"Viable" by March 2009?


Bush Gives Emergency Loans to Automakers – NYTimes.com

Detroit News Article

I don't understand this at all. What is the operational definition of “viable”? What will/can change in three months? I'm honestly asking those of you who have been following this more closely than I've been able to. Is “Lean” any part of the discussion? I know Lean isn't a cure-all, but what operational changes and culture changes are the companies expected to undertake?

I nearly threw up a bit when I heard a TV news promo asking if the Madoff investors could be “bailed out.” Yikes. Where will this end?

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. The one TV headline says “… leaner, stronger automakers…”

    That’s what I hate about the word “lean” in “our” context.

    There they mean “smaller” automaker, of course. No wonder so many people are afraid of lean/TPS.

  2. And still the most interesting part of the Automobile industry discussion seems to be “How Toyota will handle the difficulties?”

    I guess, I will not be that far from truth saying that whole “Lean community” is waiting with great aspiration to see the Toyota financial performances during the recession.

    I am quite curious myself how serious are the concerns that failing US auto giants will affect Toyota as they are in fact using the same suppliers?

    Could be quite an interesting topic to discuss..

  3. A final moronic act by a President I’m ashamed to say I voted for twice. Morons bailing out morons. Where is it in the U.S. Constitution that the government can “bail out” some companies over others? This is insanity. The government has no right to do any of this, regardless of what “feels right.”

    Our country is on the road to ruin. We’re bailing out companies (the UAW really) with money we’re borrowing from the Chinese.

    Wake up people.

    Someone explain to me how this “lifeline” is going to fix one damned thing? Let’s come back on March 31 and discuss.

  4. I don’t get the impression that anyone in Washington really believes that GM’s and Chrysler’s management has a clue. This bailout is about not creating a domino effect, or at least trying to put a stop to the current domino effect that is occuring. If (when?) GM and Chrysler go down, it will send shock waves through the economy. I don’t like giving these guys any money on principle either, but sometimes you have to take one for the team. I’d certainly feel much better about all this if I saw that GM and Chrylser showed that they actually understand their predicament (they are exceeding market demand and they can’t slow down, and they aren’t doing anything to make themselves fundamentally more effective and efficient). It used to be fun to use them as an example of the antithesis of Lean, TPS, what Deming espoused, but it’s not so funny now.

  5. Let’s treat the Big 3 as 3 different companies. Ford isn’t asking for any money. They’ve got a truckload of problems, but bailout isn’t one of them. GM actually has many good things going for them, like leading the race in fuel efficiency and great new cars like the Malibu. They just need cash and to get rid of legacy costs. Chrysler on the other hand isn’t even a viable company anymore. They aren’t even developing new products any more. If they restarted developing new products today, which isn’t going to happen, they would have a 4 year gap in new products. I can’t believe the auditors are even signing off on this entity.

  6. This situation could be a very good thing for the big auto firms.

    My understanding is that one of the major problems for them moving toward a lean model (as per Toyota, etc) is that it would require changes to their financial reporting, removing most of their finished goods and work-in-progress inventory from their asset base and creating massive “losses” as this inventory stock is reduced. Such a change would have been market suicide previously – shareholders would never have accepted billions being effectively wiped off the balance sheet. Perhaps now, with the balance sheet in tatters anyway, they might be able to get away with it.

    Assuming they are smart enough to try and change of course.

  7. This “bailout” just means history won’t show that the automakers failed during W.’s regime. They’ll fail under Obama. The messiah won’t be able to save them.

    Someone on TV (congressman?) said “all they’re doing is kicking the can down the road three months…”

  8. They don’t have to be viable in 3 months, just submit a plan to become viable by the end of 2009. Not that it really matters. I could produce a plan for them to be viable by the end of 2009 before I’m done with my coffee…doesn’t mean it will work.

  9. I think “Neutron Jerk” nailed it on the head. It’s a game of pass the trash.

    Nothing practical can happen in the next 3 months that hasn’t already happened in the last 2 years. These companies have slashed tens of thousands of both white and blue collar jobs. They’ve shuttered plants, shut down vehicle platforms, cut pay and benefits for remaining workers and many other traditional cost cutting acts. Consumers just aren’t interested in buying what they are selling. No operational changes are going to fix that.

    As a hard headed free market guy, I say let them all die. However, the practical application of that will gut a large portion of the economy of the midwestern US when you factor in everything from suppliers to dealers to truckers to restaurants to you name it. Using some sort of restructure to eliminate “legacy costs” is just as ugly because it then forces the burden of supporting those “legacy” families on to the US taxpayers through Medicaid and other programs.

  10. “Consumers just aren’t interested in buying what they are selling. No operational changes are going to fix that.”

    Joe – I disagree. It is entirely possible to execute operational changes such that they start producing what customers are interested in buying, and doing so in a efficient manner. The Japanese firms are living examples of this.

    Change is a possibility, it’s just a question having the willingness and desire to overcome the barriers to making it (which I agree are very large). Deming did say “Change is not necessary, survival is not mandatory”, so you’re right that they have the choice to not change, to fail and to disappear. But this is a choice – change is possible.

  11. Chris – the one thing I *do* see eye-to-eye with Rick Wagoner on is that the latest Chevy Malibu is a pretty solid car for it’s class. It’s about time, after so many mediocre attempts.

    GM has some great product. The question is “is it too little too late” and do they have enough cash to survive? They’re supposedly burning $1B a month in cash.

  12. The bailout would help the Big Two-and-a-Half if their problem was temporary, i.e. caused by the financial crisis, or easily fixed by capital investment. The much-ballyhooed “legacy costs” will not be temporarily mitigated, but not alleviated, by the bail-out money.

    The big problem is not even legacy costs; it’s perceived value. The legacy costs add about $1500 in cost per vehicle. Those vehicles also sell for thousands less than comparable Toyotas or Hondas. The bailout will not fix this problem, and it may make it worse. The Malibu and Vue are good steps toward correcting this problem for GM, but they’re not going to solve the problem, either.

    I think that the bailout should not focus on keeping these companies in business, but on keeping the industry’s employees employed and in the middle-class. It seems to me that this is a much more challenging proposition than simply floating GM and Chrysler for a few months, but I think this is also the only viable long-term solution.


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