By on April 9, 2010

People do the right thing, unless money and power is involved. From the highest paid executives to the lowest ranking newbie, money and power is a motivator. Those in positions of accountability are held to a higher standard, and post-bailout Detroit is not immune to criticism. But in an act of corporate cheerleading, Pete Mateja’s Internet flamebait at Automotive News [sub] titled “Detroit had lousy management — and other myths that need debunking” shows how the “experts” got it wrong.

“For the past year, I have…seen commentaries by industry analysts and consultants giving their opinions on all the causes of the problems and wrongdoings in today’s auto world and, in particular, the Detroit 3. Everyone has become an expert.”

Perhaps these experts prefer someone take responsibility for the systematic destruction of billions in stockholder’s equity? And maybe they’ve run about eleventy-billion tests on Detroit’s offerings since the dawn of the Pontiac Astre to the death of the Pontiac Aztek? But Mateja has an inside line to myths that need de-bunking.

“Myth No. 1: It is because of bad management. Senior executives such as Rick Wagoner, Jim Press and Tom Lasorda were not ‘bad management.’ All of these people have degrees and knew the industry.”

I know many MBAs and have one myself: those execs can indeed manage and inspire people. But coming clean about their fundamentally broken system? Not on the syllabus. They were lying to themselves: lies that grew more heinous with every 10K filing.

“Could they have done things differently if they had known the depths of the recession? Sure. But this could be said for almost any senior executive in the past 18 months.”

Short-term thinking works on Wall Street, building a reputable brand with a strong customer base takes decades. Destroying it takes a few years, maybe eighteen months when you’re hooked on GMAC’s highly-addictive smack. Those responsible for the decades-long slide into bankruptcy were caught red handed: tracked by every financial statement known to man, available to anyone with an Internet connection, understood by anyone who stayed awake in a freshman-level accounting lecture.

“Myth No. 2: The truth is the Detroit 3 and North American manufacturers listened and built vehicles that consumers wanted for more than 10 years…You can go back to 1990, when GM was the first automaker to introduce an electric car — the Impact. This is bad management? To build what your customers want?”

Detroit puts their eggs in one basket: proper Detroit Iron in land yacht or SUV form. Dude, where’s my Corolla-fighter? The EV1 isn’t an egg, it’s a zygote: not likely to earn a dollar for years. Volt redo, anyone?

So let’s talk money, bread and butter. If Detroit made a world-class compact in the Ford Pinto or Chevy Vega, choosing the relentless pursuit of product perfection, there’d be no Escort, Cavalier, Cobalt, Focus or Cruze. Which makes for another failed Detroit adage, a new name brings fresh karma. But the captain and his crew never sought atonement for past transgressions. Or if they did, it never showed outside of Bill Ford’s mass-media mea culpa back in January 2006. And to quote Jon Stewart, “look how sorry Domino’s was just for their shitty pizza!”

“Myth No. 3: Government subsidies are bad. The reality is that other countries, such as Japan and South Korea, subsidize their industry in some form. At a conference in Los Angeles, Sean McAlinden of the Center for Automotive Research said it best: ‘We’re the only country in the world that expects its auto industry to exist without some government support.’”

CAR’s incestuous relationship with the Detroit 2.5 aside, this Texan remembers the potential closure of the GM plant in Arlington, and what the Ann Richards’ era of Texas government did to keep it alive. More to the point, the American South knows the value of government gravy to court automakers. Question is, which organization deserves our taxpayer dollars? The ones with years of solid, trendable growth and a portfolio of strong performers, or those who continue to make the same mistakes with a Golden Parachute in one hand and the fate of an entire region in the other?

“Myth No. 4: Too many dealers are bad for an auto manufacturer. The rationale behind this is ‘big is better.’”

Mateja’s right, look at Bill Heard for proof. But Detroit’s “push” supply chain was (is?) a mess, and dealerships are but one cog in that failed machine. And it’s difficult to clean up with anything short of a proper Chapter 11 filing. Again, look to the top for answers. Or lack thereof.

“Myth No. 5: Unions are the real culprits because of high wage and benefit packages…now that GM and Chrysler have gone bankrupt, everyone has had to come to the table to make financial sacrifices.”

Union management enabled corporate management’s operational stupidity for years, if not decades. So it goes back to the Money, honey. Nobody’s hands are clean, this video is only one data point in how Management kept the rank and file in the dark. And today, everyone must pay: what purpose does a Union serve if it cannot reserve the right to strike?

Mateja ends by throwing the critics a bone:

“In the upcoming months, we will see whether the love affair between consumers and Toyota is over, the auto bailout money from taxpayers was a wise investment or just a postponement of the inevitable…”

We shall. And who is responsible for what the critics and staffers at the GAO point out? The automotive execs, obviously. These folks didn’t have to run to Congress with begging bowls in hand, provided they never relied on profits from their finance arm to cover their shockingly high overhead. They never needed to lie to the citizens of Michigan (and elsewhere) who trusted them. Now if only we addressed the problems of a broken system years ago.

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45 Comments on “Between The Lines: Pete Mateja’s Auto Industry “Myths”...”


  • avatar
    moedaman

    Wasn’t the D3 losing money and market share during the best auto sales years in history? If that’s not bad management, then I don’t know what is.

    • 0 avatar
      Dynamic88

      +1

      No more telling proof of bad management than the fact that within my lifetime the D3 had 85% + of the NA market. Now the 3 combined don’t have half the market.

  • avatar
    b1msus93

    “post-bailout Detroit is not immune to criticism.”

    O RLY?

  • avatar
    Motorhead10

    So, if all the “myths” were in fact mythical – who’s fault was it, Phil Rizzuto?

    This guy obviously sits on the porch and talks of the good ole days with David Cole and yells at all the rotten kids to stay off his lawn.

    • 0 avatar
      Ron

      As important as bad management (and I count unwillingness to confront the U.A.W. as bad management) was the strong dollar and World War II. World War II, you say? Yes. The U.S. was the only industrial power in the world after the war. It took decades for foreign economies to build up their capital, their organizational structure, their technology, and their internal market (for economies of scale). As a consequence, the leaders in Detroit (including the U.A.W.) had no understanding that foreign manufacturers could build overseas and ship their product here for less than the cost of assembling here.

      The Japanese had no raw materials and little capital. So, they learned to be phenomenally efficient. That’s why Toyota could take GM’s Fremont plant, which was closed to some extent because of problems with drugs and alcohol, into the most efficient plant in the U.S. within a year of taking over control, and that was with less capital equipment than similar plants in Detroit. Overhead was also lower. As recently as 1995, Toyota had fewer employees than GM had managers. Suppliers were also better. Champion was shocked that Japanese suppliers could deliver spark plugs to Detroit for less than Champion’s raw material costs.

    • 0 avatar
      JeremyR

      It was the perception gap, of course.

  • avatar
    educatordan

    Interesting, I think THE biggest fault is putting all of their eggs in one basket. Detroit has always chased the profits and put their most effort into whatever the latest money maker was, whether it was a mile long rolling living room land yacht or a dinosaur size SUV.

  • avatar
    gsnfan

    While talking about how Detroit built what consumers want, the author mentioned hybrids: “Some tried hybrid vehicles and liked them. But it is forgotten that the Detroit 3 offered them as well.”

    The vast majority of hybrids are small cars that get extremely good mileage. The only hybrid made by US manufacturers that fits the bill is the Fusion hybrid, and that is really stretching it.

    Most hybrids they built were mild hybrids that gave little improvement in fuel economy (Chevy Malibu hybrid, Saturn Aura/Vue hybrids). The full hybrids are full size SUVs and trucks (Silverado Hybrid, Tahoe Hybrid, and Durango Hybrid). They gave an increase of a few mpgs. Barely anyone buys them. I’ve only seen one Sierra Hybrid (no Silverado hybrids), and that was a government fleet owned one.

    Aside from Ford’s two (pretty good) hybrids, Detroit’s hybrid products are uncompetitive.

  • avatar
    porschespeed

    The auto crisis was just like the banking crisis – it was nobody’s fault, it came out of nowhere, there was no way to forsee it, we were doing everything right, now give us some taxpayer money.

    AN is a trade rag, and like all trade rags, it’s existence is dependent upon fluffing the stars when things get a little down (so to speak).

    Mateja is just doing his job.

  • avatar
    newcarscostalot

    I have never heard of Pete Mateja before this article.

  • avatar

    CAR’s incestuous relationship with the Detroit 2.5 aside

    Sajeev, this trope about CAR being linked to the domestic automakers has become conventional wisdom around TTAC. Yes, Dave Cole’s father was a GM big shot. Ed Cole gave us the small block Chevy V8 among other career achievements (and failures). As far as I know, though, Dave Cole’s been an engineering professor most of his professional life before starting CAR.

    CAR’s ties to the automotive industry, domestic and otherwise, are pretty transparent. I don’t think that their ties to the domestic auto industry are any stronger than similar think tanks on defense and aerospace have with those industries. Are health care think tanks less linked to hospitals, pharma companies and medical groups?

    Here’s CAR’s funding sources: http://cargroup.org/documents/fy09.pdf

    In terms of funding, actual direct monetary support from corporate sources is ~10% of their funding. David Cole told me, face to face, that Toyota is their biggest industry funder – since Toyota has a big R&D center in Ann Arbor, that makes some sense. This once fact, that Toyota gives them more money than GM, Ford or Chrysler, should rebut any suggestion that CAR is a mouthpiece for the Detroit automakers.

    The biggest chunk of their revenue comes from holding conferences and charging fees. Do the car companies pay some of those fees? Sure. It also looks like a lot of their funding comes from government sources. Not something that thrills this free market guy, but academics live and die by grant money.

    In addition to direct funding, CAR benefits from “cost sharing” through its participation in a couple of consortia, one organized by the state of Michigan for the Connected Vehicle Proving Center (CVPC) and the other by the Feds for the the Digital Body Development System project. Some car companies and vendors participate in CVPC and DBDS.

    Total Funding 9,182,012
    Less Cost Sharing 3,360,129
    Monetary Funding 5,821,883

    Funding
    Conference Revenue 1,685,468 29.0%
    State & Local Gov’t Cont 1,365,326 23.5%
    Federal Gov’t Contracts 1,272,116 21.9%
    Corporate Research 546,024 9.4%
    Affiliate Grants 346,751 6.0%
    Associations 249 377 4 3%
    0.0% 10.0% 20.0% 30.0% 40.0%
    Conference Revenue
    State & Local Gov’t Contracts
    249,377 4.3%
    Foundation Grants 248,577 4.3%
    Other 108,244 1.9%
    5,821,883 100%

    • 0 avatar

      Nicely said, and consider my wrist slapped. CAR doesn’t cater to Detroit, their bias is to all the automakers. Seriously, aside from TrueDelta and CR, are there any independent research facilities that are truly independent?

    • 0 avatar

      Rajeev,

      One problem of research institutions catering to their financial patrons’ point of view is that it does a disservice to those patron companies. If you’re operating a business, you need your consultants to give you impartial and accurate advice, not for them to just say what you want to hear. It’s analogous to hiring a lawyer or accountant to advise you so you don’t break any laws.

    • 0 avatar
      Telegraph Road

      “If you’re operating a business, you need your consultants to give you impartial and accurate advice, not for them to just say what you want to hear.”

      Good point, Ronnie. I hope you repeat it next time JD Power gets disparaged here for giving good quality marks to Detroit brands.

  • avatar

    Oh, and FWIW, I think Mateja’s very wrong, though I do believe that Detroit can make competitive product. Almost every single one of Detroit’s fatal mistakes was done by management, not engineering and design. From no sway bars on the swing axled Corvair, to the abysmal quality control on the Vega, to the not properly developed V8-6-4 Caddy engine, to the decision to use the same machinery on the Olds diesel when Detroit Diesel had a great V8 suitable for cars, to badge engineering gone wild and brands competing with each other.

  • avatar
    cardeveloper

    Oh, where to start…

    Being involved in the heart of product development, I saw a LOT of mistakes made, from simple stupid decisions to create new tooled parts that looked 99.99% like the old tooled parts, to stupid stupid product decisions that only made sense to the people who convinced themselves they were making the right decision in the face of over whelming evidence to the contrary. Then in the middle of the layoffs, creating ADDITIONAL layer of management. That one boggled my mind.

    Then there’s the UAW {sigh}… I remember walking through a UAW plant and having pile of foam come crashing down on me because the worker sleeping on the shelf woke up from underneath the pile and just flung everything off the shelf. UAW actually has a useful purpose, unfortunately, it’s been totally bastardized to protecting and supporting the incompetent.

    Reality of the situation, automotive production is very complex, more so then most people will ever give it credit for. It’s capital intensive, and still, even today, has a huge impact on the US financial system. Remember, wall street doesn’t create anything, they only shift money from one pile to another and then claim they are doing work. At least automotive actually creates a product.

    • 0 avatar
      CarShark

      I find your way of thinking a product of the demonization of Wall Street by the media and politicians alike. Bonds allow companies to hire more people, buy more equipment and grow. Stocks give people a chance to own a part of that growth. You say automaking is “capital-intensive”? Well investors (yes, even institutional ones) are the ones that pay for it. Yes, the futures market is a high-stakes, zero-sum, money pile-shuffling guessing game, but don’t just paint the whole sector with such a broad brush.

  • avatar
    ihatetrees

    The D3′s sickness was well known even in UAW towns where I grew up.

    Even 10 years ago in the midst of the SUV boom, anyone who could understand a balance sheet knew the D3 had problems. From UAW work rules that allowed senior hourly workers to ‘bid’ for layoffs (at full pay) to cratering resale values, the writing was on the wall. Brock Yates did a piece (I think) for Business Week in the late ’90s that predicted this current train wreck.

    Today, you see the same myopia in certain states’ finances. I wouldn’t be surprised if the feds allow certain states to declare a form of bankruptcy in order to escape insane fiscal promises made to every constituent and his mother.

    And as far as our Federal debt goes, it’s really not a problem if you own the printing presses.

  • avatar
    djoelt1

    I think it’s more subtle than bad management, although that was certainly a factor.

    First, these companies successfully managed a decline in marketshare by being profitable for many years. That’s a measure of success. Declining market share, not so much success. But why did their market share keep declining?

    I think their inbound marketing operations misread what the market was telling them. The IBM (inbound marketing) department imagined on seeing the Prius that everyone wanted a hybrid, and slapping a hybrid badge on any vehicle would make people want those vehicles too. But people who bought hybrids wanted big numbers on the EPA estimate, and the bragging rights that went with it. It was obvious to me that no one would buy a Tahoe Hybrid because the very decision to look at a Tahoe in the first place was diametrically opposed to any environmental care in the first place. Oh, some people need Tahoe’s but no, they mostly don’t; there are four wheel drive cars and minivans that serve the function but get better mileage, so someone considering a Tahoe does not care about MPG!

    This type of misformulation – either willful blindness or stupidity or both – of a market need permeates GM and Chrysler and Ford in the past. These companies would formulate vehicles for non-segments that they imagine existed because of bad inbound marketing.

    Looking back over the vehicles I’ve owned in the last 20 years, neither GM, Ford, or Chrysler made a credible class leading vehicle in ANY OF THOSE SEGMENTS except a compact car, which their hearts were not really in.

    It’s possible the inbound marketing departments were directed to come up with answers that GM already built, but if not, I lay a large part of the failure on misidentification of customer needs by inbound marketing.

  • avatar
    newcarscostalot

    I was watching a show recently detailing the building of the Chevy Volt prototype. One of the engineers were talking about the center tunnel width, and how they had to make sure this one was the correct width for the batteries. The previous chassis was a little too narrow for the batteries, as they found out when the car reached the battery installation station. These engineers could have simply measured the batteries, then measured the center tunnel, before any production was started. Yet for some reason they didn’t. Therefore, the issue was not known until it was too late, for that one prototype. That sounds like an engineering and design mistake to me! Thank goodness it was only a prototype.

    • 0 avatar

      That’s why they make prototypes, to make sure parts fit. They make a few prototypes, then a couple hundred preproduction cars, then maybe 500 on the regular assy line before they start making cars for the general public. The battery is a tight fit. While CADCAM has reduced the need for “whittle to fit” substantially, sometimes dies need fine tuning.

    • 0 avatar
      newcarscostalot

      I agree. However, what I fail to understand is that whoever was doing the measurements on the chassis did not contact, or already have, the measurements of the batteries prior to building the chassis. This oversight resulted in one chassis with a tunnel that would not accept the batteries, because the tunnel was a tad too narrow. How hard is it to make a phone call to get the measurements of the batteries, which are pertinent, before you build a chassis? I know CAD CAM helps, and dies need to be adjusted, however the engineers in charge of chassis development should have made a call to make sure all the measurements were correct before committing to build a chassis. This resulted in problems which could have easily been avoided. This culture of ‘pass the buck on down the line’ is why GM is where it is today and it is not ‘just the management’ it is company wide. However, this is just my opinion, and I make no claims to the accuracy of my opinions and/or judgments! :-)

    • 0 avatar
      porschespeed

      CAD/CAM should eliminate this type of error, but changing spec mid-stream without a concomitant update will.

      Sounds like bad PM to me.

      (waiting for the excuse train to roll in…)

    • 0 avatar

      CAD/CAM, correctly done, does eliminate that type of error. Only in a medieval process do you build prototypes “to make the parts fit.”

    • 0 avatar
      newcarscostalot

      That’s gonna be a really long train…

    • 0 avatar
      newcarscostalot

      I was wondering if I was right in my thought process when I first saw the program. I am not an engineer, nor have I used CAD/CAM. I just thought it odd that nobody thought to check the measurements, and no engineers featured on the program seemed to think what had happened was strange, or might have been prevented. Oddly, (sadly?) this is the only thing I really remember about the program on the Volt! Finally, I will say it was difficult to put my thoughts into words without any engineering background. Advil time! My brain hurts, lol!

    • 0 avatar
      cronus

      Because computer simulation does not equal reality.

      They probably did check the measurement of the battery and the tunnel but if you have four parts with a tolerance of +/- 1mm and all four of them move the same way suddenly you’re 4mm off and the battery doesn’t fit. Unless they had to make new dies it’s not a major problem, from your description it doesn’t even sound like a minor problem. It doesn’t indicate a problem with GM or even automakers in general, it’s just the way things work in life. You wouldn’t expect a computer programmer or a writer to be perfect the first time would you?

    • 0 avatar
      porschespeed

      @cronus,

      Where do you work that leaves a MM +/- on multiple parts?

      Aircraft carriers are designed and built with tighter tolerances.

  • avatar
    littlehulkster

    Wow, a TTAC article about the industry and the comments aren’t all “RARRGHH UNION PINKO THUGS MAY THE INVISIBLE HAND OF JOHN GALT STRIKE YOU DOWN, LAZY BASTARDS!”

    The fact of the matter is, people, the UAW built the cars they were told to build. Assembling a turd is easy enough, but even the best craftsman can’t polish it. It’s really not their fault GM, Ford and Chrysler were building shitty cars.

    It’s also quite odd how people rant and rave about the UAW, yet never seem to mention the German Auto unions, which are far more powerful, and yet the German automakers are doing alright.

    Then there’s the Japanese unions, who strike when someone looks at them wrong, and the South Korean unions, who seem to think striking and rioting are the same thing. Yet still, these automakers seem to do fine.

    Wonder why THAT is?

    • 0 avatar
      ihatetrees

      It’s also quite odd how people rant and rave about the UAW, yet never seem to mention the German Auto unions, which are far more powerful, and yet the German automakers are doing alright.

      “…far more powerful…”
      No.
      Different. Yes.

      German Unions are hardly weaklings, and they strike. But their pay, benefits and work rules are much more rational than any US UAW plant.

      Perhaps Bertel Schmitt can correct me, but I’m near certain that German plants have
      - much tighter rules regarding unplanned absences.
      - higher retirement ages (with lower benefits).
      - pay scales that really reward skilled trades. (US transplant factories do this)
      - fewer work rules and job classifications. (Another US transplant plus).
      - the best skilled trades’ apprenticeship programs in the western world. (which is, admittedly, more a function of culture than management).

      German labor law is also paternalistic in ways that would make the average American cringe. This may have changed, but 12 years ago I knew a German gal who agreed not to get pregnant (and take leave) during her 18 month apprenticeship.

  • avatar
    Runfromcheney

    This article is bogus on so many levels. This guy sounds like all the people around here in Detroit, who stick their head in the sand and pretend that the Detroit three’s problems are all the result of the recession, when anyone with half-a-brain and a basic knowledge of the industry saw this coming years ago. Has this guy forgotton already about back in 2006, when the market was still good, GM and Chrysler were losing money hand-over-fist because they had insanely large inventories of large pickups and full size SUVs that they couldn’t sell for any price.

    Heck, one could look back to the 1990s and see this train wreck coming. GM was permanently damaged by Roger Smith’s mismanagement and they skated through the decade on SUV profits. With the notable exception of a few products (Like the Oldsmobile Aurora), most of their 90s product line up was half-baked rental fodder. Ford had been losing market share hand over fist since 1995, and the only thing keeping them in the black was Alexander Trotman’s aggressive cost-cutting. They destroyed any inroads they made in the car market during the Petersen era with the Contour and third-gen Taurus being the busts they were, and quality problems were rife. By the time 2000 rolled around, Ford was pretty much a truck-only company. They were just lucky enough to have reconigized their problems early enough to be able to rectify them before the recession swallowed them. Chrysler was the only one of the big three in the 90s to have genuine success: They had a strong product line up, they were solidly profitable and were gaining marketshare. But of course, Daimler stepped in and made sure they put a stop to that….

    Oh, and one last thing. Nobody ever considered Jim Press a bad manager, and they never blamed him for Chrysler’s problems. (Everybody knows Daimler is to blame for Chrysler being the mess it currently is). But Rick Wagoner? COME ON! That guy couldn’t even manage a Burger King, yet alone a multinational corporation! It annoys me about how the guy is generally getting a free pass, when his name should go down with the likes of Angelo Mozillo and Richard Fuld in the Bad CEO Hall of Fame. There is no way that GM’s management can get a free pass on this. Ford went through the same crisis as GM, but emerged in one piece because Mulally and his directors actually knew what they were doing.

  • avatar
    obbop

    An internal tremor quaking the depth of my bowels requires I question if there is ANY way the many TRILLIONS of dollars spent by the USA to arm over the decades for the Cold War, the ongoing HUGE cost for a massive military from 1946 onwards located across the globe, the BIG bucks spent on military research…………

    The costs of wars from small to semi-large ( a HUGE war if you are one of the killed or injured) from Korea to the Berlin Airlift to the Nam to billions of patrol miles for ships and subs and aircraft and… and… and… and…..

    As complex and convoluted as economics is and with ell the intertanglements (is that a word? If not it should be and I hereby proclaim it to be so).

    Others have written how countries shielded by the USA’s “nuclear umbrella” had massive economic savings.

    Surely there HAD to be effects over the decades due to the USA’s interactions across the planet.

    Heck…. peek at the monetary sums used for military costs the past few years.

    What if that money could have been spent within the USA for our OWN good?

    Another factor though smaller than decades of military spending but it especially affects the folks of my class…. those often viewed with no class…. those supposedly unwilling to perform the jobs as spewed by many of my “class enemies” (who would likely be severely pummeled if they had ever confronted me in a street brawl Grrrrrrr)

    The BILLIONS of dollars sent out of the USA economy yearly via illegal aliens earning those funds within the USA and remitted to foreign countries.

    Those are dollars removed from the economy that would have possibly been available for earning by the ever-growing number of working-poor within the USA.

    Hey!!!!!!!

    Maybe THAT’S the answer to our problems!!!!!!

    Outsource every job within the USA that pays more than 25K bucks yearly!!!!!

    The borders ARE open!!!!!

    The world is FULL of intelligent people assuredly capable of performing many to all the tasks within the USA that supposedly require HUGE salaries and HUGE pensions and HUGE perks and those “golden parachutes, etc. etc.

    Look at the overhead that could have been tossed aside decades ago if the “elites” had to contend with those from outside the USA as my lowly spat-upon class of folks have had to contend with.

    There are a multitude of other aspects of SO MANY THINGS that have withered the once dominant “Motor City mob” but to point an accusatory finger at a mere few leaves so much unmentioned.

    Is it even possible to factually ascertain the “real reasons” when the topics involved cover a multitude of economic, social, political, historical etc. etc and more etcetera reasons?

    The world wonders and that is more than the radio message received by a certain admiral steaming northwards away from Leyte.

  • avatar
    Happy_Endings

    I wonder if Pete Mateja is related to the Chicago Tribune’s Jim Mateja. In addition to having the same last name, they both write complete crap.

  • avatar
    Revver

    One little issue with “Myth No.1″

    The Harvard Business Review recently released its list of “Best CEOs”.

    Notably only 6 of the Top 20 had MBAs. The man who (easily) claimed the No.1 position, Steve Jobs, doesn’t even have a college degree. (And, as a side note, neither does Bill Gates.)

    It raises the question – Does the American business leadership development process even work? How many of our CEOs possess the core skill set of shepherding PRODUCTS PEOPLE WANT TO BUY to market, ahead of the competition?

    I know lots of them are great a schmoozing with Wall Street, which is often mistaken for a customer base…

    • 0 avatar
      kkt

      Young Master Gates was invited to depart the Hallowed Halls of Harvard when it was discovered that he was stealing their computer time to use for his for-profit business. They could have forgiven him for stealing the computer time, but endangering Harvard’s non-profit status got him a one-way ticket out.

    • 0 avatar
      porschespeed

      Please ‘splain how Gates making money would in any way endanger Harvard’s tax exempt status.

      Most any tax-exempt university you can name has students who create profitable businesses from patents they obtained as students. And pay some royalties to the institution for doing so.

      He stole computer time when he was at Lakewood (highschool). I just can’t even imagine a scenario where Harvard would care about computer time, let alone ask someone to go. Even back in the day.

      Citation or a credible source?

    • 0 avatar
      mcs

      @porschespeed I can verify first hand that Gates developed a product while at Harvard. I’ve seen the actual source code. At one time, Harvard had the source code listings on display in the Maxwell-Dworkin building on the Harvard Campus. The Maxwell-Dworkin building was funded by Bill Gates and Steve Balmer. So, that part is true.

      Whatever the stories about Gates’ departure from Harvard, the fact is that Harvard is a demanding place and there wouldn’t have been enough time to keep up with the course work and develop a product. There was a lot of money to be made at the time and given the choice of either staying in school or losing some lucrative business prospects makes the choice easy. You can always go back to school, but the business opportunities are gone forever.

      On the business side, Gates was smart enough to hire Steve Balmer, a Harvard grad and Stanford Biz School dropout, to run the financial side. While MBAs aren’t always able to provide engineering vision, they’re indispensable at making a business work financially.

      This link is from a Harvard Magazine story on the dedication of the Maxwell-Dworkin building that confirms part of the story:

      http://harvardmagazine.com/2000/01/dedicating-maxwell-dwork.html

    • 0 avatar
      porschespeed

      @mcs,

      You’ve got the same story I’ve heard about Gates.

      The part that I took issue with was the terms of his departure. A student making money on campus using school resources is the way of the world. It is not something that will endanger a school’s tax-exempt status, or garner sanction.

  • avatar
    Telegraph Road

    Experts getting it wrong? When F traded at $1.51 in Feb 09, who was running “Ford Death Watch” editorials?

  • avatar
    Adamatari

    This article is just about right, but there is one very pertinent metaphor that needs extending:

    The EV1 was the zygote/fetus of a profitable electric car, and GM aborted. Rather than take a hit to continue to develop a technology for future profit, GM decided it wasn’t worth the bother and now is in the position to have Nissan eat their lunch almost 15 years later (not to mention the Prius). It was a horrid mistake – imagine what 15 years of continuous development could have made the EV1?

    Developing new technology is a huge risk. It takes lots of money, and may or may not pay off. However, if you flake out in the middle of research every time (GM electric cars, GM hybrids, GM aerodynamic research…) then you will CERTAINLY lose. GM had the profits (from SUVs) and had the research, but they didn’t have the long term view. They failed.

    GM put $1 billion dollars into developing an electric vehicle, only to throw all that money out the window. It’s as simple as that.

  • avatar
    Mungooz

    As to MBAs: If you have all the MBAs in the world and none of them has vision, your enterprise has no future.
    Big 3 Management: If management has no vision, the enterprise is doomed.
    Unions: If union demands are counterproductive (and a living wage, job benefits & retirement benefits are not by definition counterproductive) then visionary management draws a line in the sand.
    Managers who drive their industrial enterprise into the ground, recession or no recession, are proven both inept and failures. They should give their wages and retirement checks back.

  • avatar
    dagwood

    If these were all myths, then the writer surmises that Detroit should have just kept on with business as usual. Blame it all on the recession. That would work only if the big three weren’t getting their rear ends kicked the entire time the market was roaring and everyone had cash.

    They were the weakest players in the industry before the recession, so it should come as no surprise that they failed when the recession came.


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