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Posts & articles that have helped thousands build performance through pragmatic leadership.

Bailing out Detroit: It’s Going to Take Proactive Leadership

Author: Jim Biolos

The seemingly failed bailout requests by our nation’s auto makers shows why proactive leadership must be an imperative for all current and future executives.

When it comes to the US automobile industry, there have always been five important stakeholders:  the US congress, the American public, the United Auto Workers union and its legion of workers, oil companies, and the auto company’s shareholders.  The leaders of each car company needed to make its case to each of these stakeholders — to keep its profits strong, its interests protected against foreign competition, and to keep its operations running smoothly.  Every auto company CEO since the ’70s has learned to play this game.  Some had perfected it.  Using lobbyists, they built congressional support for their agenda.  They used a combination of hardball tactics and moderate conciliation to keep the union relationship on an even keel.  They stayed in lock step with big oil’s interests.  And through hefty advertising, constantly kept in front of the consumers’ eyes.  Auto company leaders worked these stakeholders and, despite losing market share over the decades, they managed to keep their stakeholders on their side.

It was a tenuous collection of relationships, while they lasted.  But over the past seven years, those relationships changed.  The war in Iraq, the push for sustainable (green) products and services, an increased concern that Congress was NOT working for the American public’s interests, greater acceptance of foreign made goods, and rising oil prices changed the relative power and positions of these stakeholders.  American auto executives seemed to ignore these shifts.  They continued to play the same game they had in the past.  Through lobbyists, they petitioned congress to uphold their interests.  Through advertising they continued to push the “buy American” mantra.  And while Toyota was pumping out and improving their Priuses, GM was figuring out how to get more of those cool looking Hummers on the road.  In short, those CEOs’ agendas were the same as their agendas a decade or two before.

When Wagoner, Nardelli, and others came to Washington with a request for bailout funds, they found out how out of touch they were with their stakeholders.  Congressmen no longer had the strong support of voters, when it came to defending and protecting the automobile companies.  The Treasury Department didn’t see themselves as “bailout specialists,” but as specialists in managing the problems of the financial services industry. Even GM’s board began to take a different view of GM’s options than Rick Wagoner did.  Even the American consumer — devastated by a crashing stock market, high unemployment, and falling housing values — seem less interested in protecting this symbol of Americana, especially if the money comes out of their pocketbooks.  And the UAW’s tenuous relationship with the auto companies have kept them from presenting a unified front with management.

Auto industry executives have failed to be proactive leaders.  They failed to constantly understand their stakeholders, identify who were allies, who stood in their way, and who wanted them to go down.  They used yesterday’s methods and yesterday’s attitudes and applied them today’s problems.  And it hasn’t worked.  They failed to see key constituents leave their fold….and they failed to bring in new coalitions of support to give them the leverage and power they needed.  They may be pursuing decent strategies (not clear).  They may have been showing decent results (until this quarter).  But they have been unable to keep people on their side, sustain momentum for their agenda, and effectively manage the political landscape within which they lead.

The auto companies may turn things around.  But it is going to take proactive leadership to get the job done.



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