GM Conference

On November 11-13, 1997 GM-NAO held its third annual Plan To Win Conference with the theme of  “The Race to Win.”  The conference emphasized the need for faster implementation of our strategies to win the race for industry leadership.  The conference was attended by 2,000 of GM-NAO’s top leaders, Delphi leaders and general managers, and representatives from suppliers and dealers.

Tuesday, November 11
Welcome and Opening Remarks

Rick Wagoner reviewed NAO’s key priorities to accelerate the Plan to Win results by:
•          Leadership accountability
•          Driving implementation faster
•          Celebrating the wins
•          Building enthusiasm.
         
         Rick also stressed that the most important theme for 1997 was the faster implementation of Plan to Win in the context of Jack Smith’s priorities of:
•          Running common
•          Thinking lean and fast
•          Competing on a global basis
•          Growing the business in all sectors.
         
         Business Overview
         
         Since the 1996 conference, GM-NAO made great improvements in the areas of Health and Safety, VDP, Engineering Productivity, Warranty Reduction, Structural Cost Reduction, Brand Management, and Distribution Network.
         Some notable wins in these areas included:
•          19 facilities recorded 1 million hours without a lost work day.
•          VDP lead time was at 31 months (down from 42 months) with a stretch goal of 24 months.
•          Warranty Improvement in the Truck Group translated into a 24% reduction in warranty expense and  approximately a 17% decrease in warranty costs per unit.
•          Quarterly engineering spending decreased while the workload increased.
•          GM founded the John Smale Brand College at GMU and implemented Brand Plans.
         
         GM-NAO had some wins, but noted room for improvement in the areas of:
         Areas for improvement included:
•          Employee Enthusiasm  (Communication): While most unclassified and salaried workers are somewhat satisfied with communication, only half of hourly workers are somewhat satisfied.  The NAO Strategy Board made internal communication a focus topic for 1997 with Bill O’Neill spearheading the effort.

•          Employee Enthusiasm (Diversity): GM-NAO was under-performing in the area of diversity (involving everyone in our efforts to succeed as GM expands globally).  GM is not retaining women and minorities for their full careers.  This lack of diversity in the corporation leads to products which don’t appeal to a wide audience.  GM’s customer base is less diverse than Toyota’s.
•          Common Processes and Systems, and Lean Manufacturing: NAO’s overall market share was impacted by strikes in 1997 and by the heavy incentives offered by the competition.  In addition, in 1997 GM continued to use more workers per vehicle and spend more hours building each vehicle than its competitors.
•          Quality and Customer Enthusiasm: GM competitors also improved in their quality ratings, so the gaps between GM and our competitors still exist.  GM still had major warranty problems (118,000 claims per day) which greatly affect customer enthusiasm and costs.
         Overall 97 Outlook
         Jack Smith, participating in the conference via videotape, gave GM-NAO its annual report card.
         
         Engineering = A
         GM-NAO made great progress in 1996 to get common and remove redundancy while remaining within its budget.  NAO demonstrated higher productivity and engineering throughput.  The added challenge was to establish centers with clear and single-point responsibility for vehicle innovation, development, and validation.  NAO also made great progress in beginning to implement the Lean Manufacturing Process.
         
         Health and Safety = A
         NAO witnessed a 70% improvement in lost work days since the initiative started in 1995.
         
         Quality = B
         NAO made good progress in achieving 1997 objectives with an 18% improvement in problems per 100 vehicles. NAO needed to continue closing the gap to Ford and Toyota, who still outpace us.
         
         Sales = B
         NAO was challenged with strikes and products availability mid-year.  In the third quarter of 1997, the share of small cars, utilities, and trucks had been disappointing.
         
         Profits = A-
         NAO did a good job making progress toward targets, particularly in the area of cost reduction, but was still short of achieving a 5% net margin and 12.5% RONA.
         
         Overall grade = A-
         Jack said he was “Very proud of NAO’s performance.  All the hard work is showing up on the bottom line.”
         
         The major challenges facing NAO in 1998 are:
•          Driving costs down to make the 5% margin, and the 12.5% RONA
•          Shortening the VDP through the use of 100% math-based tools
•          Developing more brand distinction
•          Gaining market share
•          Improving warranty performance to reduce costs and increase customer enthusiasm
•          Developing technology to address global climate issues
         
         Harry Pearce’s Keynote Address
         
         Harry Pearce, GM Vice Chairman, Member of the Board of Directors and President’s Council, addressed the conference on Tuesday evening on thinking innovatively.
         
         Each person in the audience is responsible for changing the organization through effective leadership, Harry said.  Effective leaders have the ability to approach problems in completely new and different ways, encouraging innovations and rewarding risk-taking.
         
Harry explained some of the new rules of the global workplace.  Today, wealth is achieved through innovation not optimization.  We can no longer perfect the old ways, we must find new, innovative ways to do things.  Innovation is best done in an environment of agility and speed.  Great companies dare to make their own products obsolete.

Failure and perseverance are a necessary part of innovation.  GM can learn from its failures and get results through perseverance.  GM must counter the inevitable failures of innovation with encouragement and perseverance to achieve success.

GM must also realize that although quality and cost are required for entry into the market, environmental, safety, and personal security issues may decide the winners and losers in the marketplace.  In the past competitors have challenged GM by being ahead in process capability, lean manufacturing, and quality in execution.  GM cannot allow them to get ahead on environmental technologies.

For 60 years GM was at the forefront of the technology wave.  Gradually GM lost that traditional spirit of innovation.  “Over the past five years GM has rekindled that spirit of innovation.  We are returning to our roots and it is paying off.” Harry said.  Plan to Win generates the cashflow needed to support the investments required for innovation.

Harry concluded, “Our job as leaders is to encourage, endure, and embrace innovation and market-based risk taking.  We must encourage those who think they can change the world, because they’re the ones who usually do.  If we reach beyond the expected, and lead rather than manage, GM will always be one dream ahead of the competition.”


Wednesday, November 12, 1997
Breakout Sessions
The conference attendees participated in breakout sessions led by members of the GM-NAO strategy board, as follows:
Innovation and Growth – Ron Zarrella, Larry Burns, Beth Lowery
RONA/Cost Reduction – Paul Schmidt, Dan McNicholl, Tom Davis
Communications/Employee Enthusiasm – Don Hackworth, Bill O’Neill, Jerry Knechtel
Quality/Warranty Improvement – Harold Kutner, Arv Mueller, Don Mitchell

Innovation and Growth
Innovation (ideas plus implementation) is required for growth in non-traditional ways.  Companies that don’t innovate either spend their time playing catch up or they disappear.  GM needs to sense and respond to customers’ needs fast and first to leapfrog the competition.  GM is detecting customer needs by identifying trends such as “going green,” and “time squeeze” and developing products to meet these needs.

Another way to grow the business is to identify revenue generating “downstream” opportunities.  Currently, new auto sales make up the bulk of GM’s income.  But the average midsize automobile generates approximately $70,000 of revenue over its ten year life cycle.  GM currently realizes very little of that “downstream” revenue in financing, service and repairs, insurance, parts retailing, rental and fleet services.  This is changing. 
OnStar allows GM to provide services such as roadside service, route support, buying fuel, and emergency services.

Everyone within GM should use their imagination, be innovative, and think of new ways to reduce costs, streamline processes, and contribute to the company’s growth. Leadership needs to stimulate peoples’ imaginations, nurture ideas, and move them to market faster than before.

RONA/Cost Reduction
The Board of Directors is using return on net assets (RONA) as GM’s primary measure of financial success and to track earnings growth. At the time of the conference GM’s RONA was 7% – a RONA of 10-15% is typical for companies in the industrial sector.

Using RONA as a measure will highlight the impact of business decisions on the bottom line.  This will help us to make the best decisions for improving efficiency and productivity and will foster accountability for achieving business objectives.

Increasing RONA affects the shareholders, employees and customers of GM.  Creating a higher value company will increase shareholder enthusiasm and provide more money to invest in employees and assets.  Skilled employees are highly valued and produce high quality products of which they can be proud -- in turn improving employee enthusiasm.  High quality products increase customer enthusiasm and increase sales, which in turn, increases RONA.

RONA --with a target of 12.5% -- is increased by raising the net income margin (to at least 5%) and/or the net asset turnover (to at least 2.5 times). GM can raise net income by lowering direct and structural costs.  Many of the initiatives which support the Plan to Win are aimed at either cutting costs or increasing revenue.  Therefore implementing the Plan to Win helps GM to reach its RONA target.

Communications/Employee Enthusiasm
When asked, employees state three themes regarding communication:
•          Employees do not feel they are being heard by leadership.
•          Credibility and trust are at an all time low.
•          Employees think their supervisors are credible sources of information, but the supervisors need more relevant information.

There are four levels/stages of communication:
1.          Information: Data is received
2.          Understanding: Information is made relevant
3.          Commitment: Personal buy-in, agreement to do something
4.          Action: Observable behaviors or change occurs.

Leadership is focusing on the links between the levels: 
•          It takes dialogue to move from information to understanding, when the information’s relevance is established. 
•          Allowing people to participate and letting them influence the plan generates personal buy-in and commitment. 
•          Giving people permission to act and increasing their responsibility for results leads to action.
         
         Three strategies, known as MAP, have been identified to increase the effectiveness of communication.  Set the Mood by choosing the right moment to deliver the message, know the Audience to make sure the message is relevant to them, and set a Positive tone to keep everyone focused on future possibilities.
         
         Quality/Warranty Improvement
         Quality and Warranty Improvement have direct impacts on customers, employee and shareholder enthusiasm. 
         
         Setting aside reported warranty problems for the moment, GM was number one in sales satisfaction and service satisfaction, according to the 1997 GM CSI survey, ahead of Toyota, Chrysler, and Ford. 
         
         However, GM is behind Toyota in new and older vehicle satisfaction, and customer loyalty.  Chrysler and Ford are not far behind GM.
         

         GM has programs in place to help the company improve.  Chief among these is the Warranty Improvement Program which helps GM to balance increased customer enthusiasm and reduced cost with dealer and supplier satisfaction through the following initiatives:
•          Effective Service
•          Rapid Detection
•          Common Current Product Continuous Improvement Process (CPCIP)
•          World Class Design/Performance
•          Warranty Expectations of Suppliers
•          Appropriate Financial Management
•          World Class Information Technology (IT).

To close the gap in the area of older vehicle satisfaction GM has:
•          Increased supplier involvement
•          Accelerated common process and product activities
•          Implemented the Enhanced Powertrain Development Process.

To increase customer loyalty GM needs to:
•          Produce higher quality vehicles
•          Improve reliability and durability
•          Improve the purchase/service experience
•          Lower the cost to purchase or lease a new vehicle
•          Develop vehicles that will retain higher residual (or trade-in) values.

Thursday, November 13, 1997
Rick Wagoner’s Closing Remarks

Rick congratulated everyone on their creativity in addressing the topics of the conference and the breakout sessions.  He also thanked all those involved in planning and delivering the conference and distributed awards. 

Rick continued by reviewing his and Jack Smith’s evaluations of NAO’s performance in 96/97, the key points of Harry Pearce’s keynote address, and the themes of the four modules.  He concluded by giving the attendees their assignment for 97/98.

All of the attendees are expected to:
•          Reflect on the key learnings from the conference
•          Incorporate the key messages from the conference and functional meetings
•          Customize the roll out session materials to include what your unit is doing to support the Plan to Win
•          Emphasize the need to move fast
•          Spread the message as far as you can.


NAO’s 1998 Priorities are:
•          Implement the Internal Communication Initiative
•          Implement Warranty Improvement Plan
•          Reduce cost
•          Improve quality
•          Grow revenue by expanding sales and market share, and developing innovations.

Rick concluded by saying teamwork is the purpose of NAO’s Plan to Win.  “Let’s all act as leaders of GM,” Rick said.  “Let’s focus on our customers, GM employees and our shareholders.  Let’s drive results fast.  Let’s build a base for winning in the future and let’s do it as a GM Leadership Team.”