I don’t know how many times we’ve pointed out that the blame for GM’s descent into bankruptcy ultimately lies deeply and completely with the automakers’ Board of Bystanders. Yes, GM CEO (and Chairman of the Board) Rick Wagoner drove the artist formerly known as the world’s largest automaker into a wall. But the Board threw him the keys, patted him on the back, walked back inside the house and played Ratchet and Clank Future: Tools of Destruction. To wit: “In an interview with The Detroit News, [BoD member] Kathryn Marinello ruled out the ‘fantasy’ of a prepackaged bankruptcy, which requires advance agreements with stakeholders before a filing, something that has never been attempted on such a large scale.” After reading our own Richard Tilton’s treatise on the matter, I disagree completely. But hey, it sounds reasonable. This however… “She strongly defended GM Chairman and CEO Rick Wagoner, calling him ‘the mailman,’ because ‘he always delivers. He is the only person that can keep the automotive industry alive in America,” said Marinello, chairman and CEO of Ceridian Corp., an information services company based in Minneapolis. ‘Not just keep it alive, but make it the technology and green leader.'” That’s incredible.
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Yes, that is incredible. But it’s also standard corporate p.r. I assume that the board’s support of Wagoner is subject to change without notice. Recall how quickly The Collapsed Three shifted gears on executive pay and travel arrangements to Washington after the backlash against its first round of testimony.
We don’t really know what’s happening behind the scenes. GM’s board could very well have a “Plan B” waiting in the wings. And if it is activated, undoubtedly corporate spin will treat Wagoner’s exit with kid gloves. Because if the board doesn’t do so it will be admitting to its own malfeasance. The legal staff won’t let that happen.
Incredible, ubelievable, what superlatives adequately describe whats happened. We are to trust the guy who showed he doesn’t have a clue what the customer wants is the guy to lead us out of the crisis, duh!
@ Dr Lemming:
“GM’s board could very well have a “Plan B” waiting in the wings. ”
Really? Why now and not 10 years ago?
If GM had fired Wagoner five years ago, brought in someone like Carlos Ghosn who has zero fear about pissing off the BoD or the UAW rank-and-file, GM would not find itself where it is today.
Again, if GM had fired Wagoner five years ago and brought in someone like Alan Mulally who seems to be very capable of making good swift decisions and ably removing a corporation’s old guard culture, GM would not find itself in the position it finds itself today.
Yes, Nissan-Renault find themselves with issues of their own today, but not quite the magnitude of GM’s.
To insist that Wagoner is the only person who could ‘save’ the industry makes me incredulous. Rick does have skills and talents but he should have never been let out of the accounting side of GM…
I once saw a report about how GM’s upper mgt was mostly Engineers (kind of like Honda and BMW today?!?!) up until the first OPEC Oil Embargo in the early 1970’s and how once that hit, the BoD no longer trusted the Engineering side to run the company and replaced the Engineering Execs with Accounting execs-thus began the long slide to where we are today.
Anyone know what report I’m speaking of? I cannot remember the author nor the title but it clearly showed that GM under Engineering Mgt was a thriving, vibrant, competitive, world-class company and that just 10-years or 3-model-turns later it was out of touch.
Loved the Racket and Clank reference… good game, GM = end game.
Wagoner still being there is classic GM . The peter principle rules the day. They promote and reward incompetence for those skilled at playing the game. He needs to go and don’t just promote some long term harvard MBA insider . The company desperately needs a fresh face like Mullaly who can come in and be objective and reform this company with a free hand. Wagoner has practiced a form of gradualism intended to minimize pain and suffering and in the end he has created greater pain and the possible death of the company. I blame the board and especially George Fisher. He mortally wounded Kodak and why would anyone want him to be lead director of a huge auto company. He is there because of Rick Wagoner who saw in George a pliable incompetent Director who could be managed to go along with Rick’s every decision. Wagoner is good at makeing convinceing arguements,But his record is dismal.
My experience when people swear that someone is just short of absolute godliness is that the person is a con-man.
Perhaps Wagoner’s next career will be as a televangelist.
This may be a naive question, but what keeps the feds from overriding the state franchise laws that supposedly make it so expensive for the big three to shed dealerships? I’m not sure what the state/federal balance of power is in this area but the feds seem to be able to use the interstate commerce clause to push into just about everything else. Why can’t they push into this, let the big 3 downsize to a rational number of divisions and dealers, then see how they do?
The way the big 3 handled this whole bailout thing shows that even if they weren’t incompetent at running a company they are either brain dead or attempting something very close to blackmail in seeking the bailout.
First, what did they think was going to happen to sales of their vehicles when they went into those very public hearing and said ‘Gee we’re going to run out of cash in a month or two without a bailout’? Second, what did they think was going to happen to the rest of the economy when they timed that very public set of statement for the start of the Christmas shopping season which is close to half of annual sales for most industries? If you answered “That’s probably going to depress sales in just about every other industry, which will mean more layoffs in industries outside of the auto industry and ultimately even fewer car sales” that’s a bingo.
Going to Washington very publicly in the way they did was self-defeating and incredibly irresponsible. If the public actually believes the things the Big 3 are saying about huge numbers of lost jobs people are not going to spend anymore than they absolutely have to on anything. Not cars. Not electronics. Not clothes. Not houses. Way to make an already shaky situation worse, guys.
This is the sort of situation you try to handle quietly if it has to be handled at all. Line up the votes. Ask for the minimum necessary to get you through the Christmas buying season, which also gets you to a different Congress that in theory should be more UAW favorable.
Given that the hearings have happened, it probably makes sense to give GM and Chrysler the bare minimum to get them through about mid-January so that they don’t screw up the Christmas buying season for everyone else, but they need to make removal of top executives a condition of doing that.
It’s disappointing.
The General is in its most dire hour.
These bean counters (Red Ink Rick, Chainsaw Fritz, and Red Ink Ray) have no credibility and can’t inspire the troops.
Red Ink Rick will ride the wave until the initial loan will be chewed up by the Red Ink Machine (or RIM job for short). Perhaps THEN the powers that be at RIM job will make a change at GM.
hmmm…on the one hand sits Red Ink Rick with more cuts and closings combined with Billions more being borrowed, toting more statements of support from an absolutely worthless Board. on the other hand we have Return to Greatness, a proven set of pricinciples and specific ideas for increasing sales and profit. been warning folks for years that surgery would never make us healthy. we need to sell cars and Wagoner and his Board are truly not only incapable, they are in fact the obstacle.
If Wagoner is the only person who can save the US auto industry, God help us all.
Stu, good point about GM’s mgt history. I don’t know much about GM Chairmen, but through the 50s, the Presidents were certainly Operations guys – Charlie Wilson and Harlow Curtis. I’m not sure about John Gordon and James Roache, who ran the company from the late 50s to the late 60s, but I know that Ed Cole was the engineer behind the modern (well, I still think of it as modern) overhead valve V8s from Cadillac & Oldsmobile in 1949 and Chevrolet in 1955.
Another engineering guy was Bob Stemple who was president in the late 80s and Chairman for two years in the early 90s. Don’t know much about him, but he did not last long.
I’m not a GM insider (or even much of a fan, for that matter) but have read a good deal of industry history, so this is just seldom-used stuff from the back of my brain.
But I think your point is well taken. I recall reading John Delorean’s On A Clear Day You Can See General Motors, written in the 70s, I believe. I think I recall him saying that GM was such a big company, you could manage it in a completely incompetent way and it would be 10 years before anybody would even notice. Well, I think he was right, but maybe conservative.
As an aside, Delorean made an interesting point. From the days of Alfred Sloan in the 20s, GM’s secret had been centralized administration and decentralized operations. GM did the accounting and kept the various divisions off of each others turf, and the individual divisions engineered, styled and built cars. I’m still old enough (49)to remember distinct differences between the divisions. Different engines, transmissions, even different things like radios, heater controls and even windshield wiper designs. But starting in the 60s, the dministration/operations balance shifted more and more towards GM central and away from the divisions. All the cars started being built by GM Assembly Division. They all started pulling from the same parts bins. By the 80s, the divisions were nothing more than marketing entities trying to sell virtually identical versions of the same car. Ford and Chrysler had always done this to some extent, which is why they never really threatened GM in the middle and upper price ranges through its golden age (imho). But GM has slowly been stripping autonomy from its car divisions since the 60s, (until there was none left) and its market share slide has been the result.
Robert,
Love your site.
Your point about the GM Board of Directors is right on. The Board has been completely incompetent for at least as long as I’ve been alive. Any folks with any business acumen who have joined the Board have quickly run the other direction when they figured out the deal.
Rick Wagoner is a very intelligent guy and is exceptionally good at his job, *IF* you view his job as doing the bidding of the Board, keeping the Board satisfied and keeping himself employed. (I’ll wager that even Jack Smith, who arguably put Rick in as Jack’s fall guy, didn’t expect Rick to be around this long.)
This explains the China strategy (some Board members read some magazine articles that said China is the future, but the articles didn’t mention the possibility of nationalization one day), and also the Bob Lutz appointment (completely the wrong move to get good product, but took the heat off Rick and got him good press at the time of the appointment).
Which brings us to the stockholders. In America, each share of stock you buy (except at Ford) entitles you to one vote. Every year, no matter what boneheaded decisions are made and who is nominated, the shareholders of GM blindly go along and support the Board member slate and their agenda, in overwhelming percentages. If you can figure this one out (I never have, but I’m getting closer), you’ll have a better understanding of what is wrong with America.
Extra credit: Who in fact are the shareholders of GM?
http://finance.yahoo.com/q/mh?s=GM
“… he always delivers … ”
Is she getting some extra special personal attention from Rick, or what? I can’t think of any business sense in which Rick always delivers.
Plan B? Where is Plan A?
Which brings us to the stockholders. In America, each share of stock you buy (except at Ford) entitles you to one vote. Every year, no matter what boneheaded decisions are made and who is nominated, the shareholders of GM blindly go along and support the Board member slate and their agenda, in overwhelming percentages. If you can figure this one out (I never have, but I’m getting closer), you’ll have a better understanding of what is wrong with America.
You own a share of stock, but your immediate interest is whether or not you can maximize your return on it, i.e. “can I make a crapload of money off this stock in the future?” Technically, the more stocks you own, the higher your clout is within the board. What we have here are people who own a lot of shares of these auto stocks, but they’re also the same people who golf/dine/wine/hobnob with these execs and more than likely share the same mindset they do. They own millions of shares of these stocks.
You might own a few thousand, if you’re just a stock market small-fry. Your opinion, in the grand scheme of things, doesn’t count for much, if at all.
The shareholders that voted for these clowns will be amply rewarded when their equity (what little is left) goes up a whiff of bankruptcy scented smoke.
Wagoner’s inabilities are so obvious even Chris Dodd today mentioned he was in favor of Wagoner leaving as one of the bailout conditions.
The guy is completely clueless and has left GM on autopilot for years. He also does not know what is going on inside his own company. One of the senators asked about a rumor of plant expansion in Mexico. He said he would go back and check on that but he was unaware. How can he be unaware of a large capital expenditure such as plant expansion at a time when they are shutting the elevators off and putting all product development on hold?
I cannot remember the author nor the title but it clearly showed that GM under Engineering Mgt was a thriving, vibrant, competitive, world-class company and that just 10-years or 3-model-turns later it was out of touch.
They also made cars that were needlessly complex and badly targeted. Engineers can run a company into the ground even more quickly than accountants, if for no other reason than a bad management of engineers has no fiscal discipline. Bad engineers think they know better than customers (or good marketing people) and the result is often an expensive car that no one wants to buy.
What you want is good management, regardless of background. Fujio Cho (Toyota) is a lawyer; Kat Watanabe a business major, as is Hyundai’s Chung Mong-koo. Takeo Fukui is an engineer, as are Ferdinand Karl Piëch (VW) and Norbert Reithofer (BMW), and you’ll see all three companies kick out the occasional “huh?” car.
Rick Wagoner is a bad leader for GM at this time. Not a lot of vision, no strategy, no unifying plan–and it wouldn’t matter what letters he had after his name.