The Jaguar and Land Rover Turnaround

I was pleased to read the New York Times recent article “Tata Motors Finds Success in Jaguar LandRover”.

The article describes the turnaround of the troubled England based manufacturer of Jaguars and Land Rovers by Tata Motors an automobile manufacturer headquartered in India.

Tata purchased the company from Ford Motor Company in 2008.

The sad aspect of this story is that an Indian automobile manufacturer could fix and turnaround this complex operation but the venerable Ford Motor Company could not.

Surprisingly, this may be an indication of some weakness in Ford's management ability.

Allegedly foreign manufacturing operations in developing countries are not capable of matching the management abilities of USA companies.

Can Ford's failure in this regard, be applied to studying the weakness in the USA's overall manufacturing capability?

The question remains, “Can Manufacturing Return to the USA?”

General Motors versus Toyota – who will win?

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General Motors just reported a 41% reduction in its second quarter Net Income to $1.5 billion with a $1.8 billion decrease in Sales.

The main source of the GM decline was its European operations. Its future results are questionable as USA sales forecast predicts declines. Both of which are understandable in this difficult economic environment.

But, Toyota reported a huge increase for the same time period. Its Net Income was $3.17 billion on robust sales growth – profit was 111% greater than GM’s. Its sales forecast expects substantial increases.

Can GM be successful up against Toyota and other Asian manufacturers?

Toyota’s USA based operations have lower product costs compared to GM because their hourly factory labor wages are lower – further compounded by lower health care and retirement costs. Toyota has a leaner salaried organization and thus lower overhead costs. These significant issues were not dealt with during GM’s bankruptcy.

GM is not the best cost producer in its industry and, as a result, will decline. Its profit margins and free cash flow will be squeezed resulting in less capital available to develop new products and productive manufacturing systems and equipment.

Will this bring GM to its knees again?

Most likely.

Click on the following links to read my earlier posts with greater details of GM’s issues:

General Motors - Industry Leader? 

GM & Chrysler Bankruptcies

UPDATES:  

On August 15^th Forbes published a thorough analysis of General Motor’s declining performance entitled GeneralMotors Is Headed For Bankruptcy – Again -  a worthwhile read.

A September 10^th Reuters’ article, Insight: GM Volt: the ugly math of low sales, high costs,  details General Motors costly failure with the Chevrolet Volt – a loss of $49,000 on each car. Couple this failure with the Chevy Malibu being rated dead last versus five competitive vehicles in Car and Driver magazine’s comparison tests raises two questions: Is GM well managed? Can it succeed?

These product failures signal the absence of coordination and cross-functional communication among GM’s operating functions. In particular, for these two product failures, are product engineering, marketing, manufacturing engineering and cost accounting working in sync?

In my experience there is an absence of open and candid communication through all levels of distressed, troubled companies. Cross-functional communication is always missing. Consequently mistakes mount, problems fester.

Cross-functional communication requires that the CEO uses it and demonstrates that it is an integral part of the company’s culture. Absent that it is difficult for functional officers and mangers to use it – the negative politics of some human beings results in certain people being unwilling to participate in this style of management. Need a fully competent and self-confident CEO - highly knowledgable of what goes on in the bowels of a manufacturing company.

If its faults are not corrected, the prediction that GM will reenter bankruptcy may come true.

October 31 and November 5. Toyota’s net income tripled and market share increased while General Motor’s net income declined12%.
 

Is China’s decline permanent?

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News reports are replete with China’s struggles and decline. China’s past success is frequently labeled a “Bubble” with the question – Is it bursting?

Yes, China is in decline. But not just due to negative Global economic struggles. China has entrenched problems that are contributing to its decline. Are these problems intractable?

Following are significant but an incomplete list of its problems:

● Manufacturing processes and systems are at the same capability level as were in-place in the USA in the 1970s. Relatively inefficient production operations coupled with the sizable increase in hourly factory labor wages are reducing profit margins and free cash flow. A large percentage of Chinese company owners and managers do not have knowledge of the more productive methods of operating.

● The absence of trucking and freight forwarding capabilities to support expansion into lower labor cost Western China. In addition, it is difficult and costly to get quality managers to move to these remote areas.

● China needs to maintain its historic growth rates to ensure that capital is available to clean up its environmental problems. In addition, high employment levels must be available to mitigate the current increases in social protests and riots.

There are several other negatives for China. Click on these links to see further details:

Where is China Heading?

China’s Achilles’ heel– Obstacles to Low Cost

Will China duplicate Japan’s decline from its 1980s success level?

Not exactly the same as Japan since China’s leaders have a history of responding and changing its formulas. But some of its entrenched problems will not be easily solved and China’s pendulum will swing to the negative side of the ledger.

UPDATES: 

August 23rd New York Times article, Manufacturing in China Slows, reporting on a worsening economy.

Business Week’s November 15 article, “Xi takesChina's helm with many tough challenges”, further documents the serious problems facing China’s new leader. 

Miyamoto Musashi, “The Book of Five Rings”

There are several revered authorities whose management principles result in businesses becoming and continuing to be successful. Two of the most famous: Peter Drucker and the legendary Sun Tzu.

Peter Drucker is the eminent author of 39 management books and is considered the “father of modern management”. Sun Tzu is the author of “The Art of War”. He was China’s first professional General. Prior to Sun Tzu's leadership, armies in China were largely disorganized, impotent, failures.

Surprisingly Peter Drucker’s and Sun Tzu’s advice is quite similar. Both list almost identical characteristics needed for effective leadership. Each focus on developing and executing strategic and operating plans. They also stress the importance of innovation to achieve success, or in Sun Tzu’s words, “do the unexpected”.

Another source frequently referenced when effective management and leadership is discussed is the famed Miyamoto Musashi, the author of “The Book of Five Rings”. This work is described as a classic guide to strategy. He was one of the most accomplished Japanese Samurai warriors of the 17th century.

While Miyamoto Musashi’s book is a worthy and interesting read, it is not truly a guide for effective management and strategy development. It is a manual more specifically focused on the Samurai, especially offering proven tactics for prevailing in battle. Topics include insight on combat expertise needed to excel, such as swordsmanship, weapons, technique, intimidation, etc. There is even teachings on Machiavellian concepts designed to distract and demoralize an opponent.

The value of his book is the healthy guidance it gives for leadership. There are very interesting portions of the book, which include a sound philosophy of life helpful for anyone seeking a successful leadership role. Here are a few quotations to be remembered:

“A truly confident person never loses self-control in whatever situation he is forced into.”

"One’s state of mind must be like a shiny blue sky without clouds – free from doubt and confusion."

“If a person is determined to accomplish something without fear of the outcome, nothing is impossible.”

Miyamoto Musashi, “The Book of Five Rings”.

Click on the following links for the earlier Peter Drucker and Sun Tzu posts:

Peter Drucker

Sun Tzu