General Motors in Free Fall – A Case Study with Purposeful Action


This is a special discussion of a case study applying the Four Principles of Purposeful Action to GM’s decline over the past two decades, with special focus on the company’s most recent and rapid deterioration.
General guidelines are included at the end of this post.
The case study is centered on two discussion topics.
1.   Discuss GM on the basis of the four principles of purposeful action: (i) action, (ii) ethical balance, (iii) desires that motivate action, (iv) the environment, including geo-politics, competition, management and other key influencers and individuals (archetypes and BrookMaster).

 A brief comparison on GM and Toyota would be helpful in discussing the four principles of purposeful action.

GM: After World War II there was big demand for each and every product that was introduced in the market. There is reason for this was rationing of product usage came to a halt. Two of the major industries emerged out of this boom one is housing and automotive. GM took advantage of this market. In order to be the competition GM focused on producing cars at the least cost. The concept of manufacturing cars at least cost helped GM to evolve into a mass manufacturing company. In mass manufacturing system of production raw materials are purchased at the lowest price. The raw materials and finished products will have high inventory. Whether a car has demand in the market or not still the inventory of the car will be high. It is the job of the marketing team to come with ideas to sell it. In this business model GM quickly transformed from visionary to a goal oriented company. The only goal of GM was to be the largest producer and seller of cars, which sacrificed its vision and mission. Every action taken inside the company had no purpose to benefit the society.  There was no ethical balance in the form of producing cars that consumed lot of gas without any forecast for environmental impact at later stage. Executives and leaders were happy as for as the goals were accomplished. The desire that motivated these goal oriented action were in the form of: financial numbers, bonus package and salaries for the executives. The company gave the least importance on the desire to serve the welfare of the employees, society and environment.  Hence company lost to listen the voice of internal and external customers, which resulted in low quality cars, low employment morale, lack of visionary leadership and motivation and poor financial planning. The only thing that was helping GM these days is that customers were enticed by emotional market strategy as “GM is the car built by Americans for Americans” and selling to rental car companies. Even rental car market share fell to other Japanese and Korean car manufacturers in the millennium years. On the whole GM got locked in the ego and arrogant pride as the largest car producers and lost the humbleness in its action.

priusToyota on the contrary: After World War II Japan economy was in shambles.  The quality of all the industrial products developed in Japan was not up to the international market. Toyota was producing car that was least desired by consumers around the world. Moreover the company was in deep financial shambles.  Most of the financial institution did not want to give any kind of financial support to the company. In this crisis, there was one company that provided financial support to Toyota with a stipulated condition. The stipulation was that Toyota can only borrow when it sells a car and the amount must equal to the selling price of the car. This means if Toyota sells one car the company can borrow the money equal to the selling price of that particular car. Toyota accepted this challenge. The management was looking for ideas to produce and sell the car. This created the leaders in Toyota to develop the concept Kaizen meaning continuous improvement (Phase III of Purposeful Action), which later became Toyota production system. Kaizen was applied at every level of the company from the top leadership to the bottom management, from shop floor to dealership place. This became the vision of the company. Every action applied by the employee had to evaluate how it continuously improves the process. This led to employment empowerment. There was open communication at all levels. Toyota saw the company as integrated system not separate entity from the environment, which was not in the case of GM. Every action taken inside company was customer focused. The company sent its executives to see how other companies around the world were manufacturing their products. The executives went to developed nations in the west from Germany to USA. They were open-minded to benchmark companies from other than companies that were producing cars.  The benchmarking process did not lose customer focus. Toyota developed the concept called quality circles which gather information to improve the overall quality for each and every process of the company from both its internal and external end user. In this process the company paid every attention to the welfare of the employee.  This boosted the morale and motivation of the employees.  One important thing was Toyota maintained high ethics of commitment. It never layoffs employees to cut cost instead every aspect was focused on improving the quality of the product without losing its vision on customer focus.  Toyota maintained product line was customer wanted for its needs and necessities. Also made sure the cost of maintenance of the car was at the least cost related to were and tear of the vehicle due to operation.

One the whole Toyota’s action had a purpose at every aspect of its business; ethics to stick to its commitment and were not driven by financial goals; desire to serve the customers, employees and society better.

Sources from

For example Toyota-General Motors sold 9.37 million vehicles worldwide in 2007 and lost $38.7 billion. Toyota sold 9.37 million vehicles in 2007 and made $17.1 billion. That was the second best sales total in GM’s 100-year history and the biggest loss ever for any automaker in the world. For Toyota, that was roughly $1,800 in profit for every vehicle sold. For GM, it was an average loss of $4,100 for every vehicle sold.

2.   What kind of a leadership is required for the present scenario of GM.? Please provide your views, with justification.

 As mentioned in the first question on the comparative analysis of GM and Toyota. GM should focus applying purposeful actions in their operations. The company should develop and implement Kaizens at all levels. Eliminate bureaucracy in the management and involve everyone to seek better solution for both welfare of the company and society. In the recent years GM has improved its quality of cars both in design and performance. It is time for the executives to listen to both internal and external customers. The company should develop health welfare programs for its employees to boast and improve the well being of its employees. One way is to help its employees to eliminate unhealthy practices like smoking and consuming alcohol. Providing incentives for people improving their health which will indirectly reduce the health care cost. The reason for this is the number of employees working for GM is more than 100,000.

Sources from websites: and

Health care, pensions and other benefits -General Motors isn’t bankrupt, but the once-great firm is on the rocks, having lost nearly $4 billion last year alone through September, recently announcing 30,000 layoffs. And at first glance, its long decline would seem to be GM’s fault. Consider perhaps its foremost headache: Its hulking health insurance costs for which workers pay nothing out of pocket, and retirees very little. They have about 145,000 employees, active employees, and we have health care coverage for 1.1 million retirees, independents and family members. Last year we spent $5.2 billion on health care coverage for all of our employees in the U.S. basically. It equates to about $1,500 a car.

That’s more than the steel in an average car and $1,500 that GM’s foreign rivals, with government health insurance, that don’t pay. GM’s got another cost disadvantage as well: full pensions after only 30 years of service, regardless of age. To pay for this largesse, tack on another $1,000 per car.

The lushest benefit of all, however, may be GM’s jobs bank. Workers whose plant closes can transfer elsewhere in the company or, if they choose not to, take classes, do community service, continue to get full pay and never retire. So in Baltimore, when a GM plant closed recently, the jobless weren’t exactly distraught.

When you add the jobs bank to the pensions and health care tab, GM has a total cost disadvantage, compared to non-U.S. rivals, of $2,500 or more per car — before it even starts making one.

Questions and background information for this case study discussion were prepared by Chandrika, Discussion Leader.

This discussion will continue for the next three weeks, through midnight on April 21. Each student will discuss in depth the two questions posted above, applying the specific principles assigned to each student. Assignments of principles will be posted under Assignments in Blackboard. Posts should be based upon research, with appropriate references and links.

This discussion will carry more weight with respect to course grade than a weekly discussion.

Good luck.

Video Post on Managing Desires

Dear Friends:

This post is a test, as we construct our new Video Channel on Purposeful Action. Real video posts will be in the form of questions, similar to our written blog posts. For example, the video segment embedded below provides the basis for creating several individual discussion videos, opening the way for comments by viewers, either in written or video form. It will take effort and time to create a steady flow for video blogging, as most worthwhile enterprises do…. and, we will get it done. Thanks for your participation and help with this new initiative.


We welcome your comments, suggestions and questions on improving lives and careers – particularly if they help others. Step into the channel and join the flow!

For more information, please visit the announcement “Video Channel on Purposeful Action – For Practical Self-help Tips” using the link on your right or above the banner.

Managing your desires.

boat3There are four basic levels of desire. The second level of desires includes wealth, power, and respect.

How do desires from the the second level specifically relate to corporations under the current economic conditions?

How should corporations manage these desires to remain successful in the current state of the economy?

Discuss these questions in the context of the Four Principles of Purposeful Action, with examples and appropriate links. Please review the accompanying video post on “Managing Desires.”

This post was written by Brad Renter, who will lead the blog discussion for the week starting March 3.

Can Passion be addictive?

img_1712How does passion for what we do impact our success?

Is passion addictive or does it change over time and as careers progress?

What do the actions of today’s corporate leaders tell us about their passion?

How has their passion changed over their careers – to get them to the position they are in today?

Discuss these questions in the context of the Four Principles of Purposeful Action, with examples and appropriate links.

This post was written by Chris Miller, featured here with his daughter. Chris will be the discussion leader for the week starting February 24.

Are Accountability and Victimization cousins?

img_1493As our nation’s economic speedboat threatens to run aground, the economic crisis is a hot topic everywhere including our blog discussions as well.

What can you say about the acceptance of accountability, or the lack thereof, by our leaders – for this economic disaster?’

Has a sense of victimization spread rampant through our society, alleviating all responsibility?

It seems as if no one is to blame – so are we all to blame?

Discuss these questions in the context of the Four Principles of Purposeful Action, with examples and appropriate links.

This post was written by Chris Miller, who will lead the discussion for the week starting February 24.

Chopra talks on leadership and ethics to Engineers Club

img_0140Here are video clips from a talk on Technology Leadership and Ethics by Prem Chopra at the Chattanooga Engineers Club on Monday, February 9, 2009.

Part 1    Part 2    Part 3    Part 4    Part 5

Comments are welcome…

P.S. Venkat, who recorded and edited this talk, is exploring ways to improve the exposure (the lights we dimmed to highlight the slides).

Was this economic crisis caused by the lack of integrity?

img_0987In the accompanying post, we discuss the global distress resulting from the dramatic nosedive of world economies.  The general belief is that this situation was brought about by greed and corruption in financial firms, while our government loosened regulations and oversight. Most of you will agree that the lack of integrity (excerpt from lecture in September 2007 (3:09): Make Integrity a Habit) is a major cause for this mess. But but is there more?

Has there been a lack of all five positive core values (integrity, commitment, persistence, teamwork and communication) in the actions of corporate executives and government?

Can you discuss this, citing examples?

Did greed cause the economic crisis?

boat3We are all aware of the dramatic nosedive of the stock markets, which has eroded trillions of dollars from the value of US and foreign corporations, and is causing economic stress globally.  A CNBC TV series suggests that a major cause for this situation, at least in this country, is American Greed. Others blame our government for loosening regulations and ignoring their role of oversight, as CEOs of now bankrupt Wall Street firms walked away with the hundreds of millions of dollars bankrolled by U.S. taxpayers. Listen to this excerpt from my lecture on quality improvement in September 2007 (4:09): Unjust Rewards: Compensation for Failure.

Is greed the only negative core value (of the five: lust, anger, greed, attachment/possessiveness, arrogance) that caused this crisis?

Can you discuss, with examples, how all five negative core values have played a role in creating this crisis?

Why Make Integrity a Habit?

The following article is excerpted from a lecture by Prem Chopra at the University of Tennessee, Chattanooga in September 2006. The text of the entire lecture can be found in Masters of the Game: Reaching Beyond the Nexus to Success and Happiness.

Make Integrity a Habit

Some individuals search for ways to do the least to get by. Others look for ways to get the most for giving the least, manipulating to present the appearance of giving more that they actually contribute. They wrongfully believe this to be “optimization.” Who would you want to hire or promote, would you want to hire or promote such persons? Such individuals are inherently dishonest and untrustworthy. They are not dependable. It is foolish to be dishonest to your purpose. In fact, it is detrimental to your self-interest to be untruthful. Truthfulness and integrity are sound principles for success in any action—in your personal or your professional life. It is in your self-interest to be honest and to not try to out-smart or “fool” others. Here is a tip for you: never assume other people are stupid. Always assume others are very smart, and you will do the right thing. Then, you will be elevated in their esteem, and they will think of you as wise. If you assume people are stupid you will make some mistakes that are hard to recover from, and then you will be resented all the more. This often is interwoven with arrogance, which also is a negative core value.

Consider the fall of Richard Nixon. He was smart, and very clever, so he tried to outsmart others by lying, and eventually he had to step down from the presidency of the United States in disgrace. Bill Clinton, another American president, provides an example of dishonesty with his attempts to mislead the world regarding his conduct with a young female intern. Of course some people may say that as President why should a personal scandal matter? Clinton is a very intelligent man, and he is very competent, but look at what the scandal did to his inner moral life, to his legacy. As President, it is important to have the love and respect of the people you swore to serve. Do you think Clinton feels he has this?

The point here is to keep your life clean, by keeping your actions clean—that is, morally and ethically sound. It will make your life more efficient and productive—and most of all, fulfilling. It is easy to do, once you understand that honesty is in your best interest. You cannot divorce ethics from action, if it is to be fulfilling. So get into the habit of integrity.

Equitable Rewards Reinforce Purposeful Action

The following article is excerpted from a lecture by Prem Chopra at the University of Tennessee, Chattanooga in September 2006. The text of the entire lecture can be found in Masters of the Game: Reaching Beyond the Nexus to Success and Happiness.

The Final Step – Reward and Reinforce

The final or Twelfth Step of Purposeful Action involves Rewards and Reinforcement. In effect, rewards must be used to reinforce performance that meets or exceeds goals, and thus fulfills the mission. The mission, of course represent fulfillment of the vision, so we come full circle with the twelfth step. As we discussed earlier, rewards can be positive or negative, but they must be equitable and just. We also saw and discussed cases that showed how some managers have difficulty in giving negative rewards, especially to themselves.

We also covered, earlier, several examples of unjust and inequitable reward systems that prevail in the corporate world.


Understanding the Twelve Steps of Purposeful Action is like seeing the entire elephant, and not just the rope-like trunk or the flapping ear that resembles a fan. You have a comprehensive framework that encompasses all actions—in your personal and your professional life. You have seen how this framework can be used for continuous quality improvement. Use it completely and consistently, in all your actions—to achieve both success and fulfillment.