Sunday, March 15, 2009

Business Model: Epic Fail

Now that AIG has convinced the current powers they need more money so that they can pay their astute executives hefty bonuses in order to keep them so that they can make more wise decisions, I expect that General Motors will be next in line.

Admittedly, there are differences between these two global corporations. GM actually makes a product, albeit badly, whereas AIG just produced paper in their failed units. Still, their executive philosophies seem to be about as astute. Make the employees accept less pay and fewer benefits, and/or lay them off, but reward the executives handsomely.

General Motors has just as global a reach as did AIG, which mean their failures did as well. Just what this means was nicely encapsulated in a column in Germany's Die Welt. The article is based on information provided by an "anonymous insider" of Opel, one of those companies that GM sucked up in Europe. Right from the start of the relationship, GM's executives played capitalistic hardball American style and literally sucked the respected European auto maker dry.

You know what? I get really mad at how General Motors hollowed us out, plundered us, sucked us dry. How they fed us their bullshit just to get their hands on our patents. Bullshit is the only word for it. One day, a bunch of GM people arrived here from Detroit and said, “OK, we want all your inventions, all your patents and all your know-how and we want it all right now, and in a generous quid-pro-quo, we’re going to give you GM bonds.”

Now our patents belong to General Motors and for every car Opel builds we have to pay them a fee. Need I mention that Opel never received a single cent for its patents from General Motors? The same goes for Opel’s engineering plans. Dimensions, tolerances, materials, the entire range of blueprints. That’s more important than patents because they cost a fortune to develop. GM took them all for free and now they use them for their other brand names and in countless models all over the world.

Not an auspicious beginning, but, wait, it gets worse. GM's bean counters also inserted themselves into the quality control aspect, much to the horror of the German engineers at Opel. The results were devastating.

Opel currently has an eight percent market share – not good enough. For years, GM forced Opel to make the wrong models. But worst of all, poor quality control took us down. It was a horror story. We were ashamed. Terrible. One day, more people from GM came to visit and they showed us what they understood about quality control. We pointed out the rusty longitudinal frame members on the Astra. They replied, “So what? It runs, doesn’t it?” German management could only clench their fists in private. Brand new Astras with rusty frame members, all for lack of a few cents worth of rust-proofing! Complete idiocy. We shouldn’t have swallowed that. None of us should have. But try starting a revolution against the highest corporate bosses. Nobody does that, and we didn’t either.

And complicating matters further, GM's American executives didn't have a clue as to the European auto market and the healthy niche Opel had carved out for itself. Then those same executives screamed when market share went down and did what capitalist barons do, they laid the workers off.

I spent a lot of time in the United States and I know pretty well how GM is organized. I have a great deal of respect for their technicians and engineers, but GM’s management isn’t worth discussing. Those are the people who plundered Opel and forced their model policies on us along with their concepts of quality and what a European bestseller should look like. But did we at Opel also make mistakes?

We certainly did. We failed to stage a palace revolution in 2004 when 9,000 workers had to be laid off. That’s when we should have said, “If Opel has to sacrifice 9,000 people because General Motors drove us into a ditch, we’re not going to stand for it. From here on, nobody dictates to us what the European market needs or doesn’t need. From here on, we’ll decide that.” That’s what we should have said back then.

Don't feel bad, anonymous insider. Thousands of American auto workers and buyers should have done the same damned thing, and we didn't. At least in this country we still have a chance to do something about it, at least theoretically.

We do if we can get our government's attention, but that is beginning to look unlikely because the current administration is obviously unwilling to look at the underlying faults in the system. The bottom line has to be more forward-looking than the next quarter's profit and dividend, especially during both an ecological crisis and an economic crisis.

We might just have to take to the streets. I just hope that after 233 years we remember how.

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Anonymous larry, dfh said...

It seems to me that a.i.g. was looted from within. I bet alot of those mortgage default insurance polices are tracable to within the company, or friends thereof. It doesn't make sense that a very conservative stodgy insurance company would all of a sudden make all these wild policies, unless someone on the inside is making off with the loot.
And screw g.m. Let them eat Hummers.

9:33 PM  

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