Why GM’s Failure to See Tougher Times Ahead Matters

Patricia Sherlock

The recent announcement that General Motors will be closing plants has sent shock waves throughout the economy. The news seemed to be a surprise for many and was originally attributed to the tariff wars. However, a closer look reveals that GM had the wrong products and structure to face changing consumer preferences.

In a New York Times article, Steven Rattner, a veteran Wall Street financier and former assistant Secretary of Treasury, noted that “GM sales have begun to soften. Consumers have shown little interest in small cars, and GM lacks a strong line of crossover vehicles. Moves toward electric vehicles, in particular, will vastly change the types of factories and workers that GM needs. What’s more, the whole industry faces disruption by the sudden rise of ride-sharing apps and other innovations that will discourage vehicle sales.” Simply put, GM failed to anticipate what consumers wanted and kept providing a product that did not match to what was happening in the marketplace. GM didn’t move fast enough when customers were shifting to SUV purchases.

There is an important lesson for mortgage banking managers in GM’s downfall: Failing to adapt to changing circumstances can be fatal. As we have all experienced, innovation or doing something differently is difficult for any company and its employees even in the best of times. Implementing significant changes can be hard especially when profits are high and a measure of success has been achieved. The thinking goes, “If it isn’t broken, why fix it?”

Once losses have occurred and there is less money to invest in necessary changes, the problem becomes more critical as corporate panic sets in. The recent MBA profitability report telegraphs a dismal picture for an industry that not that long ago was highly profitable. According to the report, productivity is below 2 units per loan officer and at least half the lenders are losing money.

It is rumored that between 25 to 50 percent of independent mortgage bankers won’t survive 2019. Similar to GM, the writing is on the wall for mortgage banking firms that doing the same thing over and over just doesn’t make any sense and won’t change sales results. What will?

McKinsey’s Doug Yakola, who runs recovery programs for the consulting firm, lists several tips to turn around a company:
Redefine your perception of what a company in distress looks like. Seldom is it one or two issues but a greater number of problems interacting together and with other external factors that can indicate distress.

• Force yourself to criticize your own plan. If you are not moving with the rest of the industry or outpacing the competition, then your plan could be obsolete. If you keep missing performance targets, ask why.
• Focus on cash. Is the business generating or burning cash? It’s a simple question but critical if the company is to survive.

Create a great change story. A change story is all about creating a sense of urgency at the company. Everyone in the company should know the present situation not just the executives. A crisis drives people to action and makes employees more open to try new things.

• Find and retain talented people. In a turnaround, it is critical to have employees who are willing to point out the uncomfortable truths.

In these turbulent times, everything should be on the table if companies are going to survive. There is no better time to commit to a thorough evaluation of your company and sales force than right now.

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