans” for how they’re going to use $34 billion to shore up their business and hope to survive for another year.

(Note: If you’re not much for rants, skip the next paragraph or two.)

As a native of the Upper Midwest, I’ve been watching the Big 3 flounder for decades now. When I was a kid in the early ’80s the companies all went through their first huge rounds of layoffs, devastating communities like Flint and Detroit, Michigan. I saw them put out garbage products like this. I also saw how the Midwest’s economy is deeply, inextricably linked to the health of those 3 companies.

Essentially, if the Big 3 fail, it will effect everyone in Michigan, Ohio, Illinois, and Ontario, Canada (and lots of people in many other places) directly or indirectly. That is because the Big 3 are the largest direct or indirect (through suppliers and other vendors) employers in many, many communities. They are also the biggest taxpayers to state and local governments. If their pension and health care coverage ceases, hundreds of thousands of retirees will be forced to seek public assistance. Laid off workers will present huge burdens to the public and nonprofit social welfare systems at the state and national levels. Plus, there’s all the ripple effect on the national economy. If all 3 were to go out of business (unlikely, but possible), the U.S. economy could loose 3 million jobs and $250 million in personal income within 3 years. More than likely, my own father would be among the ranks of the unemployed. He’s a tool and die maker and works at a shop that relies on Ford for most of its business.

(Note: Okay, it’s probably safe now.) 

Now that the Big 3 are all on the brink of bankruptcy, I want to share with you some ways that you and your company can grow up to be just like the Big 3. I don’t want these guys to fail, but they only have themselves to blame if it happens. I have combed my memory, the Internet, and little bit of change management material and identified the following 5 ways that you can create a bloated, obsolete dinosaur of a company.

1) Build Protectionist Walls Around Your Business. The Big 3 have worked with Michigan lawmakers for years to put legislation in place that attempted to protect them from competition. They have lobbied for tariffs on imported cars, fought increased fuel efficiency standards, and pursued subsidy after subsidy.

Why this is bad: The Big 3 have been classic change resistors and the lawmakers who helped them haven’t done them any favors. By fighting fuel economy standards, they have been attempting to drive the market, rather than allowing the market to drive their product offerings. Instead of trying to build products that would be more attractive to buyers, they have focused on forcing foreign car makers to price their cars higher, while trying to keep their costs a bit lower through tax breaks. It was inevitable that companies like Toyota and Honda would find ways to out-innovate them and build good cars that people actually want to buy.

2) Take Advantage of Customer Loyalty by Building Lousy Products. In the 1970’s and ’80’s the Big 3 turned out some god-awful heaps of metal. Trust me, my first car was a 1978 Buick LeSabre. I know junk when I drive it.) Coincidently, this was at the same time that they could have capitalized on HUGE customer loyalty from the WWII generation and their Baby Boomer children. Instead, they forced those customers to look elsewhere for well-made products.

Why this is bad: Reputation is everything. It takes a long time to build, and an even longer time to rebuild after its been damaged. Even though the 2008 Consumer Reports most reliable cars list includes many Big 3 products, most people still think of American made cars as less reliable than German or Japanese machines. In fact, Big 3 product quality has been increasing for almost 20 years, but they get very little credit for it.

3) Assume the Future Will Be Just Like the Past. The profit model at all three of the Big 3 seems to be based on the thought that huge trucks and SUVs worked well in 1995, so they’ll work well in 2015. Well, gee. Anyone ever heard of Peak Oil? Even though gas prices have backed off from the $4 gallon of this summer, it seems like people have realized that fuel efficiency matters and is going to matter until a real alternative energy source becomes available. The Big 3 waited WAAAAY to long to start developing appropriate technology to address these issues and now they’re so far behind that it will take MORE government subsidies to get them making competitive hybrid and efficient conventionally powered vehicles to meet market demand.

Why this is bad: Look, it doesn’t take a futurist to figure out that things are going to change. Read some freakin’ newspapers!

4) Wait Until a Crisis Hits to Try to Change. Sure, the Big 3 were slooowly retooling their product lines to produce more attractive products, but they needed to be hustling, not crawling. Now, with the contraction of the consumer credit markets and an all-out recession spreading internationally, they are well and truly screwed. The Big 3 were not prepared to handle any slack in their sales and now they have to try to change rapidly without the money to pull it off.

Why this is bad: The best time to change is when things are going well. Every try to steer a car with a blown tire? That’s pretty much the same situation that the Big 3 are in. Regular processes for surveying market conditions and changing to meet those conditions – or innovate ahead of them – ensure that a company is producing desirable products. Instead, the Big 3 are going to have to scramble to bring something to market that people will want to buy.

5) Blame Others, Beg for Money, and Reject Sound Advice. I would have embedded this video with GM President Fritz Henderson, but CNN won’t let me. In short, he is completely rejecting the idea of GM filing for bankruptcy despite the fact that this move has been suggested by many people who know the auto industry well. Now, no one likes the thought of their company going bankrupt, but in this situation it may be the best option available. What Fritz doesn’t realize is that it isn’t his choice anymore. It’s now up to Congress since another “No” to their funding request could put them under in a matter of months.

Why this is bad: As mom always said, “Beggars can’t be choosers.” It’s way too late for GM (or Chrysler, or Ford) to negotiate from a position of strength. They better just cross their fingers and pray that they get some cash to keep themselves solvent for a while longer. Bankruptcy may or may not be a good option, but that is now up to the people that write the checks. In my view, the current publicity campaign reflects the same insulated thinking that the Big 3 have practiced for decades.

Okay, enough of me ranting. I know many of you have opinions of these issues, and I would LOVE to hear them. Let’s discuss in the comments section.

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