Making Changes, Not Threats

I didn't threaten them. This was two years before I was even bidding anything. I said, "Why don't all of you come to GM and for the next year and a half work together to help me design this. You are designing the processes that will help your business. By the way, IBM, you don't even do this across customers, you don't even do it across processes or business transactions. Neither does EDS. You can use this in your own company. I don't care if you share it with anybody else. As long as I have a two-year lead, you can take it any place you want."

I even took some GM money and paid for some of their people who were here. I actually paid them money to go define their standards for the future. Okay? And they worked in rooms at GM in secrecy, meaning they were not allowed to disclose this to the outside world, because as soon as it was disclosed, I'd spend more time talking with the press and talking with standards committees, and I don't have enough time in my life for standards committees. All I was concerned about was GM.

How did that effort go?

The first couple of weeks they were kind of strange bedfellows. They don't usually sit down in meetings like this. But it evolved over time. The CEOs wanted this solved because they saw the merit. You know, I'm not too sure they were totally enamored with GM.

I had people in each of the rooms who were the adult supervision. ­After about a month or two, though, they didn't need any adult supervision. They became a team, and they thought they were doing something that might change the industry for the future.

Now what they do with it, I don't know. Do I hope it affects the IT industry? Yes. All I asked of them was not to talk to the press. And for two years, it never got to the press, which was quite amazing.

I guess we're not doing our jobs.

Exactly right. You guys screwed up on this royally. Now why didn't they talk? They knew at the end there was $15 billion to be bid.

So it's a very interesting thing. I mean, if 17-year-old kids can collaborate over the Internet, build open-source software, basically run companies, design things, don't tell me that the best IT companies in the world can't collaborate.

So what is your role in this new scenario?

Well, I've always said that we are ­essentially IT brokers. All my people do in this new world is either build or buy information technology to change the business, and they are measured on improving the business, not the information technology. As I've told my people for years, if you go build a two-million-line program, and it's on time and within budget but it doesn't improve the business, you're the biggest failure I've ever seen.

Also, we architect the system. We don't ask our suppliers to solve our business problems. I mean, how in the world is EDS or IBM going to solve our business problems when they're not even in the automotive business? They can't.

So you're basically chief IT broker?

That's exactly right. I just manage a lot of money, but if you talk to my boss, I'd say 80 percent of my performance is based on business-process transformation, not IT.

Where does the innovation come from in this model?

I have what's called process information officers. They go horizontally across GM. I have a process information officer for manufacturing. I have a process information ­officer for product development.

I have one for sales and marketing. I also have CIOs in each of the businesses that have to make things work and drive the business.

The horizontals are the innovation. They are the economic buyers. They buy the new technology and the new capability. They are supposed to know what's in the marketplace, where it goes, and so forth. They are the ones who basically get involved with [venture capital firm] Kleiner Perkins.

My whole staff goes out to Kleiner Perkins ­every year and looks at the top 15 or 20 new start-up companies. These executives are the ones who buy the $3 billion a year. So they are the key brokers. If there are innovations they don't see, I'm going to give them all kinds of hell: "Where were you on it? Why did you miss that?"

Remember, I'm buying $15 billion, but we only talked about $7.5 billion worth of contracts. There's another $1.5 billion for telecommunications, but the rest of it—all the innovation—is being bought by the drink. So there's still more than $5 billion out there. It could be IBM, or it could be a 20-person company in Silicon Valley—or, these days, a company in India or China.

So how does this help you build better cars and trucks?

Well, what happens is it takes away all of that foundation building, and now I can start building the house. I can start differentiating.

Technology has a very, very significant position at GM. GM's processes run as well, or better, than just about every other automotive company. If you looked in the manufacturing area, three of the five most productive manufacturing facilities in North America are GM's—and that includes Toyota and Honda and everybody else. If you look at the product-development cycle time at GM, it is getting close to under 20 months, down from around 48 months. It's basically world-class. Those aren't issues at GM.

The issues at GM are pretty easy to explain but extremely difficult to fix. One, we have two and a half retirees to every active employee, and those retirees are getting full benefits and full pay. No other company has that ratio.

Toyota doesn't have to worry about pensions or healthcare. Other countries take care of that. But even at Ford, they have one and a half retirees to one active employee. GM has been successful for 100 years, and has a long legacy. That legacy will get fixed because our aging workforce will go away as they die. It's just going to happen, but we need another 10, 15 years.

The next thing is, because we've been around so long, our plants are in high-cost areas. So plants that were built in the 1950s and 1960s and 1970s are in the U.S. or western Europe or whatever, whereas our competitors put plants wherever in the world because they're just starting, or they're growing.

You can also talk about not having the right product. But that isn't driven by process so much as fashion. But you won't hear anybody talking about GM's processes being old and antiquated or not world-class. So if you're wondering why Wall Street is beating up GM? Well, they want to know what we are going to do with Delphi? What are we going to do with pensions? How about all this healthcare we have? GM's got to go fix those problems.

It has nothing to do with processes at GM and how the company runs.

So I think IT is a differentiator if we do it right, if we put the right model in. It can't change everything at GM, but it can help. All I'm trying to do is make GM somewhat successful.

This article was originally published on 04-06-2006
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