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General Motors Stays Limber by Being Global

Richard Wagoner, GM

Wagoner

February 17, 2004

STANFORD GRADUATE SCHOOL OF BUSINESS—Running General Motors, the world's largest manufacturing company, could be considered as challenging as leading a small country Richard Wagoner Jr., the youngest CEO in the company's history, told a standing-room-only Stanford Business School crowd February 13.

When Wagoner took over as GM chairman and CEO more than three years ago, the motivating question for him became: "How can you set up an enterprise to run big and be fast?" The answer, he discovered, was tapping into its global resources.

To compete, GM has slashed development time—from about 48 months to 24—and has made product development more global and less regional. For example, the company recently took the base of a car being developed in Australia, made a few changes, tuned it up and introduced it as the new Pontiac GTO in the United States. "If we can develop a common architecture (parts and engineering), we can wrap specific sheet metal around it and give it specific performance capacity to meet various brand and local requirements around the world," Wagoner said during a View From the Top speech at the School.

And the firm has expanded its product line. This year General Motors will roll out 29 new products—the largest number of introductions ever—and plans to debut similar numbers in the future. Wagoner also said the company's presence in China and its investment in OnStar technology have both been winning bets.

With about $180 billion a year in sales, the company employs 350,000 people worldwide with an additional 1.1 million retirees and dependents. GM's size gives it the financial muscle to take risks and make investments in technology, said Wagoner, but big organizations also tend to run slowly, a major disadvantage in a market driven by time-paced competition.

At the Detroit Auto Show this year 70 new production concept vehicles debuted, demonstrating just how competitive the auto industry has gotten, said Wagoner . "The only way anybody can run against that—and get 25-30 percent market share which is a tougher and tougher assignment against that kind of competition—is to bring out more and better products. We have to do that in an environment where we frankly can't afford to spend a lot more. So the only answer we have is trying to leverage our global capitalization," he said.

Being big and moving fast, he said, is also critical with emerging markets, especially in China. Seven years ago, GM had only 1 percent of the market share in China and was debating whether to invest $250 million to partner with a mid-size car company. At the time, it seemed like a gamble, mainly because GM wasn't sure mid-size cars would sell well in China. But GM took the bet and the Chinese car market has been growing at about 30 percent annually for the past couple of years. Sales of Buick are now stronger in China than in the United States and GM has over 10 percent of the Chinese car market. In the future, GM plans to broaden its product line, introducing Chevrolet and Cadillac. And the growth looks like it will continue. Wagoner thinks China will become the No. 2 market for Cadillac.

OnStar, a global positioning and satellite system, has been another bet that has paid off for GM, said Wagoner . Since OnStar's introduction, the company has had 27 million interactions with OnStar customers. The system receives 250,000 questions about navigation, 16,000 roadside assistance requests and 8,000 emergency calls every month. Customers give it rave reviews with 85 percent of those who own OnStar recommending it.

Wagoner predicted that GM will also be rewarded for investing in a wide variety of fuel-emission reducing technology. No one agrees how best to reduce fuel emissions so "if there's one area where size and resource depth is important, it's here." Instead of betting on one solution, GM is pouring money into all four of the major research areas: diesel engines, hybrid vehicles, hydrogen-based fuel cells and internal combustion engines. "We can't afford to be behind on this," said Wagoner .

Speed and size, said Wager, also play a huge role in GM's culture. "We stress the importance of acting like you work for one company," said Wagoner . And, he adds, "we talk about moving with a sense of urgency." Indeed, the issue of speed is so important that several years ago the company started holding "Go Fast" seminars, meeting with employees and talking about what keeps them from getting to solutions quickly. Since the program started, the company has held 10,000 of these seminars.

Wagoner also introduced the concept of "stretching." In the past, GM rewarded managers for meeting conservative deadlines. Today, Wagoner tries to tell employees, "The hero is not the person who budgets three and makes four. The hero is someone who rallies the team to shoot for 15 and makes nine."

Other tips from his leadership playbook include remembering to be product and customer-focused. "Driving excellence in our functional areas is critical but people don't buy great brand positioning or fast product development," he said. "Always look out of the foxhole and make sure what you're doing is adding value from the customer's perspective."

Lastly, each fall Wagoner sits down with the managers right below him to make sure everyone is focused on the same important goals. Those managers then speak to their direct reports and the chain continues until the whole company is in alignment. "Focus is so critical," he said. "It requires a lot of discipline and being careful and thoughtful." Thanks to clear goals and good alignment, several dealers and suppliers recently told Wagoner, working with GM is like dealing with a small company. "That's something we've never been accused of. But it made my day. It's the best feedback I've gotten."

—Sarah Robertson