GM Churned Out Management Gurus Because Its Founder Was Thrown Out
Founder William Durant was pushed out by the banks, and that is precisely what made GM fertile ground for professional managers — Sloan's BU system and Drucker's management theory both grew here. At Ford, where the family never let go, the professional manager never had a seat.
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He bought 25 companies in three years, then was thrown out
Durant started out as a carriage maker. In 1904 he first bought the struggling Buick; on September 16, 1908, he founded General Motors, whose initial assets were just Buick. He didn't only buy car brands — he bought parts companies too, acquiring 25 companies between 1908 and 1910, 11 of them automakers. The other side of all that buying was a financial crisis: he spent too fast, bought more than a dozen companies in two years and still had to digest and integrate them, and he was forced to bring in two banking groups, DuPont and Morgan, to rescue the company. A rescue always comes with conditions: I want management, I want control. Durant was cleared out by the bankers. But he didn't stop — he started Chevrolet from scratch with Louis Chevrolet, and four years later used Chevrolet to take GM back. The old GM was folded in and reorganised to form the new GM.
Only after the founder was ousted did professional managers grow
Ford was an engineer from a farming family, relatively autocratic, and his tight control over the company left no room for professional managers to speak in early Ford — talented people like Iacocca were all washed out along the way. GM was the exact opposite: an iconoclastic founder who was repeatedly thrown out by the banks, and the banks couldn't run the company themselves, so they had to bring in professional managers. That's why GM offered professional managers fertile ground from the very start. Before Sloan, GM had already gone through eight presidents, and Sloan himself didn't study management — he studied electrical engineering, at MIT. That's why there is now the MIT Sloan School of Management.
Sloan's management philosophy: centralised policy, decentralised operations
The management system Sloan created was clear: centralised policy, decentralised operations, multiple brands, financial independence. He originated the BU (business unit) mechanism — before him there was no BU system. A BU is essentially an authorisation mechanism; it replaced Ford's dictatorial mechanism, and they called it a decentralised organisation. He also encouraged employees to speak up, having people who disagreed attend the same meetings and express their views — a very democratic thing at the time. He wrote: as a chief executive, being objective and fair is very important; you must have an extraordinary capacity for tolerance; a boss cannot eliminate the distance between himself and his employees; work is an extremely rigorous matter and cannot be confused with friendship or other social relationships. Both Drucker and Sloan wrote books about GM, and Sloan's was actually forced out of him by Drucker — he felt Drucker's book couldn't express his own views on managing the company, and Drucker wrote the foreword for his.
Sloan ended the Model T with four sales tactics
The Model T appeared when consumers could put a few hundred dollars on the table; once consumers' finances improved, they wanted to buy a better car. Sloan did four things. First, instalment payments — a financial innovation. Second, trade-in subsidies for used cars, so an existing car could be swapped for a coloured one. Third, the enclosed body — a technological advance; Ford used an open body to make cars cheap, like a carriage, and consumers wouldn't accept eating dust forever. Fourth, the annual model change — previously a model stayed unchanged, now consumers wanted something different every year. This set of things was the exact opposite of Ford's position, and it formed the basic playbook of the auto industry; the carmakers that followed have essentially operated around this approach.
GM's bankruptcy wasn't a manufacturing failure, it was a broken financial chain
GM's biggest crisis was its bankruptcy after the 2008-2009 financial crisis. There were two layers to the cause. First, selling cars wasn't profitable and making cars wasn't profitable — it survived on finance, and in the financial crisis it couldn't borrow, so the financial chain snapped. Second, on the employee side there was too strong a union, the status quo couldn't be changed, costs couldn't come down, and many employees had worked at the carmaker for generations. The result of concentrating on the warm plate was that hardly any finance companies failed, but GM went down first. In the bankruptcy reorganisation it was split into an old company and a new company: the old company took on the historical liabilities, the new company started light and brought in professional managers with industry influence. The price was that early brands were shut down — without the Chinese market, even Buick couldn't have been saved, and brands like Oldsmobile were killed off immediately.
CEOs took a billion, worker wages fell seventeen percent
Bloomberg reported that the CEOs of GM, Ford and Stellantis took home more than $1 billion in realised compensation since 2010, including equity; over the same period, American auto workers' wages, whether unionised or not, fell seventeen percent. Individually: Mary Barra's take-home pay last year was $34.1 million, Ford's CEO $18 million, and the Stellantis one $13 million. Workers' wages are basically seven or eight thousand dollars. The pay gap keeps widening — that's why there are strikes. Both CEO and employee pay in the auto industry are higher than at other listed companies, but far below the internet — and auto company CEOs are not founders, whereas many internet companies still have founders, and Chinese carmakers are mostly founder-led and pay very high salaries.
Having many children to fight in a group brawl, even insiders can't tell them apart
GM entered China first as Buick, and later wanted to bring in its most core brand, Chevrolet — but Chevrolet looked like a lower-end brand in China, so how to bring it in? At the time they came up with the ‘hundred-thousand-yuan little Buick’; that model was actually the Opel Corsa, and its price and positioning should have been pushed down into Chevrolet, but there was a gap between Buick and Chevrolet, so the little Buick made it more acceptable to consumers. Later sales and customer segments differentiated, and Chevrolet had to serve as the base, with Cadillac extending above it, forming a pyramid system. Chinese carmakers copied multi-brand strategy, having many children to fight in a group brawl, but they never created product differentiation, so it became a waste of resources and mutual cannibalisation. However cleverly you name the brands, if the communication doesn't land, even your own employees can't tell them apart — how can you expect consumers to remember them.
The worst position is many brands with small volume
A friend drew a four-quadrant chart: the strongest companies are multi-brand, high-volume, like BYD or Geely; single-brand, high-volume, like Tesla; in the few-brands, low-volume quadrant there are many companies that are always there, but they aren't necessarily bad, because some specific models can survive as long as they can secure a model source — Porsche, Lamborghini and Aston Martin all have to attach themselves to a large platform, they need a platform model provider. The worst case is many brands with small volume: not enough volume means wasted resources, and many companies are struggling in that position. The need to split brands shouldn't be thought about purely in terms of how to carve up the technology platform, but in terms of how the market should recognise and segment them.
In their own words · checked verbatim
And GM had an iconoclastic founder from the very start. The founder was unstable, thrown out by the banks, and the banks couldn't run it themselves, so they had to bring in professional managers. That's how it gave professional managers fertile ground — very good fertile ground. GM's success is the success of professional, specialised management.
而通用一开始就有一个特立独行的创始人 创始人动不好 被财团给赶出去 那财团自己也不能管 肯定要引入职业经理人 所以才会出现 他给职业经理人提供了一个土壤 一个非常好的一个土壤 通用的成功是职业化专业化管理的成功
As a chief executive, being objective and fair is very important. He must have an extraordinary capacity for tolerance. A boss cannot eliminate the distance between himself and his employees — never mind whether he likes or dislikes a particular employee. Work is an extremely rigorous matter, and it cannot be confused with friendship or other social relationships.
作为一个首席执行官 客观公正是很重要的 他必须具备超强的容忍能力 老板不能消除 与员工的距离 别说喜欢还是厌恶某个员工 工作是一份非常严谨 这是不能和友谊 和其他社会关系混淆在一起的
If the coming century is China's auto century, China is still missing two things: an absolutely leading auto brand, and a production model and mode of production absolutely ahead of its time.
如果说今后的世纪 是中国的汽车世纪的话 中国还欠缺两件事情 一个是绝对领先的汽车品牌 以及绝对领先于时代的生产模式和生产方式
First, he didn't make money selling cars, didn't make money building cars, and survived on finance. Over the long run, finance isn't necessarily always smooth; once you can't borrow in a financial crisis, the financial chain snaps.
第一 他卖车不赚钱 造车不赚钱 靠金融活着 那长期以后 那金融不一定是一直都是很通顺利 在金融危机里面借不到钱了以后 金融链路就断掉了
In fact they even spent a lot of effort on very cleverly named brands, but if your communication doesn't land, even your own employees can't tell them apart — how are you going to get through to consumers?
其实甚至花了很多精力 去叫很巧妙的品牌 但是你如果传播不到位的话 连你内部的员工都分不清楚 你怎么去传达消费者评
Because think about it — if even you, looking from a distance, can't see the models clearly, how can you expect consumers to see them clearly? This is a very clear problem: you need differentiation.
因为你想这车型都算套完 你自己都远观都看不清楚的情况下 你怎么能指望消费者能看清楚 这个是很明确的一个问题 你要有差异点
Figures
| GM founding date | September 16, 1908 | 14:13 |
| Companies Durant acquired in three years | 25, of which 11 were automakers | 14:13 |
| Buick orders at the New York auto show vs. actual output | Brought back over 1,000 orders, built only 20 | 12:13 |
| German vs. Chinese carmaker development cycles | Germany 36 months, China 24 months or even a year and a half | 7:36 |
| China's auto export ranking | Surpassed Japan in the first half of this year to become the world's largest auto exporter | 5:08 |
| Change in US auto worker wages | Fell seventeen percent over the same period | 51:11 |
| GM market capitalisation | $40.8 billion, below Ford's $46.5 billion | 49:31 |
Glossary
- BU / business unit
- Sloan's original authorisation mechanism: split the company into independently accounted business units, replacing Ford-style autocratic management.
- Model T
- Ford's single-model black car; Sloan ended its myth with multiple brands and annual model changes.
- take-home pay
- Income actually received after taxes and deductions, including salary, bonus, stock, fringe benefits and pension.
- Telematics
- The in-car communication system GM built earliest, namely OnStar.
How to listen
Founders and investors interested in auto industry history, corporate governance, the professional manager system, and multi-brand strategy.
The opening Munich auto show segment, roughly 2:36 to 10:13, is low density — skip straight to the GM section.