In November, GM CEO Rick Wagoner appeared before Congress to ask for $25 billion to bail out the struggling Big Three automakers. To critics like Thomas Freidman and Mitt Romney, it was a sign that the American auto industry should be led out to pasture; if the Japanese are better at making cars, they said, then we should let them do it. To defenders, the loss of the country’s largest manufacturing sector would be an incomprehensible disaster. Nearly every day, the debate rages on the op-ed pages. Billions of dollars and millions of jobs hang in the balance.
In Why GM Matters, William Holstein goes deep inside GM to show what’s really happening at the country’s most iconic corporation. Where critics say that GM has sat on its hands while the market changed, Holstein demonstrates that GM has already radically retooled its entire operation, from manufacturing and cost structure to design. Where pundits say we’d be better off without GM, he shows how inextricably linked GM and the nation’s economy still are: The country’s largest private buyer of IT, the world’s largest buyer of steel, the holder of pensions for 780,000 Americans, GM accounts for a full 1 percent of our country’s GDP. A dollar spent on GM has profoundly different consequences from a dollar spent on Toyota.
Following a diverse cast of characters—from Rick Wagoner, the controversial CEO, to design director Bob Boniface, to Linda Flowers, a team leader on the line in Kansas City—Holstein examines the state of GM’s health and builds a persuasive argument that GM is essential to our nation’s well-being and, with the right economic climate, ready to compete with Toyota as one of the biggest global automakers.
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General Motors once dominated the auto industry, garnering more than 50 percent of the U.S. market share, but complacency, health-care costs, and competition from more efficient Japanese companies have all contributed to a dramatic decline. When GM CEO Rick Wagoner asked for a federal “bridge loan” of $25 billion for the big three automakers, the reception was anything but warm. Holstein, author of Manage the Media (2008), takes a look beyond the sound bites to reveal a car company struggling to meet high-tech standards while fighting for its very existence. Holstein argues that GM is worth saving because for every manufacturing job, there are 10 jobs throughout the whole chain of suppliers that also serve Ford and Chrysler; thus, a GM failure could mean the collapse of the entire auto industry. Holstein’s defense of GM makes sense at a time when the company is about to begin production of a fuel-efficient, plug-in hybrid, a critical bridge to U.S. energy independence. --David Siegfried
Review
“General Motors once dominated the auto industry, garnering more than 50 percent of the U.S. market share, but complacency, health-care costs, and competition from more efficient Japanese companies have all contributed to a dramatic decline. When GM CEO Rick Wagoner asked for a federal “bridge loan” of $25 billion for the big three automakers, the reception was anything but warm. Holstein, author of Manage the Media (2008), takes a look beyond the sound bites to reveal a car company struggling to meet high-tech standards while fighting for its very existence. Holstein argues that GM is worth saving because for every manufacturing job, there are 10 jobs throughout the whole chain of suppliers that also serve Ford and Chrysler; thus a GM failure could mean the collapse of the entire auto industry. Holstein’s defense of GM makes sense at a time when the company is about to begin production of a fuel-efficient, plug-in hybrid, a critical bridge to U.S. energy independence.”
— Booklist
“At a time when GM and the domestic auto industry are in acute crisis, this book makes sense of what has happened--and what should happen next. Bill Holstein is an extremely knowledgeable and perceptive journalist, and his book is a must-read for anyone who cares about the future of the American auto industry.”
— Alex Taylor, Fortune
“Holstein makes a compelling argument that the business model has changed dramatically - that Wagoner and other GM executives do get it - but by his own account the changes came far too late, and took far too long to implement.”
The transformation of GM (and Ford under Alan Mullaly) in the last few years has been extraordinary, as Wagoner and team have changed a resistant corporate culture, reduced costs, vastly improved quality, and fought entrenched customer perceptions formed by two decades of poor domestic product. The author gives a good narrative of a number of these aspects. Unfortunately, the overall book is flawed enough that I came away disappointed.
The first problem is one outside the author's control - the world has changed for most people and companies in the last several months, including the domestic auto manufacturers - GM's Herculean efforts may end up being too little, too late. This book would have been much more relevant if it was published in Q1 of 08; in Q1 of 09, events have overtaken the details he presents. GM's survival is now contingent on macro issues outside its own control. The author tries to be timely and includes details from as late as December '08, but it's clear that the rapid unfolding of events over a matter of months have impacted a story that was likely researched over a matter of years.
Second, the book is a bit too much of a Wagoner-worshiping puff piece. Everyone at GM is smart, Wagoner's a great guy with impeccable wisdom and people skills, the selection of inside players he presents are all committed to change, quality, globalization, diversity, etc. The only opposing view is an interview with cranky Jerry Flint from Forbes magazine. Holstein accurately presents Flint's views, but obviously doesn't agree. A corollary issue is the repeated "Rick Wagoner told me.." and "in a 2005 conversation with Wagoner, he expressed..", etc., etc.... Yeah, Bill, we understand that you're an important journalist seriously wired inside GM - we got it by the 5th or 6th self-important reference to your conversations with Wagoner, Lutz, etc. I didn't buy the book to read about your importance, I bought it to read about the story. And btw, the self-referential approach probably contributes to the homer/puff piece issue - can't be too hard hitting and keep that access, can you?
Finally, the book is badly damaged by numerous detail mistakes. The one I'll particularly note is in the last (obviously hastily written) chapter recounting recent events, where the author all but accuses Deutsche Bank of shorting GM stock because a DB analyst produced a report assigning a value of zero to GM common shares. To quote: "..there was no way to know if Deutsche Bank was shorting GM shares. But how else was there to explain its estimate zero dollars for the share price?" Umm, gee, maybe because the analyst looked at GM's balance sheet (i.e. interest obligations and debt maturity schedule), and its recurring losses, and figured the company was likely to go bankrupt without a government bailout? In a bankruptcy, Bill, the common shares go to, that's right, zero. Unfortunately, Holstein is apparently financially illiterate, a troubling trait in a business journalist - he makes reference on the same page (again blaming the shorts) that "..GM's market capitalization..was less than $4 billion, when the company had reported $178 billion in automotive sales last year, an absurdly low price-to-earnings ratio." Pssst, Bill, that's $178 billion in revenues, not earnings; GM has had negative earnings for years, which is why it's in the straits it's in. If business journalists don't understand income statements, they should get editors who do..or find other work.
In summary, an important story that's still waiting to be told. Maybe when (if?) things stabilize, someone will take it on and produce a better book than this one. I hope so.Read more ›
The price of ongoing access to high level GM corporate officials and mid-level managers for this author is treating them and their company gently in your book. Holstein spends most of the book arguing that GM is made up of bright, competent, hard working people who deserve a chance to succeed. He points out that they are finally listening to their critics, implementing neat ideas like OnStar, building neat cars like the new Cadillacs, and finally building higher quality cars.
In addition to being too easy on Rick Wagoner, the author chooses to minimize decades of gross mismanagement. He glosses over the expensive strategic errors made by GM executives like their aborted alliance with Fiat and the purchases and sales of shares of various Japanese manufacturers. Instead he characterizes management errors by highlighting tactics like using cheaper upholstery material.
This book needs a lot more data and a fewer conversations with executives and department managers in manufacturing plants.
I would like to see G.M. succeed, but Holstein fails to make the case that it should. Too much ink is taken up with little personal stories of long-time employees, and very little devoted to any sort of business case. Nonetheless, the book does provide some interesting background.
When G.M.'s leadership was appealing for government support in November, 2008, its share of the U.S. market was down from almost 51% in 1962 to 22.4%, and it was headed for bankruptcy. After receiving $13.4 billion in federal aid, it posted a $30.9 billion loss for 2008, reduced cash reserves by $6.2 billion during the last quarter, and requested $16.6 billion more for 2009, as well as additional support from Canada, Germany, Britain, Sweden, and Thailand.
G.M.'s retiree health ($7 billion/year) and pension expenses have given its vehicles a $1,500 cost disadvantage, and to reduce this it negotiated a $1 billion reduction in health costs in October, 2008, and later shifted health care costs off its books through funding a $55 billion amount to be administered by the UAW. Other cost reductions include a two-tiered hourly pay scale, with new employees hired at $15/hour to replace those retiring at $28/hour, closing factories, and laying off salaried workers. It also sold off its GMAC financing arm and Delphi parts-maker, though the latter still has expensive obligations linked back to G.M. Holstein reports that costs will decrease by $5,000/car in 2010.
Prior improvements include reducing 77 hourly job classifications to 2, consolidating its prior 20 purchasing operations and 7 manufacturing units, improving quality, cutting assembling hours/vehicle from about 2X Japanese plants in the U.S. to about 5% higher in 2002....
OnStar communications has been a bit of a success - I was impressed with its ability to slow down stolen vehicles when police were in place.
China has been a bright spot for G.M. - it is now selling 500,000 Buicks/year there, modified with 600 changes for the Chinese market.
What "Why GM Matters" doesn't contain, however, is any credible data on how much more support it will require, and what further actions it must take. Holstein also fails to address the question of "Why is Ford surviving without a bailout?" Where do we draw the line - Chrysler, Delphi, etc.? Finally, his overall credibility suffers due to failure to find significant fault in either G.M.'s long-ensconced top management or its rapacious U.A.W. "partner."Read more ›
Bill Holstein has written an excellent assessment of America's biggest car maker. This neat, tight little book is stuffed with penetrating reporting and useful insight. Moreover, it is a brave book since it charges into a tumultuous, uncertain situation without the comforts that historians normally enjoy. In a spare 267 pages, Holstein puts his neck on the line knowing full well that this isn't a blog post that he can go back to later and update.
Holstein's years as a business journalist covering the auto industry in the U.S. and in Asia are clearly evident. He walks us through General Motor's rich history and how it became an iconic U.S. corporation. GM evolved into the corporation model for the 20th Century with hundreds of thousands of workers, complex management systems and extensive benefits that remain tremendous financial burdens. Holstein takes us all around from design laboratories to the assembly line floors. He quickly lets us know in detail how GM stumbled and was overtaken by Japanese competitors and how GM sought a comeback by chucking sideline electronics companies and turning its manufacturing processes upside down.
It is easy to trash GM these days and to Holstein's credit, he doesn't fall into any such trap. He notes how GM management came to realize in the 1990s just how far behind they had fallen and how they had to reinvent themselves. Was it entirely successful? Obviously not, since GM is close to bankruptcy. But consider the facts. GM really did improve the quality of its products. For example, I had shunned American cars when I got out of college in the 1970s. When I came back from an overseas assignment in 1996 and bought a Chevrolet Blazer, I was stunned at how much better made it was than GM cars had been years before.... As for sticking with gas-guzzling SUVs, okay, all car companies stumbled, but let's not forget that sales are driven by market demand. In the SUVs' heyday 15 or so years ago, gas prices were incredibly low and without high prices at the pump, behaviors aren't going to change.
Holstein takes us into hopes upon which GM is basing its future if not its survival, namely the electric Volt, which, unlike Toyota's Prius, is not a hybrid powered in part by a gasoline engine. He might have taken his predictions of Volt's possible success or failure a little further, but he certainly explains the strategy well.
Like any author writing into a storm, Holstein had to quickly rewrite his last chapters as the book was heading to the printers. Once the subprime mortgage crisis hit last summer, economic events were changing at warp speed. GM's chronic cash problem became dire and the firm's weakness became all too clear. Holstein does a good job in his rewrite and brings up some political issues that others have missed, such some perspective behind Alabama Senator Richard C. Shelby's sharply-worded put down of GM's bailout request last fall. Shelby's Southern region, Holstein notes, is chock-a-block with foreign-owned car-making outfits that compete directly with GM such as Toyota, BMW and Mercedes.
My one complaint with Holstein's book is a difficult one. I do think he could have been a little tougher with some of the GM executives. He obviously has a good relationship with boss Rick Wagoner and that gives us insights others might not know. But Wagoner's use of a corporate jet to ask for a Washington bailout was just plain stupid. Other reviewers have accused Holstein of being a pushover for GM, but that criticism is excessive. It is easy for authors or journalists, especially young ones, to posture as being tough and savvy by making snarky comments. Holstein is too much of a veteran for that. Without waiting for the convenience of a rear view mirror, he has done readers an immediate service by providing clear insight about why one of America's biggest firms and manufacturing in general still matter in these shaky times.Read more ›
