Calling Tom Guarriello and Bob Lutz: shirts ready

[Tees? Of course!]

Detroit News

Chrysler image: bad marriage

What is with Germans and matrimonial imagery? At DaimlerChrysler's annual shareholder meeting this week in Berlin, investors discussed Chrysler like a cheating ex.

"This marriage made in heaven turned out to be a complete failure," said Hans-Richard Schmitz, one of a long line of investors who condemned the 1998 merger and called for a quick sale of Chrysler.

"Were Chrysler finally to be led before a divorce court judge, we would be very thankful," chimed in Henning Gebhardt, head of German equities at DWS, which manages funds for Deutsche Bank. "But what will happen if you do not find a new bridegroom for Chrysler, or if he demands too high a dowry?"

If that wasn't bad enough, some shareholders went on a refuse tangent, saying Chrysler was "garbage" that belonged on a "scrap heap."

Yeah, what is it with the marriage example?

April '04

...Even Daimler-Benz got interested, not for Chrysler's sexy balance sheet--it still wasn't all that sexy, yet--but for their ideas.

And that brings us to the prologue. Once craft and goofy passion had generated the new appeal, guess who got re-interested and re-exerted their control? Yes, the suits. Cat's away the mice will play. The suits then went to their "craft" and engineered a very dumb M&A with D-B, two different DNA streams, poorly imagined and merged. Not impossible, but poorly understood and intuited. And now, the indigestion is getting worse. Germany and the US are at each others throats. Again, an arranged marriage signed in differing blood types, on a balance sheet, not--NOT--on a dogeared 1969 copy of a Le Mans month Autoweek, after a suitable period living in sin to learn and blend each others quirks, as it should have been.

April '06

...I once wrote somewhere that the problem with Daimler's and Chrysler's merger was that they hadn't lived in sin together. Not to any meaningful degree anyway, and, without a simple requirement: Once enough hot, rough, draining and sweaty rapid prototyping had steamed up the windows and, uh, "preferences" were known (Dirty Secret Soulmates!), the marriage (we don't do "deal" here, baby) should have been signed in blood, on a dog-eared 1969 copy of June Autoweek. Maybe cigars or Don Shermans afterwards. But definitely Jaeger. Lots of it. And Strohs. And Moet. Shooken up and sprayed wildly. Then a wild orgy of kimono-opening top to bottom with get out jail free cards from accounting and PR.

And then, something really good: Let's make catalytic converters obsolete in 20 years. While cranking out the baddest, sexiest rides since, since.... well, forever. Now go!

Can you say "obscenely high margins" and "fresh fields and metaphors of marketing"? Of course you can. That's where folks who believe in the future's possibility naturally send their minds. Frontiers do that to us Americans. At least, they used to. Until our extractive, subtraction-rewarded brethren took over the show.

As I sat in executive-business school classes, then guest-taught them, I began a really tortured wonder: blind and deaf AND insensitive to the ground shifting under us? Yeah. Completely and narrowly and proudly so. The really sucky part of this prognostication thing I now gamble on is that many people who deserve better must wait interminably long until their 'betters' figure how to do this 'business' shit better. I'm no genius and it's not hard. I just read *all* of Adam Smith.

“if man is not asked of his work to exert his understanding, or his invention when presented with challenges, then he generally becomes as stupid and ignorant as it is possible for a human creature to become. [p. 210

Looks like someone else I know read Adam, too

Martin Fridson, Chief High-Yield Strategist, Merrill Lynch
Financial Management Association International, October 2002

[The Invisible Hand is a] "very convenient cover story for people who are actually trying to stack the deck in their favor."

Yea, Martin. Silly, stupid, pretenders. Business is a subset of life, not the other way 'round. Would solve and save alot of expensive and dead-inducing problems if managers were drilled on that metric before they met a scatter-chart.

Thank God it's Friday. [FYI: Martin, Tom has no allegiance to this blog, this post or to GM]

[UPDATA :stoopid me. Tom is my bud. I meant that i hadn't talked to Martin since way back on a panel and was apolitical on this one .]

Me? I'm a board-room terrorist for hire.
.

Disney bought Pixar. Why shouldn't GM buy Target?

GM and Target? Whaa? Apples and Oranges you say? Nah. To wend thru this sclerotic mess that is GM, maybe analogy is the perfect tool. But let's step back. Into sensibility-ville. Okay. I mean into Bentonville.

GM has a Wal-Mart problem.

On the surface, they have the tools. On the ground, they have mass. Up top, they have one functional lobe. In the chestal area, somewhere between the 2nd and 5th rib... space to let.

In the fever swamps of customer perception, there's two kinds of fauna, each with their own unique situational awareness. And talents. And blindspots. For our purposes today, those two M.O.s are Wal-Mart and Target.

With one, you get the sense that if they could give you product without the box, and still flow inventory seamlessly, they would. Surely they would. A box is overhead. The product? Check yourself, pardner--it's a SKU. And don't bug the employees, they're stacking.

With the other creature, the mindset from Minneapolis not Bentonville, broadly speaking you get a sense that someone up top likes cool stuff. The product? Ptosh. It's a prize. They get visceral and reflective design appeal and its cues (see: Don Norman.) They know why they retail, on multiple dimensions.

Okay, after those gross and grossly unfair generalizations, time for one more. One produces to make money, the other creates to make a living. A useless distinction? No. The signage sez so, the layouts say so, the hardware, flow, partnerships and marketing say so. And each of them combine to fashion an experience, and potential outcomes. In one case, the mental moire of one more readily aligns and does things to our heads.

A consumer of my aquaintance compares the two.

She bought a GE Deep Fryer from Walmart. It crapped out fast. She bought a Samsung digital camera from Target. It was crap from the get go.

She blames Wal-Mart for the fryer. She blames Samsung for the camera.

She? Aha!

Wait up. Before you Martians go off on Venus, pay heed to an Alpha-martian, David Ogilvy. "The consumer is not a moron. She is your wife."

In the above comparison, the consumer, holds two graduate business degrees and is known for ruthless exclusion and for shredding seemingly-competent business plans. The Boys call her "Zena." My kids call her Mom.

She has no patience when she detects no skin in the game, or no heart. I'll leave the GE/Samsung/WMT/TGT Rashomon experiment there for now. In GM's case, up high where it really matters these days, we seem to have neither skin nor heart. Or, we have love of the wrong thing.

But what happens when your moneymaker--your mass, your distribution, your built-in legacy-market of father-to-son hand-me-down brand-preference--slowly goes bye-bye and you don't notice? What happens if you've spent a huge amount of executive energy dreaming, not of drive-ins and kansei and Laguna Seca but, instead, about vanquishing the evils of CAFE standards and the artful finagling of sport-ute classifications? (Help me out here, Financial Times.)

What happens? Death. Or deathbed conversion.

Tom Gaurriello was an early fan of Bob Lutz' Fastlane blog. But I'm familiar with Lutz's work back to when he was pumping a jack for Chrysler as he's now doing with GM. Over at Tom's blog you'll see he's been hoping for and prodding at Bob to do good things. Me? I've been suggesting that the mother ship still has too much cash. Why? Cash equals hubris. And hubris is GM's and, to be fair, most of today's DinoCos' problem.

Cash means comfort and options. And time. And, when you're already the victim of really insular choicemaking, defined by who you think you are rather than by why you do, more options is not what you need. Nor more time. You end up being very proud of all your options. You invite folks over to look at them. And you tell everbody who'll listen how hard you've been working on your collection; and that you really must get around to sorting it one day.

Then they ask "which is your favorite?"

And you do not know.

Then, they ask "why'd you start collecting?"

You don't have an answer.

Tom wanted to know why I keep saying GM has too much money in the bank. Well, 125,000 pensioners and Wagoner's pleas notwithstanding, money is not GM's problem. It's their excuse. Cash is not their bane.

Soul is. And GM's has wanderered off.

I once wrote somewhere that the problem with Daimler's and Chrysler's merger was that they hadn't lived in sin together. Not to any meaningful degree anyway, and, without a simple requirement: Once enough hot, rough, draining and sweaty rapid prototyping had steamed up the windows and, uh, "preferences" were known (Dirty Secret Soulmates!), the marriage (we don't do "deal" here, baby) should have been signed in blood, on a dog-eared 1969 copy of June Autoweek. Maybe cigars or Don Shermans afterwards. But definitely Jaeger. Lots of it. And Strohs. And Moet. Shooken up and sprayed wildly. Then a wild orgy of kimono-opening top to bottom with get out jail free cards from accounting and PR.

And then, something really good: Let's make catalytic converters obsolete in 20 years. While cranking out the baddest, sexiest rides since, since.... well, forever. Now go!

Sound silly? Hell no. I posted this morning on Jon Strande's big boss's pondering the idea of Organizational Maturity. Oy vey. What a disgusting concept in a time where you need a child's perfect willingness and roll-with-the-tide nonchalance. When everything is new, it makes perfect sense to believe that a sponge can talk. And if anybody needs to suspend disbelief, it's folk who've seen firsthand what "Organizational Maturity" has done to Mr. Sloan's tank factory.

That's the thing. Either two DNA chains mingle or we just stand around like preteens at a mixer.

We admit we're horny, we exalt hormones, we make "is that a torque wrench in your pocket or are you just glad to see me?" jokes. Or, instead, we admire each other's supply chain. We nod vaguely at the synergy of legacy systems. We ponder the economies of scale. Who needs love? We are Transportation Professionals, dammit. With Organizational Maturity!™

Ehh. Sometimes, the estrangement doesn't even need a marriage. You stop loving yourself. It can take on Nathaniel Hawthorne's "No man . . . can wear one face to himself and another to the multitude without finally being bewildered as to which may be the true."

It's a terrible thing to witness when you make chariots. At least, when chariotmakers forget why they make chariots.




Last year, Switzerland's Neue Züricher Zeitung called GM (and Ford) "financial firms now producing cars as a hobby." The March article which held that quote was about their restructuring of umpty-ump billions in GM debt. In May, the S&P gave them both a junk shirt to wear. The market spoke.

Funny thing is the market said the same thing as consumers: You Suck. Or maybe it just drawled what consumers were barking in showrooms and service departments. It probably said what the aforementioned Wal-Mart-blaming Boadicea above has muttered about her experiences in the last 7 years driving first, this



Then this



Now this




Averaged out, the woman who views herself this way



would, on the whole, and on a clear-blue-sky morning, rather not get a headful of dewdrops when cornering with an open window due to AWOL door water management. (One of many simple examples of absent behavioural and reflexive design care indicative of larger things and diverted attentions.) Makes a warrior or amazon cranky to show up for a morning meeting like a soaked kitty. Yeah, pissed off feral animal be spending her money with Mr. Ohno's outfit next time. Because the above rolling library of experiences and references average out to what the markets, financial and consumer, are saying.

The "suck" thing.

But the judgement isn't so much on their talent as carmakers. They're past that. It's much more of an insult. A stick right in the eye of management. Not only can you not master your craft of curve and sheen and gurgle, a thing so difficult to quantify and, therefore, forgivable for swings and misses, but also, you fail on that open-book test called fiscal discipline.

That really hurts.

To answer Tom Gaurriello's question directly, "too much money in the bank" will become Goldilocks'-just-right when Wagoner and Kerkorian and the legions armed with HP-45s have no choice but to understand their real and only true cause is as warriors for the soul of GM.

When does that happen? Maybe this summer if Moody's and S&P gets medieval on them. Or in the fall when a couple of major suppliers start pushing back, or walking. Or in January when Kirk has one of Kissinger's "lack of options clears the mind marvelously" epiphanies and accedes to the Lutz-esque WTF! Why not?

Why not what? Tar-zhay? Would make more sense than Hughes, but how the hell do I know?

But I'm sure it'll be good. Because the options are dwindling. And the suits are already looking for another host because Mr. K is taking away their bling, their collection. The hubris money is almost gone. And when it is finally all gone, along with many who live to pile it and arrange it and admire it, you're in the zone of all meaningful corporate resuscitations. You find brilliance in your poverty. And strength in your soul.

You tell "organizational maturity" you've met somebody else. And you've been cheating. And it feels gooood. And byeee.

Wagoner's lucky. I'm not saying anything Lutz doesn't already know. And, somehow, I bet he's been to Minneapolis.

Business' Bonehead Management threat to national security?

GM and Ford are national security risks
The car makers are way behind when it comes to building fuel-efficient cars, and they're fighting rule changes for better gas mileage. This leaves U.S. consumers sending money to the Middle East for oil, or to Japan for hybrids.

Scott Burns - Dallas Morning News [sign up - free]

Nearly 35 years ago, General Motors Corp. asked a consulting firm to examine a problem.

Imported cars, mostly Japanese, had captured 25 percent of the California car market. GM management was worried. The Big Three still had 90 percent of the national market, but top brass at GM saw California as the future.

So the study was done.

Today, General Motors' market share is down to 25 percent nationally. The Big Three have seen their share shrink to 57 percent.

Our domestic automakers, including Ford and Chrysler, have lacked foresight and innovation for so long that they are now fighting to hold market share in the big categories essential for survival: midsize cars, sport utility vehicles and minivans.

Management will blame this on intractable labor costs. Although labor costs are definitely a problem, it's time to consider a larger problem: Intractable Bonehead Management.

The same Japanese managers derided for their conformity and slow decision-making are eating Detroit's breakfast, lunch and dinner. That's a management problem.

Today, GM and Ford are well positioned to be dinosaurs. So is Chrysler. Worse, they are threats to national security.

How is this happening? Here are three main thrusts:

• The industry has consistently lobbied against any changes to the Corporate Average Fuel Efficiency, or CAFE, rules, even as our dependence on imported energy has increased. The domestic carmakers talk about a global industry but have acted as though the United States was peculiarly immune to rising energy costs. One side effect is that domestic cars are unsuited for foreign markets because foreign markets are geared to fuel efficiency.

• The industry has focused its profitability on gas guzzlers that are supersized – like the Hummer H2 (10/13 mpg), the Lincoln Navigator (13/18 mpg), the Chevrolet Suburban (14/18 mpg) and the Cadillac Escalade ESV (13/17 mpg) – or on an array of super-muscle cars that are remarkably fuel-efficient relative to their forebears but still send plenty of money to the Middle East.

• Rather than innovate and invest in hybrid technology, as Toyota and Honda have done, the industry has repeatedly labeled the most successful car introduction in a decade as a "niche market" car. Ford, belatedly, is licensing Toyota technology for its first hybrid.

When fuel efficiency becomes crucial, American consumers will have two ugly choices: Send enormous amounts of money to the Middle East for oil or send enormous amounts of money to Japan for efficient cars.

Seems to be a thread developing here. I've been sitting on a post about a recent fierce McKinsey Quarterly report saying that Corporate Directors think management are bonehads also. There's something for everybody: Sarbox haters and fans, Claw hammer haters and fans, Henry Kravis haters and fans, management haters and well, you get the picture. I'll put it up this weekend.

Seems BusinessWeek smells blood in the water also.

The Boss On The Sidelines
How auditors, directors, and lawyers are asserting their power

If anybody needed proof that the new balance of power in Corporate America has shifted, Maurice R. "Hank" Greenberg provided it on Sunday, Mar. 13. While the imperious chairman and CEO of American International Group Inc. was holed up aboard his yacht on the Florida coast, his company's independent directors were packed into a conference room in their lawyer's Manhattan office. The board members faced an urgent crisis: a growing accounting scandal that seemed to lead straight to the CEO. As directors debated whether to cut Greenberg loose, the 79-year-old titan lashed out at them by telephone. "This board is being run by a bunch of lawyers who can't spell the word 'insurance,"' he shouted. "If you get rid of me, you will destroy this company!" It was the kind of intimidation that had helped Greenberg consolidate unprecedented power in his four decades at the helm of the insurer. But this time, the bullying didn't work. Within a day, Greenberg, once the most powerful man in the industry, was out as CEO. Two weeks later, as the scandal widened, he was forced to resign the chairmanship, too.

Hank, Hank, Hank. When you ask for a loan from American Re in the shape of 500 million bux to quiet shareholders and analysts about your dodgy loss reserves, that's not spelling "integrity" either. And it doesn't do much for shoring up the long-term health of the company. What color is the sky in your world?

Hubris? Gilded Age 2.0? Bubble Hangover? Yeah. All the above. And plenty of bad mojo, deserved and otherwise. There's lots of good stuff if you follow the Bizweek link.

Bob Lutz, Blogger

New GM Vice-chairman, ex-of Chrysler fame has a blog. With comments, no less.

They be talkin' cars big time and he seems generally interested.

Cool.

Dispatches from the Climb Ev’ry Mountain department

Boy, there sure is a lot of jostle and champing at the bit out there in blogville. A disturbance in The Force. I love it! Yesterday afternoon, I was pointed to Seth Godin’s post on Alpha Credit Card Execs and Beta CPAs (Fair characterization, Seth? Probably not.):

I just finished giving a talk to a group of 400 high-powered (high-leverage, high-paid) credit card execs. As I left the hotel, I passed a much smaller room, where a seminar for local CPAs was going on...

The difference, i think, was that a long time ago, the people in the second room had made a decision about what they deserved, or what they were capable of, or what they were going to stick with. And it was a bad decision.

Then, I find Business Pundit lamenting the lack of ambition and rambunction in companies:

Talk is cheap. I guess that is why so many people talk about being great but never do anything about it.... I. Don't. Understand. Sometimes I think we benchmark not to see if we are better than our competitors, but to make sure we are all doing the same things so that we can feel comfortable.... I think most companies are confined to mediocrity because they want to do what everyone else is doing. It gives them a sense of confidence that they are on the right track when in truth they are just playing follow the leader.

And, in comments, vinod has this:

Generally, there are only 2 [opportunties] to get out of "Chasing Taillights" mode -

1) at the VERY START of the venture - before any revenue commitments are made, employee orgs are designed, relationships with external firms are constructed, etc. This is the "having sex" part of new venture creation ;-) You've got a blank slate.

2) AFTER the company is profitable / out of the woods - when the short / medium term health is secure, and you've got enough time / $$$ to fund exploration.

Fair enough. But relative to what Seth, Rob and vinod are saying is this point: many of these people are only following the rules as they’ve been set out for them. Set out wrongly. In my estimation, we see the tail wagging the dog of what Business is really about: Allowing men and women to exercise their creativity and energy, with profit as proof of their success, not a ring through their noses.

In that vein, let's add another, third bullet, to vinod's above--one I think has far more probability of occurring than his "#2":

Henry Kissinger once said "A lack of choices clears the mind marvelously." When companies are against the wall, when every available arrow in their quiver has been shot and missed, their "sliderules" are failing them, they then become open to new ideas; teachable, as it were.

Large scale case: Chrysler was in the dumper several times in the last few decades. In many instances their problems stemmed from a lack of leading their market and getting stodgy and bureaucratic, causing finance/senior management to dictate strategic risk choices due to their lesser size relative to competitiors. This led finance to go to the only bag of tricks they knew and felt comfortable with. Messy, wrong acquisitions and projects as silver bullets and "leapfrog " moves--Lamborghini, for instance. I'm simplifying for space, but these suit-centric choices, if you will, got them in holes and delivered them to death's door. At this point, many traditionalist auto-types gave up on Chrysler and bailed for another "host". Suits gone, guys like Bob Lutz, were allowed a "What the F*ck," last ditch effort. In other words, freer reign.

("Whadawegot to lose?" Who was watching to say, "NO"? )

What did Lutz do? He raided design schools and foreign and unusual sources and shipped in a hot rod culture and let them go to it... Cars built for love of curve and metal, for love of cars. Bing bang boom, Viper. Using a V10 development people in finance hated because of parts economics of scale, and because it wasn't their idea in the first place. Next: Prowler. Next PTs. Next: Curvy-fendered Ram pick-ups when the trend was to GM's boxy longbed frame and body of the 1500s and Suburban genre.

They were designing cars people suddenly "had to have." Lotta craft, lotta love, lotta intuition, and Bob Lutz out front running interference with his "First law": The customer is not always right. In this case, he meant designing to the customers desires, ahead of them, not to the customers specifications, which was what previous management had done with focus groups and market testing concepts to death--not one, but three! cupholders as "design breakthrough!" He let people exercise their love and skill, used some unususal research models like cultural anthropology and resurrected a winner. Even Daimler-Benz got interested, not for Chrysler's sexy balance sheet--it still wasn't all that sexy, yet--but for their ideas.

And that brings us to the prologue. Once craft and goofy passion had generated the new appeal, guess who got re-interested and re-exerted their control? Yes, the suits. Cat's away the mice will play. The suits then went to their "craft" and engineered a very dumb M&A with D-B, two different DNA streams, poorly imagined and merged. Not impossible, but poorly understood and intuited. And now, the indigestion is getting worse. Germany and the US are at each others throats. Again, an arranged marriage signed in differing blood types, on a balance sheet, not--NOT--on a dogeared 1969 copy of a Le Mans month Autoweek, after a suitable period living in sin to learn and blend each others quirks, as it should have been.

Now, race back to the 1920-30s when car manufacturers were everywhere. Look at a PT cruiser or Ram. Shape remind you of anything? A Packard, Ford, Doble, Velie, Studebaker, Hudson or Dodge of the era? Of course it does. Car designers didn't have CADCAM or statistical sampling or one way mirrors with customers behind them to guide ideas. They had their gut, their art and their craft.

Now go back further: Adam Smith. Division of Labor. 1776. Wealth of Nations. Smith knew he was onto something good. But, while he may not have seen all the effects of his newly new minted economic description, he recognized one: It’s stifling potential on people’s minds and ambition….

“if man is not asked of his work to exert his understanding, or his invention when presented with challenges, then he generally becomes as stupid and ignorant as it is possible for a human creature to become.

Funny how most of us business types gloss over that one for the more soul-crushing but "actionable" examples of mass production Smith used in his Pin Factory example, eh?

And herein lies the entrepreneur's dilemma: We are allowed to make it very personal, to actualize ourselves in the extreme through our business efforts. For us it's not business, it is personal. But the structures we then create, unless we're very careful, suck the very same passion we crave out of the efforts of those who work for and represent us. We then demand of our people "Where's the commitment!? Where's the magic?!" Once we're done huffing, we then unleash them on unsuspecting customers who somehow sense from these employees: "Gee, it's all business with this guy. Where's the humanity and flexibility and can do? Where's the power? Where's the personal?"

Ladies and gents, Seth and Rob and Vinod are right to wonder. They're just right. It doesn't have to be that way. This way.

You have the Pole.