It’s been a tough week for the nation’s Big Three automakers.
Turns out you can’t even fly your corporate jet to Washington for a bailout any more without some snippy senator asking for a business plan.
“Why should we believe your firms are capable of restructuring now when you weren’t able to do it under more benign conditions?” Republican Sen. Richard Shelby of Alabama demanded to know. “What would you do with the money if you were able to get $25 billion, and how would you pay this money back?”
Sheesh. These congressmen are starting to sound a lot like bankers–and not the kind of bankers that used to hand out subprime mortgages as if they were Halloween candy.
The bottom line: Congress agreed to give GM, Ford and Chrysler until Dec. 2 to prove they’ve got a viable plan to keep their companies afloat. The plan must show how management and labor would work together to make the concessions necessary to get the automakers back in the black.
Now I realize that this doesn’t give the Big Three and their unions much time. After all, these guys are some of the best-paid workers in America–and they’ve been at each other’s throats for years. To be honest, I think it would be easier to bring the Giants and the Patriots together for a game of touch football than to get these arrogant executives and their spoiled union workers to reach across the table and compromise.
But whether the automakers manage to persuade Congress to fund their bailout plan or the industry reorganizes under federal bankruptcy protection, the auto executives and their workers will have to kiss their fat paychecks goodbye. Especially in this economy, the Big Three can’t be competitive unless they can figure out how to make their cars for less. (They’ll also have to figure out a way to persuade U.S. consumers to buy their cars, but that’s another story.)
That’s why I believe that any restructuring plan the automakers present to Congress must be based on the principles of “open-book management” pioneered by Jack Stack, the visionary CEO of SRC Holdings and author of The Great Game of Business. Stack turned around a failing International Harvester plant in the early 1980s by teaching factory workers how to read financial statements and by opening the company’s books to motivate them to think like owners and save their jobs.
Open-book management works like this:
1. Teach your employees to understand your company’s financial statements.
2. Give your employees all the relevant financial information about your company.
3. Make your employees responsible for all the numbers under their control.
4. Give your employees a financial stake in your company’s performance.
Another aspect of open-book management is what’s called the “critical number,” which represents a key indicator of profitability or break-even point. After all, you can’t win the game if nobody’s keeping score.
What would the critical number for the automakers be? That’s up to the auto executives, their unions, the shareholders and Congress to decide. One metric might be “gross margin per car”–that is, the car’s wholesale price (before dealer markup) minus the cost of manufacturing (labor plus materials). That would show how efficiently the taxpayers’ capital is being put to work. Another metric might be “workers per car”–the number of workers it takes to assemble a car and ship it to the dealer. This way, the unions would have an incentive to work through lunch and management would be motivated to roll up its sleeves and screw on a hubcap once in a while.
Who knows? It just might work. Because once America’s automakers get out of the business of begging the government for handouts and get back to building cars that consumers want to buy, then what’s good for General Motors might once again be what’s good for this country.
This entry was posted on Monday, November 24th, 2008 at 3:00 pm and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.Leave a Reply
