Which Albatross Needs Dumping?
The linked column requires a paid WSJ subscription, but I’ll try to summarize. The piece bemoans high labor costs as the things that are sinking Delphi and possibly GM.
The author also blames the “albatross” of vertical integration, as practiced by GM (and let’s not forget Henry Ford’s Rouge Plant vertical integration).
Originally vertical integration seemed like a good idea. GM founder William Crapo Durant thought, reasonably enough, that the more value that could be added to a vehicle within GM, the more profit the corporation would harvest. So did his protÃ©gÃ© Alfred Sloan, the managerial wizard acquired along with the Hyatt Bearing Company, one of Durant’s first initiatives to implement his strategy.
So it’s not so smart today? What about Toyota and it’s vertically integrated semiconductor fab?
Vertical integration makes sense if you adding value and can keep costs low enough. That requires good management, which I’d argue Toyota has. When vertically integrated, you don’t have to pay a supplier an additional layer of profit margin, which should be to your advantage. It should also be easier to coordinate a value stream that’s owned by the same firm.
Complacency was a natural outcome of having what amounted to captive customers.
Complacency and failures such as workers reading newspapers on the job, as mentioned in the column, are the failures of the MANAGEMENT SYSTEM. Sorry for my shouting.
The internal partsmakers were increasingly resented for unresponsiveness to their GM customer needs. They were at least complicit in GM’s late adoption of such key technologies as disc brakes, multivalve engines and single rail fuel injection
Unresponsiveness to customer needs. Again, a management problem.
The article says GM and Delphi need to shed the albatross of vertical integration. The problem, I think clearly stated, is the management system. Why aren’t we talking about getting rid of THAT albatross? Why aren’t we talking in the media about GM needing to adopt the Toyota Way, not just dabbling with lean practices at the plant level.
The other headline from today’s WSJ (and Detroit News article):
“GM’s Wagoner Gains Some Time For Turnaround”
Hmm. Any comments on that?