Old Failures And New Rules For The Auto Industry

The best pieces I’ve read on the auto industry bailout/failure/bankruptcy are Bob Sutton’s giant flame, “Thoughts About Why GM Executives Are Clueless And Their Destructive ‘No We Can’t’ Mindset” and Umair Haque’s “Detroit’s 6 Mistakes and How Not to Make Them.”

While neither of these articles are about green energy or hybrid cars or sustainability per se, they both get at some of the big issues that industry and finance worldwide have to overcome for the the world to change as it must.

Sutton is a measured and careful writer, whose primary beat as a teacher (at Stanford School of Engineering, B School, and D School), business consultant, and writer, is using effective techniques for creating innovation, and using evidence to understand whether the decisions you make are taking you in the right direction. His post, in a measured and careful way, excoriates GM for decades of practices that go against those precepts:

I could list hundreds of management, cultural, and operational reasons why I believe that GM is such a flawed organization, but to me, a pair of root causes standout: Most of the senior executives — and many of the managers — are (1) clueless about what matters most and (2) suffer from a “no we can’t” mindset.

Haque, on the other hand, looks to the good future of what he calls “the new rules of 21st century business,” using Detroit as the example of the old rules.

Old rule: Choose evil. Industrial era business is unrepentantly and almost sociopathically evil: shifting costs onto others, while striving to internalize benefits. Detroit chose lobbying, marketing wars, and low-cost hardball – to always and everywhere try to socialize costs and privatize benefits. Never was this truer than Detroit’s lobbying against public transport throughout the 20th century. Why does public transport in the States suck? Because Detroit’s lobbying machine doesn’t.

New rule? Choose good. In the 21st century, every moral imperative is also a strategic imperative: doing good – for customers, employees, suppliers, or society – is a radical strategic choice that unlocks new pathways to innovation and growth. The opportunity cost of defending evil for Detroit was never learning how to choose good – and that’s a crucial mistake other auto players didn’t make. Tata chose to make a car that was accessible to the world’s poor. Porsche and BMW chose to invest in talent, people, and imagination. Honda and Toyota chose to invest in renewables and partnerships with the public sector. All opened new avenues to growth for an industry at the brink of extinction.

Tomorrow I’ll be posting again about the auto industry, focusing on Obama’s pledge on Saturday for “public works on a massive scale” and Tom Friedman’s Sunday op-ed, in which he suggests we tie any bailout to a commitment by the car makers to having their entire fleets running on hybrid power plants in 36 months.