“Can we blame quality programs for GM’s demise?”
World War III has begun. This time it’s not a war of battleships, bullets and bombs—this is an economic war. The weapons are televisions, steel, cars, and clothes. This is a war where we have no allies. Every nation is out to capture more of its share of the U.S. and world’s market. We are being attacked with tires from Brazil, cars from Japan, radios from Taiwan, clothes from China, cosmetics from France, shoes from Italy, and beef from Argentina and Australia.
Businesses in the United States entered the 1980s with a deep-seated resolution to stop the flood of import products and as a result, a group of “new admirals and generals” took over to reestablish our industrial leadership. These were people such as John Akers of IBM, F. James McDonald of General Motors Corp. (GM), Jim Olson of AT&T, and John Young of Hewlett-Packard. Industrial leaders like these laid out strategies to thrust the United States back to the prominence it once had. But it takes years to reestablish a reputation once it has been destroyed or at least tarnished. General Motors—one of the most powerful and respected organizations—went into bankruptcy in 2009. Why did this happen? What did they try to do that didn’t work? To help understand this, I will report on an interview I had in 1988 with GM’s corporate president, F. James McDonald, which was documented in my book, The Quality/Profit Connection (American Society for Quality Control, 1989).
General Motors celebrated its 100th anniversary on September 16, 2008. It was on this date in 1909 that William C. Durant founded. General Motors Co, predecessor of the current GM. The first motor company acquired by Durant was the Buick Motor Co.
In 1988, GM had 151 facilities operating throughout the United States, in 26 states and 90 cities; in Canada, there were 13 GM plants. It had assembly, manufacturing, distribution, sales, or warehousing operations in 37 other countries. GM also had equity interest in associated companies, which conducted assembly, manufacturing, or distribution in several countries. The average worldwide employment totaled approximately 748,000 men and women in 1984.
Following is an excerpt from my interview with F. James McDonald, president of GM from 1981 to 1987.
H. James Harrington: What were the circumstances leading to the current focus of GM on quality improvement?
F. James McDonald: Efficient, small, high-quality vehicles from Japan, and the availability of these vehicles at just the right time in history were watershed events in the U.S. auto industry. Their perceived quality became the benchmark for all cars—in effect, customer standards changed dramatically. And that change swept through the entire line of products.
HJH: Do you have an official quality policy?
McDonald: Actually, the new quality consciousness at GM began with the development of a quality ethic for all GM units and operations. The essence of this ethic boils down to this: Quality is the number one operating priority at GM today.
HJH: To what sections of the business is it being applied?
McDonald: Quality improvement is being applied to all areas of our business. Specific quality objectives and strategies must be included within each unit’s five-year business plan. All departments within a business, and of course, each employee, contribute to meeting those quality objectives.
On new product programs, resources are allocated very early when our ability to influence the outcome is greatest. This includes the front-loading of people from all disciplines including marketing, product engineering, manufacturing, assembly, quality assurance, financial, and materials management. This includes early sourcing decisions so our suppliers can work with product development teams on potential problems and improvement.
HJH: What activities were undertaken to start the quality improvement process and when did it start?
McDonald: At GM today, we have this kind of strategic vision, and that vision is simply to offer world-class quality in every market segment. By world-class, we mean parity with, or superiority to, the best in the field—product for product.
To assist the operating units in this effort, the corporation has issued four key success factors for quality, which help focus the GM quality ethic and its six mandates. Research has shown that these key success factors must be addressed in business planning and implementation strategies if meaningful quality improvement is to occur.
- Management commitment. Managers at all levels must be committed to continuous quality improvement and demonstrate their commitment by word or action.
- People development process. Every employee, regardless of function or level, must have the encouragement, support, and opportunity to be a contributing member of the quality improvement effort.
- Quality performance processes. Each task and activity must have processes and tools to ensure conformance to specifications and to provide for continuous quality improvement.
- Customer satisfaction. General Motors must be the world leader in quality, reliability, durability, performance, service, and value, as confirmed by customer-defined measures and marketplace response.
We have also identified the major steps to carry out improvements on any given project and have found that they work quite well.
HJH: What is the role of top management in the improvement process?
McDonald: Achieving true quality maturity is totally the responsibility of top management in our company. Others may carry it out to one degree or another, but those at the top must be willing to go the whole route.
We believe that the whole top management team must be aboard. Even the most inspiring leader can’t hope to reach the organization without total commitment from everyone at the top.
HJH: What is the role of the employees and the union in the improvement process?
McDonald: We are absolutely convinced that eventual success depends heavily on the employees. As we discussed, one of our key success factors for quality improvement concerns people-development processes.
For instance, we’ve trained more than 30,000 GM workers in statistical process control techniques. And I must say, to see these tools put to work right on the line is one of the most rewarding experiences I’ve had at GM. So, I think we’re on the right track on the employee side—even though we still have a ways to go.
HJH: What problems did you have in implementing the improvement process?
McDonald: Prevention within manufacturing can take you only so far along the journey. Greater success must come from moving the focus upstream, to design and engineering, for example, by combining the talents of design engineering, processing, and manufacturing, and having them work together as a team instead of individually. That’s the place to start if you’re serious about doing everything right the first time. Our product development teams on new products that we have previously mentioned are addressing this in a fine manner. We are also initiating this concept in our daily operations.
General Motor’s reorganization of its North American passenger cars and its worldwide truck and bus operations addressed changes necessary to ensure quality improvement, accountability for results, and effective allocation of resources. The reorganization was quality-driven from the beginning.
On reviewing McDonald’s comments, I see he was saying all the right things and doing all the right things, but the results have been disastrous for GM investors, employees, suppliers, and the United States.
What do you think went wrong? Are we telling management the wrong things? Is the quality message one that leads an organization into bankruptcy? Give me your thoughts on what went wrong over the past 20 years at GM. You can use the Comments area beneath this post.
Next week I will share my conclusions with you in this post with the second part, “Are Quality Methodologies all Smoke and Mirrors? Part 2.”