Last week, the U.S. Treasury sold back its last share of General Motors stock,ending the bailoutthat brought the automaker out of bankruptcy.
That same day, GM announced that CEO Dan Akerson, hired to guide the automaker back from the dead, will step down next month and be replaced by Mary Barra.
Akerson addressed the national Press Club today, and spent the first half of his speech explaining all the terrible things that drove the automaker into bankruptcy.
Akerson was pretty harsh, listing the various “poor decisions,” “indecisions,” and “no decisions that started to pile up in the 1970s and 80s like so much rotting firewood,” that eventually left the once-great automaker “disgraced.”
Here are a few excerpts from his remarks, which show how GM slowly ruined its reputation and business model.
On cost control:
For example, in 1978 GM paid almost as much in benefits as it earned in net income. Yet the very next year, it agreed to the largest pension increase in UAW history. Eventually, GM’s pensions plans — the largest private sector funds in the world — became chronically and dangerously underfunded despite tens of billions of dollars in cash and stock infusions.
That actually weakened the company because it treated the symptoms, not the disease, robbing precious dollars from product development.
More recently, U.S. hourly labour costs increased 4 per cent annually from 2003 to 2007, even though the company had total operating losses of $US17.6 billion from 2005 to 2007.
In other words, while management was burning the furniture to keep warm, we were also automatically increasing our fixed costs.
On wasteful complexity:
Complexity was everywhere. Just a few short years ago, GM had 30 different vehicle architectures supporting sales of about 9 million vehicles. The company also had more than 70 different advertising agencies around the world for the Chevrolet brand alone. That’s staggering, and shows that we lost our economies of scale.
On diminished quality and debt:
In another move, GM leaders outsourced nearly all of the company’s information technology. We effectively dismissed data capture and proprietary analytics as a core competency just as the Internet was about to transform all modern business models. We also ended up with 23 leased or partially owned data centres, which is costly and risky. Now, we are taking that down to two, fully owned by GM.
We couldn’t even close our books in a timely manner.
This list goes on. We all know what happened next. The company that topped the Fortune 500 list when it was first published in 1955, and stayed there for 35 years, became disgraced.
This part of the speech set Akerson up to explain how much better things are today. GM has reduced the number of brands and models it makes, improved its financial systems, and has a new CEO in Mary Barra, who is well-positioned to continue that success.
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