In the heydays of the 1990s, the favoured business analogy was with sports coaches and team tactics. In recession, and given events in the Gulf, military theorists, like the Chinese strategist Sun Tzu, have returned to favour. Michael McAleer reports.
The military analogies taught to business students these days emphasises the importance of flexibility, speed and timing in the successful pursuit of war.
For Harvard MBA Rick Wagoner, he's been living the analogy since September 11th. No sooner had the shock of 9/11 reverberated across the US economy than the newly appointed chief executive and president of General Motors, the world's largest car maker, introduced a package financial incentives and discounts to "keep America rolling". The first to act, GM was quickly followed by competitors like Ford and Chrysler.
Wagoner who, at 50, will be the youngest chairman in GM's storied history when he takes over in May, had the confidence to make the move because he felt sure he had more cash and a better portfolio of products than his competitors. The result was impressive. Sales revenues increased and market share grew, if marginally. However, profits suffered.
Since then the need to continue to bolster sales in order to generate cash has increased. The appetite for cash is driven by the need for cash injections for ailing partners like Fiat Auto, in which GM has a 20 per cent stake, along with the need to bolster underfunded pension commitments.
While Wagoner refuses to be drawn on the Fiat situation, on the pension front GM is described by some analysts as a pension fund with a car-making arm. It's said to have more than two retirees on company pension and healthcare plans to every employee.
However, for Wagoner, the aim is not only to generate cash, but to maintain and hopefully grow market share. To return to the military analogy, at times like these it's about winning territory, then hopefully reaping the benefits in the future.
"We are still focusing on trying to grow share and not just in the US. In Europe we really want to grow share, and I think we're off to an okay start here. I think it's also important that we continue to move ahead in key countries like China."
The incentive schemes have undoubtedly helped maintain car sales in the US over the last 1½ years. Wagoner stresses the importance of the US market. "It's the only market big enough to really drive their volume up and for the last period of years it's by far the most profitable market in the world."
But last month's US sales figures were less than impressive, and may be a sign the incentive schemes are losing their edge. As a result, hybrid incentive plans are also being looked at.
Only this month GM changed its incentives to include $2,000 cash rebates on most cars and trucks as well as $1,000 "loyalty cash" for current owners who buy or lease a new vehicle. "That's going to get a different customer base than the one we've been getting the last 3-4 months. Overall, we think it's been a very good strategy and worked to our competitive advantage and we don't really see the choice as between doing incentives and not doing incentives.
"The choice is don't do incentives and radically shrink your production, or run the incentives and produce more."
Wagoner, however, denies GM is using avoiding the inevitable production cuts. "GM, for a long time, and more than anybody else in the US, has pursued a pretty aggressive strategy of capacity reduction and productivity improvements." His comments are supported by moves last week that saw GM announce production cuts of 11 per cent.
He suggests the real issue for the industry today is falling car prices across the world, but particularly in Europe. With car firms now offering more content for a reduced price, this cost is being borne by profits, an unsustainable situation in the long term, according to Wagoner.
"I remember we approved product programmes for Europe two or three years ago where the idea was, consumers want more content so you put €100 of content in the car and you raise the price €75. Now, you put €100 of content and you reduce the price €75 and you got a €175 gap that somebody's got to cover. Right now it's largely been covered out of profitability, but long term that doesn't work because that reduces the base for future investment."
He says the only way to maintain profits is to have a "hot product, or if you get a segment that's tight on capacity within a market, but then what happens is other firms roll in. In the US the Japanese are getting in to large utilities (SUVs) because it's profitable. Take the Zafira - now we see a bunch of products that try to move into that segment. That's why the continued innovation is so important. Get there first."
Part of this search for a new source of profit and hot products has led GM to eye the luxury end of the market in Europe. GM plans to bring the Cadillac marque to Europe and Wagoner says the question is not if but when, and also how they will organise distribution.
"Right now we're looking at the independent distributor option though we haven't made a decision. I just want to be clear, we're very patient on Cadillac in Europe. We think that as we do more to upgrade Cadillac, the opportunity to sell in Europe is going to expand. Realistically its presence is going to be reasonably small, because of the characteristics of Cadillac versus the broad-based European demand. But we are patient."
Part of the limited presence is due to the fact that there are no plans for right-hand-drive versions of Cadillacs.
GM is keen to bring Cadillac to Europe as soon as possible to take on Mercedes-Benz and BMW, the German luxury brands, in their home market. Both have been taking market share away from Cadillac in the US.
So with Cadillac targeting the luxury end of the market, does this rule out a luxury Opel model? "I wouldn't say that is a decision. Our vision for Opel would be to try and move its position up in the marketplace gradually. The German base of Opel and the German engineering can probably drive you to a higher price point."
On a practical point, he says a lot of Opel's cost base is in expensive countries. "Therefore it needs to drive a higher price model. We would like to take Opel upscale somewhat, but that needs to be across the model line and not just at the top. I don't rule out a capstone product for Opel but I think we have to be honest, Opel is going to be successful first and foremost by executing Astras, Vectras, Merivas and Corsas."
He says the marque also has to recover from some poor reliability and quality issues that damaged the Opel brand in the 1990s.
In the search for "hot product" and innovation that will bring him the flexibility lauded by military analogies, Wagoner has turned to ex-US Marines fighter pilot Bob Lutz.
The septuagenarian Lutz is keen to change the focus-group mentality of product development in the GM group. Detroit's consummate "car guy", he's no typical ageing car executive. The former fighter pilot likes nothing better of a Sunday afternoon than to leap into his Czech-made Albatros L-39 fighter, and tear through the Michigan skies.
On the ground, his task is to rejuvenate GM and its product line. Lutz is the product guru who Wagoner hopes will reinvigorate the GM range. He has done something similar once before. His long career started with GM and took him to Ford, BMW and Chrysler. He left four years ago.
In the motor industry, he is best known as the man whose product-development skills brought Chrysler back from the dead in the early 1990s, thanks to new cars and minivans that sold well.
Certainly GMs plans for the next five years should keep everyone on their toes. Between 2002 and 2007, GM hopes to launch over 70 new products and this year alone sees more than 30 new vehicle or major variant world premieres around the globe.
With Wagoner's business skills and Lutz's innovative streak, GM has the opportunity to instil more innovation and excitement into the car industry behemoth.
But, like any superpower, it has a number of fires burning in different corners of the world - such as the Fiat situation - and how it deals with these, along with moving its own portfolio forward, will be crucial to GM's success and Wagoner's legacy as a business leader.