Technology Disruption in the 21st Century Isn’t Like Climate Change – It Happens Suddenly

November 27, 2018 – Yesterday, General Motors (GM), the company that was seen by the United States to be the epitome of free enterprise success, demonstrated that what is good for its survival is not good for the towns where it employs tens of thousands of workers. If you remember the comic strip, Lil Abner, created by Al Capp, and later the Broadway musical based on the characters, the song “What’s good for General Bullmoose is good for the USA” was a veiled and comedic reference to GM. But during the Eisenhower years a president of General Motors, when being considered for Secretary of Defense in the administration, made the statement almost word for word substituting GM for the General. In 1954 the company had 54% market share. By 1986 GM employed more than 877,000 worldwide with most residing in the U.S.

But that’s not the picture today. GM is a shell of what it once was and with yesterday’s announcement of the future closing of 5 of its assembly plants in North America, eliminating 14,700 jobs, the company demonstrated that disruptions in the 21st century come as sudden shocks to those impacted by them. In a carefully worded press release entitled “General Motors Accelerates Transformation,” the company announced its vision to transform itself into a “zero crashes, zero emissions, zero congestion” technology deliverer while saving $6 billion by 2020. The word “proactive” is featured in the announcement as are the words “highly agile, resilient and profitable” to describe the company that will emerge from this restructuring.

Just to the east of Toronto, the city of Oshawa, a home to GM for more than a century, will see the closing of its assembly plant putting close to 3,000 out of work. The Oshawa plant assembled Chevrolet Impalas, a sedan with a declining market share. The company has no plan to replace the model with something that is zero emission or autonomous and hence will jettison a more than one hundred year legacy.

GM’s announcement is the face of 21st-century disruption. It describes its transformation as a fundamental change to its significantly diminished global workforce “to ensure it has the right skill sets for today and the future.” It seems the 21st century has caught up with GM and to survive and keep its onhand cash from being depleted, it needs a new workforce rather than the one that has contributed to its 20th-century success. And it also has given the finger to the governments of the United States and Canada, which saved GM in 2009, bailing out the cash-starved company.

Interestingly, after the company announcement, its publicly traded shares rose in value by 5%.

So what are the right skill sets GM is talking about? There is no hint in the press release largely because the company is still trying to figure out why it no longer makes the vehicles consumers readily want to buy. One of them the Chevrolet Volt was supposedly the face of the company’s future investment in hybrid-electric vehicles. With the closing of the Volt assembly line, it appears that GM’s future vision was either mistimed or mistaken. It’s not the first time, nor the last. Back in the late 20th century, GM produced an electric car that didn’t roll out of showrooms in any kind of quantity to justify continuing to build the model. Mistiming the market on that occasion proved not to be a good thing for business.

GM right now still makes its money from vehicle sales. But for how much longer? Uber, Lyft and other vehicle-as-a-service models are changing consumer habits. As more people move into urban centers where owning a car or truck is less important than having access to one on demand, buying one is less compelling than in the past. The price of vehicles has risen to the point where they represent the second largest investment, after housing, that most people will make in a lifetime. But unlike a home, a car doesn’t last forever and so people cycle through new models every few years. The new car sale cycle that was once every 3 to 5 years is now becoming every 5 to 10 years. Younger people, many in the gig economy, are not buying cars. Add to this the anticipated arrival of autonomous vehicles on urban streets and you have a lifestyle destructive paradigm shift that is not just impacting GM, but also all other vehicle suppliers.

GM’s plant closures are all about conserving cash so that the company can place a series of new bets on the future. But it still doesn’t seem to know where the automobile industry will be in five, ten or twenty years. Will the electric vehicle finally become the standard as climate change and government regulations and policy force consumers out the doors of their internal combustion engine cars? Today in their announcement it appears that GM is betting on a pure electric play with fewer lines of vehicles planned for the next decade. But is that the right bet?

Maybe the hydrogen fuel cell will finally come of age and give the electric car a run for its money? Does GM have any skin in that game?

Or will it be better for GM to become a fleet operator of cars it builds rather than trying to sell them to consumers through a dealer network? Then GM would be a transportation-as-a-service company and could unload another overhead, its dealers.

Inevitably will the transportation-as-a-service business end GM’s need to be a manufacturer of anything? Any route the company takes will no longer equate the U.S. and GM’s interests as one and the same. That era is over.

Disruptive change in the 21st century is following an accelerating curve state futurists like Peter Diamandis. Keeping up with the pace of this creative destruction is leaving all kinds of name-recognizable businesses in the dust. Think Sears for one.

But the impact of disruptive change on labour is its most damaging consequence. In this case, creativity in the destruction is hardly positive at the beginning. But for those empty factories that will soon dot parts of the American and Canadian landscape, would it be too surprising to find a company like Tesla or one of the Chinese electric vehicle manufacturers picking up these properties for a dime on the dollar and turning the assembly lines and lights back on?