Saturday, June 18, 2011

Maximum Bob's perspective . . .

IT SEEMS THAT MOST who wander into this blog aren't "car guys", which is just fine. However, the automotive business is an important part of our economy: jobs. As we all know, GM and Chrysler went bankrupt and had to be bailed out by the US government.

These business failures were a long time coming, and had many sources contributing to the problem.

Bob Lutz (aka "Maximum Bob") retired from GM last year, after ramming the electric Chevy Volt into production, and then wrote a book about the car biz, "Car Guys versus Bean Counters" (Portfolio Penguin, $26.95). Neil Winton is a long-time automotive journalist, with the Detroit News, and has an interesting review, "Lutz says business theorists hurt auto industry more than UAW". Yup, it takes an MBA to create that kind of destruction.

Lutz reckons that his experience is not just applicable to the automotive industry, but to business generally. Originally with Ford of Europe (actually not one of his successes), Bob moved on to Chrysler, and GM in North America. A real "car guy", not to be confused with "Minimum Bob" Nardelli, the incompetent former CEO of Home Depot, who, after trashing that outfit, was appointed CEO of Chrysler by its new owner, the clueless finance outfit, Cerberus Capital Management, who bought Chrysler from Mercedes and proceeded to self-immolate.

"Shoemakers should be run by shoe guys and software firms by software guys and supermarkets by supermarket guys. With the advice and support of their bean counters, absolutely, but with the final word going to those who live and breathe the customer experience. Passion and drive for excellence will win over the computer-like dispassionate, analysis-driven philosophy every time," Lutz said.

"(Successful entrepreneurs like Steve Jobs of Apple and Britain's Sir Richard Branson) have a blissful lack of awareness of the analytical science of business. Uninfected by the MBA virus, they simply strive to offer a better product, one that delights the customer. They control costs, of course. And they tolerate a necessary level of bureaucracy. It's essential. But the focus is on the product or service ... thus the customer. American business needs to throw the intellectuals out and get back to business!"

He can't resist repeating an apocryphal story which pointed to a lack of quality in GM cars compared with the Japanese.

The Japanese had a reputation for producing incredibly tight fits in their bodywork, with no unsightly gaps around hood, trunk and doors. To test the car's air tightness, Toyota engineers would leave a cat in the car overnight.

"If the cat was active and chipper next day, there was obviously too much air entering the car somewhere. But if the cat was limp, listless or near dead, this indicated a tightly built car. Hearing of this test, a GM assembly plant also placed a feline in a just assembled car, shut all the vents and doors and awaited the morning. But when the engineers came back to check the next day the cat was gone!"


Alison said...

I'm thrilled to see someone dumping on MBA's. There is nothing more predictable than a drop in productivity the more MBA's are involved. Time that was spent on actual work must be rerouted to producing numbers for them to crunch. It also increases employee aggrevation. In addition, many of the numbers given are made up, making the crunching of dubious usefulness. A pox on the whole MBA scam. They shouldn't be employed to crunch numbers until they have years of actual productive work experience.

Edstock said...

Years ago, I signed up at the U of T for an MBA. Lasted about 6 weeks, as the reality set in that these people did not have a clue. Wound up teaching full-contact karate instead. Less remuneration, but much more practical.

Scanner said...

Alison, the Harvard School of Business developed a model that they convinced everyone was the best model. It consisted of never building production or inventing anything, but buying the competition who had capacity or new ideas. The end result was the complete collapse of the ability to build the machines that built the production machines in the US, the concept of using M&A to gut profitable businesses and the measuring of executive worth by short term share price. Thus we arrive at this point in history where the greatest steel producing area in the world is now called the rust belt and the US and Canada are manufacturing less and less of what they consume - and we wonder why the government has fewer resources and there are no pension funds for our retirees.

Scanner said...

Just wanted to point out that none of the "heroes" in "Atlas Shrugged" have an MBA, are bankers or stockbrokers.

Steve said...

I used to sell stuff to United Technologies, they had the MBA bug bad, ever two year a reorganization, it was madness.

aweb said...

I just want to object to calling MBAs "intellectuals". Intellectual is a word with a long and proud history, typically not involving accounting scams and efficiency schemes. The MBAs doing the damage are not intellectual, they are the opposite - pursuing a line of action no matter what objections are raised or how unreasonable it might be inreality.

Economics, as a discipline, should be compared to organized religion, with a similar utter imperviousness to facts. MBAs (again, the bad ones, I've known good people with MBAs, typically forced into the program to meet a stupid promotion/management requirement) are the high priests of this religion, and without highly placed plants in gov'ts around the world to bail them out, would have been shown for the utter frauds they are.

By pretending there is any certainly in a ten year projection, they kill business. Instead of making great stuff that will survive no matter what, they focus on maximizing return, but based on insanely bad forecasts (go back ten years at any point and find an accurate forecast of the future economically; or don't you won't find one).

BobMacActual said...

aweb, I've said for years that free market economics was not a science, social or otherwise, but a religion. A bad religion. Lately, I've come to a startling conclusion:

I've been wrong all along.

It's not a religion. It's a form of mental illness, characterized by a more or less complete detachment from reality. It's similar in some respects to paranoid schizophrenia, except the illusions are less colourful.

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