While steering the artist formerly known as the world’s largest automaker into career suicide, GM CEO Rick Wagoner has steadfastly maintained that “bankruptcy is not an option.” As many members of TTAC’s Best and Brightest have pointed out, that kind of stonewalling A) Is insane and B) reveals guarantees a class action lawsuit against GM’s Board of Bystanders. The Wall Street Journal reports that the Board has released a statement which illustrates their feeble-mindedness, managerial paralysis, blantant cowardice and compelling desire not to end up folding shirts at a federal prison farm. “GM said the board had discussed bankruptcy but didn’t view it as a ‘viable solution to the company’s liquidity problems.’ The board “is committed to considering all options in light of circumstances as they may develop.” In other words, NO BANKRUPTCY. Unless there is. Meanwhile, the Journal hints at disagreements between Board members and Wagoner, the company’s CEO AND Chairman.
In reality, GM’s Board of Bystanders have singularly failed to exercise proper oversight over GM’s management. They should have pulled the plug on Wagoner back in February 2005, after the CEO pissed-away another $2b on a FIAT deal that should never have happened in the first place. Or soon thereafter, when it became abundently clear that Wagoner was selling assets and draining foreign funds to pretty-up GM NA’s redink soaked ledger.
The chief culprit in this do-nothing disaster: lead director George Fisher. How the retired chairman of Eastman Kodak Co., the man in charge of another industrial giant that took a heroic dirt nap, came to control GM is another story. Suffice it to say, several times in recent years, George has voiced his support for Mr. Wagoner, even as the automaker descended into disaster and, wait for it, insolvency.
after this year’s annual meeting. I met George Fisher in the Hotel duPont lobby. he assured me that the Board would be “more than glad to listen”. after a couplle letters and phone calls to the right places, still no word from the man. of course, never expected to hear from him anyway since he’s part and parcel of the overall Illuminati plan for the One World Order.
Failure is always an option.
The other day it struck me how differently GM’s board has dealt with this crisis from its tumble in the 1990s. Back then the board was awake enough to make some aggressive management changes.
I hope that a journalist with access to board members writes a book about what has been going on inside GM’s board over the last few years. This is the big X factor that could help clarify what otherwise looks completely nonsensical. How could a board of what presumably represents America’s best and brightest business minds allow the country’s largest automaker to be driven into a wall at high speed by a bunch of reckless idiots?
As much as I would prefer GM make the dramatic changes needed outside of C11, I now believe GM stands a better chance with the significant advantage of a bankruptcy judge, who would be extremely powerful, and effective.
The hurt to the brand has been done in the media. Marketing the C11 will be key, along with new management and labor contracts, for GM to emerge out the other side. I want reorganization, not liquidation. It should be obvious that Rick won’t perform an enema on himself.
I’m not a fan of Rick, but he is probably did about as good a job as you can without rocking the boat.
Imagine the chaos that would have resulted if Rick back in 2000 had fought the unions, cut brands, killed dealers, stopped the dividend, and otherwise did what was necessary. Hell, the backlash might have bankrupted them then. The BOD would have had a massive fit and he would have gotten fired, I guarantee it. To do what was necessary would have interrupted the SUV profits, and that would not have been allowed. And everyone in GM had very delusional beliefs about the nature of GM (bankruptcy— unthinkable!).
The window where GM could have prevented this closed a long time ago. Remember they haven’t had a profitable year since 2004. And before the window closed, no one would have permitted him to do it because the company wasn’t in that much trouble.
Rick was damned if he did, doubly damned if he didn’t. Even though he is a total putz, I have a degree of sympathy for him. It’s almost Shakesperean; he finally gets to be king, but the price is that he has to live in history as the fool that destroyed a great nation.
Rick is right – a PrePack Bankruptcy is not an option.
Yeah, I said it, so there….
But, a plain, old fashioned regular bankruptcy, a la Delphi – now that’s definitely a contender.
A PrePackage Bankrupcy is nothing more then all parties getting together and saying for arguments sake “We’re T*ts Up”, so now who want’s to take the first haircut, UAW, Management Team, bond holders, anyone?? Deafening silence…
Ronnie G. has made it clear – and I believe him, that the UAW will not voluntarily give up a 50% pay cut and cut the retirees off at the knees unless there is a gun to their heads.
Economics dictate that the new GM/UAW contract will look a lot like the new Delphi contract – and that means $15/hr.
The UAW will cave, after a brief strike – just to show they can, but they are not going to give up anything just to make it easy for GM or the politicians.
Saturn should have never happened, so we can curse Roger Smith for all eternity. In fact, we can blame him for Saab as well. And EDS.
Wagoner at least pulled the plug on Oldsmobile. However, he folded with his first UAW strike when he was days away from winning, and ever since then he has done nothing.
He should have been fired a long time ago. Managers are not worker bees. They are supposed to lead, and they are paid to make money!!!
If GM does go into chapter 11, where are they going to get the financing to keep going? The government providing that funding and telling GM what to do is scary at the the very least…
The government providing that funding and telling GM what to do is scary at the the very least…
Why? I ask this question every time someone brings this up. How could government oversight be any less capable, accountable or responsible than the current Board of Bystanders?
This is a huge flaw in the directorship model: the assumption that directors are accountable and/or have the company’s best interest in mind. The corporate board, at GM’s level, is even more an effluent pond of nepotism and back-scratching than any level of government. At least government is responsible, even slightly, to the electorate. Boards are responsible to their buddies in management and vice versa.
Fisher is an example of this. Eckhard Pfeiffer (the man who killed Compaq) is another value-destroyer who sits on GM’s board. If someone in middle-management NSFWed up at the level these two did they’d be effectively unemployable, yet board memberships are effectively patronage appointments, favours in exchange for future favours. You can be as big a screwup as the law allows, as long as you know someone else in the gOld Boys Club, you’re insured a million-dollar-a-year takeaway for life.
Think about Bob Nardelli at Chrysler and his (spit) tenure at Home Depot. In fact, think about the whole ball of rot that this Jack Welch-worshipping corporate clusterNSFW has inflicted on all of western business.
Now, exactly how is government worse than this?
MikeinCanada – The UAW will merely be asked to give the automakers the same competitive wage and benefits as the transplants. And work rules that make sense. It’s not too far a stretch to get there.
But the JOBS bank goes away for sure, as does a bunch of benefits. Likely too that the VEBA gets some kind of a haircut and gets implemented sooner, but not sure how that works since it’s a court approved agreement.
The problem in Detroit is not entirely of the UAWs making – rather its more endemic of the loss of reality among all the players.
Re: Ken Elias –
I agree, “Detroit” is not the complete fault of the Unions – there’s no shortage of blame to go around….and that’s the problem.
The key players all contributed to this, mgt, workers, etc. however they all perceive that the straw that broke (is braking) the camels back is not theirs but the other guys. Consequently, they don’t want to change their behavior.
Yes, eventually salaries and benefits will come down to that of the transplants and/or suppliers, but it’s going to get ugly. Just remember the UAW’s reaction last year, and that was with the promise of a new financial vehicular that was supposed to secure benefits and pensions.
What will be the reaction when faced with salary, benefits and pension cuts – no upside – except 50% of you are going to get laid off.
Any deal that keeps the UAW involved with the automakers will ultimately fail. A house divided (labor vs management) can not stand. The transplants have no union, their workers aren’t complaining, and they will weather this storm.
I’m all for REASONABLE government regulations regarding the work environment. As it is currently, we have way more than enough regulation to protect workers. The union serves no purpose in this regard whatsoever.
As a business owner, I have the RIGHT to decide who I will hire, who I will fire and DICTATE the terms of employment at MY COMPANY. But I have NO RIGHT to FORCE anyone to work for me.
The union workers act like they have no choice about whether they work for the company or not and therefore they have a right to make DEMANDS. No, you don’t. Quit if you don’t like the terms and go work somewhere else. And if my terms of employment are so horrible, I will go out of business because no-one will work for me. That’s called free enterprise.
Bankruptcy Really an Option?
1) In the 90’s, prior to investing hundreds of millions, which led to multi-billions, in US-based manufacturing plants, the imports thoroughly investigated what GM’s response would be. They concluded GM was contemptuous of everyone except Detroit insiders, smugly arrogant, and surprisingly inept. They concluded GM was too poorly run to mount any kind of a defense to the imports building plants in their front yard. History has proven this to be an accurate assessment.
2) A few years ago Kirk Kerkorian (Tracinda Corp.) invested hundreds of millions of dollars in GM, gaining nearly a 10% ownership. He wanted to institute a few common sense changes and make a bundle. Instead, he got his butt kicked big time. Not only did he confirm the earlier assessment of GM, but learned the problems were systemic, pervasive, deep-rooted, and totally impervious to change. He walked away a big looser after finally being convinced Rick & Co. were hell-bent on driving GM right into the ground and there was nothing on the horizon to prevent them from succeeding. Even his 10% stake was not enough to force them to alter the path they were on.
The above is quite telling as both are free of any GM spin and were done by entities with a strong vested interest in getting, shall we say, their hands on all parts of this elephant to really know what it was. Both arrived at the conclusion GM is supremely arrogant and profoundly inept. This past week validated again those impressions.
All of which is to say that if the top management of GM remains intact, they will blow GM right through Chapter 11 into Chapter 7 liquidation. Every indication points to that being the outcome.
Of Rick’s Business Plan, whipped up in hours? It will be stamped “Highly Confidential and Proprietary—Not for distribution” to prevent any kind of debate on it’s merit. A sad, sad day, indeed.
There is no need to UAW to give up anything. If congress was serious about its own responsibilities after last week circus they would suggest that all privately held companies get their crap together and don’t bother 298 million people who are not affected by misfortune of 2 million employees. There is unemployment office, and we already have extended benefits.
Eventually if there is a market, cars will be supplied. Otherwise we may learn to use public transportation. Actually this is alternative to bailout of the most polluting industry.
But not to worry, congress well aware who bought them. Perhaps 2, 4 or 6 years from now, when action of this congress will be as clear as misdeeds of GM board, country will re-elect them.
+1 to psarhjinian
Wolven “As a business owner, I have the RIGHT to decide who I will hire, who I will fire and DICTATE the terms of employment at MY COMPANY”
And if the workers vote in a union you are stuck with them. Like it of not GM’s workers have voted in a union and thats that.
The GMC truck division should not continue as a part of GM. GM and the US government have one chance to get the reinvention of the new GM right and avoid continued government and taxpayer support.
Domestic and import full-size truck and SUV sales are declining with fuel economy concerns, so manufacturing two of the same brand is not a profitable long-term business model. Chevrolet and GMC trucks and SUVs are essentially the same vehicles. Chevrolet models cost less, have equal or better quality and fuel economy, and outsell GMC models more than three to one. Toyota and other imports don’t manufacture two of the same full-size vehicles under different brand names; it does not make sense, economically, for GM to continue producing both GMC and Chevrolet.
Advocates who hope to keep GMC as the auto industry changes to more fuel-efficient models want to continue a business strategy that will ultimately be as unprofitable as the now defunct brands of Hummer, Pontiac, Oldsmobile, Saturn, and Saab.
Follow the import business model, eliminate GMC now, and save the costs associated with the extra GMC manufacturing processes and distribution channels, which will not be part of a long-term solution. The new GM will be more profitable going forward without GMC if Chevrolet produces and sells all of GM’s full-size trucks and SUVs.
GM won’t need government and taxpayer support again if GMC is eliminated now.