Staring bankruptcy in the face in the early 1990s, General Motors realized it was not on the highway to success, said the company's chief financial officer Michael Losh.
In a lecture to graduate students at the Brigham Young University's Marriott School Friday, Losh explained how GM is reestablishing itself as a world leader in transportation products and related services.
For nearly sixty years, GM reigned as king of the global automotive industry. However, by 1990 the company was fast eliminating itself from competition. GM's net profit dropped from $4.2 billion in 1989 to a net loss of $2 billion in 1990, and a $4.5 billion loss in 1991.
Losh became a GM executive during this crucial period and helped the company reform its practices, beginning its climb to the top of the global transportation market. Despite a 54-day union strike, the company was still able to post a $1.8 billion net profit for 1998. GM products are currently sold in 50 countries, and net revenues for the company reached $160 billion last year.
"We had a lot of pressure from the outside to change things," said Losh. "An entire generation of leadership was pushed out, and we elected a non-executive chairman of the board."
Losh attributed GM's financial crisis to declines in overall productivity and quality, as well as inefficient investing practices and a market-share-focused strategy that failed to take into account profitability.
To overcome its difficulties, Losh said GM had two objectives — stop financial hemorrhaging and refocus company resources. GM had fallen so low that it could not secure funding from external sources. To compensate, the company consolidated purchasing, staff, car platforms and other operations to cut costs dramatically. It also reduced management turnover by establishing a new executive position to supervise car platforms through their life cycles.
In just a few years, Losh said, these changes brought GM back to its former status as a world leader in the transportation industry. The company's sales grew to cover its debt and make a substantial profit. In the process, it reduced manufacturing and product-development time by half.
"Mike was a special guest for our Executive Lecture Series, and I was impressed by the humility of his approach as he showed the difficult years at GM," said Henry J. Eyring, the director of the MBA program at the Marriott School. "GM gets credit for inventing and perfecting strategic management. It is truly one of the greatest companies in the U.S."
Appointed as CFO for GM in 1994, Losh has responsibility for GM's Worldwide Financial Operations, General Motors Acceptance Corp. and GM Investment Management Corp. Prior to this appointment, Losh served as GM vice president of North American Vehicle Sales since 1992. He has worked at GM since 1970 and graduated from the General Motors Institute with a bachelor of science degree in mechanical engineering. He received his master's degree in business administration from Harvard University.
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Writer: Peter Carr