When Wharton management professor John Paul MacDuffie is asked to explain why General Motors and Ford continue to take a drubbing from their competitors, he thinks for a moment and replies: "You can dig into the particulars around products and manufacturing processes for an explanation, but I guess the broad impression is the U.S. companies don't tend to be good learning organizations, which is something Toyota and Honda are superb at."
Whatever the U.S. car companies have learned in the past year, they have learned it the hard way. Consider the opening sentence of GM's 2003 annual report, published 12 months ag "Here's what's new about GM's strategy this year: Nothing."
That's the kind of bold statement that can cut two ways. GM intended it to convey the message that the world's largest automotive company was firing on all cylinders in its attempt to reverse its declining fortunes, and saw no reason to change. Twelve months later, though, the boast rings hollow. On April 19, General Motors posted a first-quarter loss of $1.1 billion, its worst result since 1992. Just two weeks earlier, on April 4, chairman and CEO Rick Wagoner had announced a management shake-up that gave Wagoner the additional title of head of the corporation's unprofitable North American unit, a post he had held before becoming chief executive. In addition, GM's European operations are losing money, the ratings service Moody's recently downgraded GM's debt to one step above junk status, huge pension and healthcare liabilities have saddled the company with seemingly intractable fixed costs, and its stock has lost one-third of its value since January 1.
GM's trouble is not the only tale of woe in the auto sector. On April 11, Ford's stock was hammered after the company cut its yearly earnings forecast in half, and the shock waves from Ford's bad news affected the shares of several auto-supply companies.
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