Why I Don't Want to Own General Motors

kanter_110.jpgHarvard Business School professor Rosabeth Moss Kanter blogs at HarvardBusiness.org about leadership, innovation and change.

If I had wanted to buy General Motors stock, I would have talked to my financial manager. Now I am forced to own it, along with other American taxpayers, because of the federal government's bankruptcy deal.

It is hard to see what good will come of this, and it sets a dangerous precedent. If the U.S. needs a major auto company, we have one already in Ford. Ford has proven to be nimbler, more innovative, more globally-integrated, and more competitive than GM. It saw the need to change earlier, changed faster, and did not need a government bailout. Ford's advertising is trying to make the most out of its accomplishments, but I fear that Ford will be dragged down by the GM situation and be forced to cut too deeply into its own flesh as GM is cut to the bone.

The government's rationale for its involvement with GM falls in the "too big to fail" department. I know that the current administration is dedicated to ending the recession with as few human costs as possible in lost jobs and lost wages. Yes, the auto industry's woes coincided with the financial meltdown creating a liquidity crisis which left the federal government with the only pockets deep enough to invest in the bail-out and buy-out. But the macro-management of the economy at the federal level begins to look like micro-management when they get into the details of owning (or running) specific companies.

Is this a productive new use of assets?
No. Is this a move toward transforming transportation? No. Is there a significant national security interest? No. Will this save more jobs than it kills? No. Will this promote innovation and industries of the future? No.

Okay, maybe there is some prospect of a leaner, more competitive company being created in the restructuring that will make me proud to own it and maybe to consider buying a GM car — if the name GM even survives. But the indicators make this look unlikely, for example: GM's lag in producing energy-efficient models; falling auto sales in general plaguing even world-leader Toyota; new business models such as Zipcar encouraging people to see cars as shared utilities rather than must-have personal possessions; and low-cost innovations such as the Tata Nano coming from the developing world. So I stick with my string of No's.

Where others see merely bankruptcy, I see a bankruptcy of ideas. The issue for GM is not just financial failure, it is a failure of imagination. Even Ford has a long way to go to be the Company of the Future.

The signs of GM's imminent failure were there well before the weak plan presented to Congress in November, which I criticized in detail in a Wall Street Journal interview. It would have been better to let the company fail on its own and then assist affected workers, dealers, and communities directly with transition support to start new businesses and create new jobs. We will have to assist them anyway, because the GM that emerges from bankruptcy will be a shrunken, hollow version of its former self, perhaps competitive but not viable in the long term without even greater change. This move smacks of preservation more than innovation.

I would advise the Obama administration to to help innovative new companies emerge from the ashes of GM. The entrepreneurial spirit will restore the American economy more effectively than propping up falling giants.

And if the administration wants to make bold moves, I suggest that what America needs is a big national innovation initiative, equivalent to the space program, to reinvent transportation. Not just to make it greener and more energy-efficient, but to make it radically different.

By Susan Jackson  |  June 2, 2009; 2:25 PM ET
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I'm afraid you're right. Fritz Henderson's June 1 remarks were a welter of cliches and vague promises, most of which GM made the last time the promised to "reinvent" themselves. Jeff Porro, speechwriter

Posted by: porrojd | June 3, 2009 9:29 AM

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