Search

Keywords
5 June 2009 • 8:03 pm

Economist: GM was ‘Disastrously Inflexible’

I want to share with you the opening lines of the lead story in tomorrow’s Economist. With no punches pulled, the issue’s cover story disects the decline and bankruptcy of GM, once the most powerful corporation in the world. The tale of GM is a sad but effective illustration of the deadly combination of long-term avoidance of change and institutionalized support of the status quo, in this case by the U.S. goverment. The article is a very worthwhile read for those engaged in strategic planning. Your comments are welcome below.

The decline and fall of General Motors

Detroitosaurus wrecks

The lessons for America and the car industry from the biggest industrial collapse ever

The demise of GM had been expected for so long that when it finally died there was barely a whimper. Wall Street was unmoved. Congress did not draw breath. America shrugged. Yet the indifference with which the news was received should not obscure its importance. A company which once sold half the cars in America, employed in its various guises as many people as the combined populations of Nevada and Delaware and was regarded as a model for managers all over the world has just gone under; and its collapse holds important lessons about management, about government and about the future of the car industry.

GM’s architect, Alfred Sloan, never had Henry Ford’s entrepreneurial or technical genius, but he had organisation. He designed his company around the needs of his customers (“a car for every purse and purpose”). The divisional structure he created in the 1920s, with professional managers reporting to a head office through strict financial monitoring, was adopted by other titans of American business, such as GE, Dupont and IBM before the model spread across the rich world.

Although this model was brilliantly designed for domination, when the environment changed it proved disastrously inflexible…