Pressure from the Japanese led to long-overdue drive for quality

After years of aiming for just-good-enough, GM now must win back disaffected shoppers

In early 1982, General Motors President Jim McDonald had a chip on his shoulder when he walked into a meeting of top executives.

McDonald was tired of finding oil stains on his driveway after driving home a new GM car. To McDonald, leaking fluids meant that GM's engineering specs were bad or its assembly was sloppy.

McDonald chaired the meeting, and he opened it bluntly.

"I told them, 'I don't care what's on the agenda. I'm just going to lay it on you,' " McDonald recalls. "I said, 'I don't want any more leaks — period.'

" 'Furthermore', I said, 'I don't want anybody to tell me how much it costs. I don't want any discussion. Just go back and do it.' "

McDonald's challenge came at a difficult time. Double-digit inflation, 20 percent interest rates and growing competition from Japanese automakers were forcing GM to reassess itself. The company targeted 1990 as the date when quality no longer would be a factor in consumer decisions. In other words, GM's quality would equal that of any competitor.

GM's battle to improve vehicle quality extended far beyond oil leaks — and far beyond 1990. Yet, GM has made strong progress. Today one of its biggest problems may be getting wary consumers to believe that its quality has improved.

'Commercially acceptable'

The dripping oil that McDonald targeted was one symptom of a broad problem. In the early 1980s, GM was aiming for "good enough" vehicle quality.

Domestic automakers had hastily added federally mandated fuel-economy and emissions technology to vehicles in the 1970s. They were still refining that equipment, says former GM President Lloyd Reuss, 72. They were quickly downsizing vehicles, too.

With those stresses, Reuss says, product planners targeted "commercially acceptable" quality — whatever customers would accept. They didn't mind cutting costs, either.

"So a few drops of oil on your garage floor was 'commercially acceptable' if you can take 10 bolts out of the pan," Reuss says.

But, he adds, the emergence of Toyota and Honda changed the game: "As you get more competition, there is no such thing as 'commercially acceptable.' "

Mike Losh, former GM CFO, says GM suffered from a "bathtub curve" when quality problems were charted over a vehicle's life span — high problems at launch, then good reliability until problems increased at the end of a vehicle's life.

Toyota, meanwhile, insisted that a new vehicle not return to the dealership for repairs in its first year, Losh says.

Volume vs. quality?

Attacking GM's quality shortcomings was no simple task. The high-stakes business of introducing cars and meeting production schedules overwhelmed quality concerns.

For instance, McDonald says, suppliers were under intense pressure to get parts to plants for the traditional September model-year launch.

"We were all brought up to make damn sure that we had the parts there," he says. "Nobody said you shouldn't have quality, but we all understood that you should have the parts there."

Reuss says GM had to change a belief that quality came at the expense of production numbers. In time, GM found that cutting assembly errors helped productivity by eliminating inspectors and rework. But the entrenched attitude, he recalls, was, "Do you want volume or do you want quality? You can't have both."

Bob Stempel, former GM CEO, says GM made a revolutionary change after studying Japanese manufacturing with quality guru W. Edwards Deming. Deming argued that workers must have the right to halt the assembly line — a longtime taboo — to fix quality problems.

"If you're a worker and you see that you cannot put your part together, you stop the line," Stempel says. "Now, you're expected to point out what you found and quickly help us find a solution, but in years gone by, it would've gone by. And that was a major change."

Getting work done right "in station" has increased productivity in tandem with quality. Gary Cowger, 61, group vice president for global manufacturing and labor relations, says GM has seen a 40 percent drop in warranty costs since 1999.

In McDonald's view, the character of GM manufacturing has changed: "Before, we were an inspection organization. You built a product, and then you inspected it afterward."

As GM leaders changed long-standing factory practices, they realized that the company's structure was a liability.

Don Hackworth, retired GM senior vice president, says the fiefdoms within GM all retained authority for portions of vehicle development. That could stymie an executive seeking quality.

The solution was the vehicle-line executive, established in 1995. The executive leads a multidisciplinary team and has profit-and-loss responsibility for vehicles on a specific platform. Giving a single person authority and accountability was "a huge change, fundamental," Hackworth says.

Credibility gap

David Sargent, vice president of automotive research at J.D. Power and Associates, says that GM's decades-long effort has been effective. GM and other domestic automakers have narrowed the quality gap with the best Japanese automakers.

GM's results, he says, reflect a companywide effort, starting with vehicle design. "Quality is not something you spray on the car at the end of the assembly line," he says.

Despite steady improvement, GM hasn't won the battle. Sargent says convincing consumers that GM quality has improved is a major challenge.

"One of the big frustrations is that GM's actual quality has caught up very rapidly, but the perception of quality has not," says Sargent. "The challenge for them is to turn that into public acceptance and turn that into sales."

You can reach Dave Guilford at dguilford@crain.com. -- Follow Dave on