GM stands for Giant Mess

Most of us thought something bad was going to happen in the financial markets as the real estate bubble took shape, but because many of us didn’t know much about mortgaged back securities, or the magnitude of the dealings there, many of us were totally surprised by the size of that mess.

GM on the other hand has been heading for this recession iceberg for over 20 years and I don’t think anyone is really surprised.  The smart people I talk with blame the mess on three pretty basic things:

1) Cost structures out of whack because of union deals that should have been restructured a long time ago

2) Total lack of relevant innovation on very stale products with no clear value proposition about cost, quality, or even environmental friendliness

3) A management team that was asleep at the wheel, at the very least figuratively

So now that they are finally in chapter 11, which I think is way, WAY overdue, what do I think they should do?

My guess is they will make the mistake of starting with the balance sheet and think of an outcome in terms of money.  The #1 outcome they need to deliver is shareholder value (like most companies) and to do that I think they really need to not look back at who GM was, but what a new and different auto manufacturer would be.

1) Decide who you are.  GM has been trying to be all things to all people and today they are nowhere.  Decide if you will remain lots of brands, or be really good at one.  Decide if you are going to be more green.

2)  Look at other companies in industry (and out of industry) that make their customers happy.  Tata Motors is a good example I have talked about before, but so is ING DIRECT in that both of those companies are really specific about who their customer is, and is not, and they deliver on their promise to their customers (low cost in the case of the Nano, and high interest rates in the case of ING DIRECT).  I don’t think GM knows who their customer is or what their value proposition is.  Tesla, the manufacturer of a super looking electric vehicle is another great example of a great product with a really clear value message.

2) Contain your costs.  Tata Motors has figured out a way to make a car for next to nothing. Ask why they were able to do this and you were not.  This isn’t rocket science.

3) Management oversight.  It is inexcusable that the management team failed to innovate, failed to manage their costs, and failed to have a clear and concrete customer value proposition for so long.  There are lots of great managers in, and out, of manufacturing, engage them to help coach the management team, and probably replace existing members to get things rolling.

You might even say General Motors needs to be less general and more specific – that’s how I think they need to start rethinking GM.

-Ric