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The question/headline comes to us straight from Automotive News [AN, sub]. Is there ANYONE who DOESN’T see this as a possibility? Probability? Certainty? Done deal? Meanwhile, I love this riff from AN‘s unnamed writer: “Two decades ago, Texas tycoon Ross Perot dubbed his fellow GM directors ‘pet rocks’ who sat silently beside then-CEO Roger Smith. More recently, the board was considered too close to former CEO and Chairman Rick Wagoner, who was ousted by President Barack Obama’s administration in March after the company lost tens of billions under his watch. New blood for GM’s board may be a welcome thing.”
44 Comments on “Ask the Best and Brightest: “Could U.S.-shaped GM board impede automaker’s recovery?”...”
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Since the Board is turning out to be pet rocks of Congress, the New GM is beyond impeded and effectively is DOA. The prior articles about Bawney Fwank’s and the Michigan delegation’s intrusions into GM’s business affairs are the writing on the toilet wall.
I don’t think it matters what board members they have. The Bush and Obama administrations prioritized the UAW over all fiscal responsibility. The New, Recreated, We’re-turning-ourselves-around, again GM is dead.
“Impeding recovery” isn’t the question. It’s “how long will this brain dead corpse be kept on life support.”
GM has NO chance without government intervention and direction.
Do they have a chance now?
The answer will rely on the answer to the question of “what is the intended outcome of government intervention?”
A government controlled board of directors will probably do pretty well if all decisions are examined on merit, expenses are controlled and stakeholders are given position with shareholders.
Cynder70
“The answer will rely on the answer to the question of “what is the intended outcome of government intervention?”
A government controlled board of directors will probably do pretty well if all decisions are examined on merit, expenses are controlled and stakeholders are given position with shareholders.”
What?
Barney Frank has already gotten the board to change its mind based upon political, not GM, needs.
And the Michigan members, having seen this, are now fighting for the very same.
So there is no such thing as making decisions based upon whats best for GM.
correction: Barney Frank got them to delay the closure date about a year (14 months). He only altered the progression not the outcome.
Michigan will not be as successful.
Everything depends upon who gets put on the new board, and which of those board members exert real influence vs. just taking up a chair. As in any group, one or a few thought leaders really drive most boards. Most modern US board pretend to be concerned primarily with long term shareholder value, but that is rarely the true and honest motivation of the people who sit in those chairs. If it were, they wouldn’t routinely pack exorbitant amounts of money to poor performing executives.
GM could not do any worse than they have with their boards of the past thirty or so years. Sometimes in Scrabble you throw all your pieces back in an choose new letters in hopes of improving the odds.
At the moment, nobody knows how this is going to turn out.
Government isn’t the problem.. the old board wasn’t the problem.. The problem was/is overcapacity in the industry.
So the answer is no.. A board made up of 4 year olds or a board made up of the TTAC Best and Brightest would be just as hosed.
What if the government gave GM $500B free and clear and every critical position in the company was filled with TTAC B&B?
I’ll tell you exactly what would happen… GM would keep making the same cars, sell them at dirt cheap prices until the competition was plowed under and GM could regain pricing power.
That is the smart thing to do.. Why invest in a radical new generation of vehicles when you can’t recoup the investment?
In a word – YES!
… and therein lies the problem…
“At the moment, nobody knows how this is going to turn out.”
I do. i have already seen this movie.
The only questions are how long it will be dragged out and how many Giga-dollars will be thrown down that rat hole.
Just out of curiosity, if GM does succeed in the end as the result of government assistance, what exactly will be the response from all those here convinced of its certain doom? My guess is “they cheated” or “they got lucky” will be the two most likely claims, or simply denying that they succeeded at all.
long126mike
In the main, TTAC’s Best and Brightest are not like Detroit apologists. I’m sure if events prove the anti-bailout commentators wrong, they will be magnanimous in defeat. And why not? We’d have our damn money back.
Considering GM is going to be saved by the 30,000 unit/year Volt and Chrysler is going to be saved by the (optimistic) 50,000 unit/year Fiat 500, I’m not holding my breath for success. Meanwhile, during the 18-month wait, they’ll keep sucking down government money since no private entity in their right mind would lend either of them a dime.
In the main, TTAC’s Best and Brightest are not like Detroit apologists. I’m sure if events prove the anti-bailout commentators wrong, they will be magnanimous in defeat. And why not? We’d have our damn money back.
It certainly will be interesting to see how this all turns out. If there hadn’t been government intervention, I suspect you’d be right in your assessment, absent the truly committed GM haters (who are clearly in the minority).
But with the heaviest of government involvement being by a left-wing administration and a left-wing legislative branch, it appears to start to get more at core identity issues for some people about the wrongness of a given ideology and the rightness of another.
It’s the same dynamic one can witness with Iraq in the present day — many people committed to secretly wishing for a poor outcome to “prove” that the ideology and methodologies that got us to this point are somehow flawed and reflective of a wider bankruptcy in the ideology.
Being a pragmatist myself, I care first and foremost about what works, not who or what makes it work. (And I mean “work” in the broadest sense, not a narrow sense. No crime-free totalitarian societies or human-free green planets, for example.)
Apparently you are a pragmatist as well.
Next question…
I’m not sure how important a board of directors is, at least in terms of reshaping a corporate culture. I don’t know enough business history to speak conclusively, but just offhand I can’t recall any examples of BODs being agents of change. There are examples of executives turning around companies. It seems to me that change to the corporate culture starts in the executive and managerial offices and production facilities, not the boardroom.
I think that Elmer Johnson, two decades ago and Dr. Rob Kleinbaum more recently, laid out what needs to be done to change GM from a dysfunctional organization to a profitable automaker.
The Obama administration and PTFOA don’t have a lot of experience in business, especially industry. During WWII and the development of a dedicated defense industry, captains of industry advised the government on how to make stuff. The progressive mindset of the people in the administration tends to think that business is evil. I’m skeptical that they’ll have any competence in who they dictate will be on the GM BOD.
Well, the government-UAW board couldn’t possibly be any worse than the current board, could they?
but they probably won’t be much better. They may know more about cars, but they are more distracted by political desires, like plant closing won’t happen for economical but for political reasons.
Even if the board was really smart and would be free to decide what is best. could they all of a sudden create good cars that people want and trust? Even if they now had a good car, would people be willing pay lot of money for it knowing the “old GM”? It took Hyundai 20 years to build better cars, will GM be able to do that in 18 months?
In addition the economy still is in the shitter, gas is getting more expensive (the only sizable number of vehicles currently sold and being competitive in are trucks, nothing else).
Even if they build cars like Toyota, Honda, Mazda… would people believe that they are as good for 15-20 years and that GM will exist so long? will they buy a “Mazda 3” from GM if is the same price that Mazda is asking for? will they buy a GM “Prius” at the same price as Toyota can charge?
And all the good cars GM has were designed outside the US. How much of that engineering will they get for free once the are only minority stake holders in Opel etc.?
Why are we discussing this at all? There was a board that was elected by the shareholders and they couldn’t succeed… now the unions and the government? If there was one single example in the world where such a combination produces good cars and makes a profit in a free market…
The government that doesn’t do anything besides printing money and borrowing money… and the unions that rather vote against concessions even if it means losing their workplace… who are we kidding?
Most successful car companies have some engineers in charge, or at least some car guys. VW got in deep shit in the 80’s and 90’s when the unions and worker’s representatives (Betriebsrat) established the 28-hour work week with almost same pay as the former 35-hour work week. They never could close the (most expensive) Wolfsburg factory in favor of the much better Czech and Saxon factories. It will end up the way that they keep all Michigan factories open. Here in WI they talk about GM re-opening the Janesville plant and Chrysler talks about re-opening an engine plant they closed some years ago….and MSM really believes it and writes in the newspaper like it really will happen that they will EXPAND production capacity beyond what they currently have (and mostly will have to shut down). Governor Doyle making big promises how many people will be employed in those plants. I assume I will employ as many people in my unicorn farm right by my chocolate factory. What are they smoking and where can I get some?
People have to realize that as long as they buy a Detroit car they are paying twice for it, once with taxes and again like anyone else at the dealer.
The only way to eventually fix it is to boycott and force the .gov and the UAW out of business.
The progressive mindset of the people in the administration tends to think that business is evil.
Yes, and that’s why Warren Buffett, noted enemy of capitalism, has been a supporter and advisor to the president, along with many others of his kind.
Cynder70
“correction: Barney Frank got them to delay the closure date about a year (14 months). He only altered the progression not the outcome.
Michigan will not be as successful.”
Are you kidding?
Stop with the party line.
We were told there would be “NO” government involvment.
It happened.
So you say it happened, but only for 14 months.
14 months!?
There was promised none, let alone 1, 5 , 10…let alone 14 months of it.
“So who you crappin?”, as Coach Mike Ditka(Da Coach)loved to ask.
We were told there would be “NO” government involvment.
No, that’s not what we were told. You apparently heard things second-hand, or have chosen to not understand what was said.
Here’s what the president actually said:
“What we are not doing — what I have no interest in doing — is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They — and not the government — will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.
In short, our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.”
The Chinese auto industry is largely directed by its central government and is growing quite nicely. Japan’s auto industry was also heavily influenced by government interference in its main growth phase, though Honda is to be admired for going ahead and getting into the car business against the wishes of the government.
Still and all, the Japanese auto industry would probably not have grown into the juggernaut it is without heavy involvement by the Japanese government. Interestingly enough, MacArthur’s occupation government set the course of focusing an exports and discouraging imports into Japan through policy, tariffs and the like. He also broke up the large Japanese conglomerates (zaibatsu) and fostered the creation of worker’s unions as a counter balance to corporate power. Much of the industrial policy of Japan continued to flow from what MacArthur’s team put in place, and Japan still uses the 1947 Constitution MacArthur pushed through during his years as the leader of Japan.
The relationship between government and industry is much more complex than sloganeering can capture.
None of which means that a government appointed board of GM will necessarily do a good job, but it is hard to imagine a new GM BoD worse than those which came before.
So when the Federal Mafia pulls out of GM, will they take their BOD maggots with them?
I would have liked to see Chrysler liquidated, just to reduce capacity in the profitable truck segment. On the other hand, they don’t have much of a future, except for jeep.
However, I am not that pessimistic about GM. They might have been able to eek by if they hadn’t gotten whipsawed by $4 + gasoline last year and the specter of $150 bbl oil.
I really felt bad seeing the coverage of the auto shows where they were flogging anything that possibly looked fuel efficient just as gasoline was dropping well under $2.
I’m not saying it wouldn’t have come to this eventually, but they got a lot of collateral damage from the housing based economic contraction.
Also, the GM bailout is equivalent to shovel ready fiscal stimulus which is badly needed. GM is not going to hoard the cash, but will spend it. The federal government collects roughly 20% of GNP and the net cost of the bailout needs to include the impact of additional tax revenue. Plus a decent chunk of the pension costs would be picked up by the government. Then you have unemployment insurance, etc. etc. If we weren’t in the middle of a major recession, then we could let Detroit go down just like Texas in the 1980’s. For anyone that remembers, the combination of the energy bust and the S&L meltdown wiped out all the Texas banks and destroyed real estate prices. Worse than today, but much more localized.
That aside, GM is getting rid of a lot of their legacy problems that were otherwise unfixable. A lot of the foreign competition is heavily subsidized by currency manipulation, the reliance on VAT’s and consumption based taxation, and government funded health care. Not to mention the 80’s Japanese industrial policies that subsidized their cost of capital.
The magnitude of the financial benefit of the GM BK is enormous. There balance sheet at year end 2008 showed a book value of minus $86 billion. A lot of that was so called “non cash” charges for future benefits. Still, it was awful.
They end up with a clean balance sheet and the other benefits of BK. Maybe they will just continue making cars until they run out of money again. On the other hand, they have been getting their asses kicked for a long time and have now gone through a near death experience. The changes they have just signed on to were unthinkable if they had been anywhere close to solvent. The amount of hand wringing over getting rid of Oldsmobile was enormous compared to swiftly ditching Pontiac, Hummer, their European subs, etc.
GM has had their come to jesus moment and they are no longer in a financial black hole. I wouldn’t assume that they don’t have a chance.
BOD means nothing. Who leads GM (or any other car company) means everything. I would like to see Steve Jobs or Bill Gates take the lead at GM. At least they, like Ross Perot, are successful technological visionaries, even if they don’t know cars.
However, I am not that pessimistic about GM. They might have been able to eek by if they hadn’t gotten whipsawed by $4 + gasoline last year and the specter of $150 bbl oil.
GM’s biggest problem isn’t the debt they just got rid of. It’s the fact that they sell their vehicles for less than the cost is it to make them. Using their 2007 figures (before $150 gas, before the housing market implosion, back when the US was selling 16M vehicles a year), they lost $5B on the difference between operating expenses and total revenue. Those costs aren’t changing all that much now that they’re in bankruptcy. How are they not only going to make up that difference, but also make a tidy enough profit to pay for everything else?
They are either going to have to sell their cars for quite a bit more money (probably in the neighborhood of $3,000 to $4,000 more per vehicle, perhaps more) or make their cars for far cheaper (I think Sierra Leone has ports).
Please consider this article that responds to recent criticisms of GM by various pundits
http://www.christonium.com/automotive/ItemID=12442929059128
Everything depends upon who gets put on the new board, and which of those board members exert real influence vs. just taking up a chair. As in any group, one or a few thought leaders really drive most boards. Most modern US board pretend to be concerned primarily with long term shareholder value, but that is rarely the true and honest motivation of the people who sit in those chairs. If it were, they wouldn’t routinely pack exorbitant amounts of money to poor performing executives.
GM could not do any worse than they have with their boards of the past thirty or so years. Sometimes in Scrabble you throw all your pieces back in an choose new letters in hopes of improving the odds.
At the moment, nobody knows how this is going to turn out.
and;
Just out of curiosity, if GM does succeed in the end as the result of government assistance, what exactly will be the response from all those here convinced of its certain doom? My guess is “they cheated” or “they got lucky” will be the two most likely claims, or simply denying that they succeeded at all.
As John Horner said, nobody knows how this is going to turn out. But that doesn’t mean many here can’t hope it fails. Just look at what’s gone on regarding the latest nominee to the supreme court. The ‘conservatives’ were bitching and blaming before the nomination had even been made. They didn’t know who it would be but they damn well knew they’d be against it. Even now, when a review of her decisions cast her to the right of Souter, they’re still harping on a statement she made about insights she might have due to her life experience. This country has barely survived what many regard as the worst president in our history; we might just crawl out of a huge economic catastrophe and yet large segments of our population are rooting against the guy who has been elected to fix these things. Unless we can get past being blinded by hatred based on ideology or racism or whatever the source, we’re in for a bad time, and we don’t have much room for (more) error.
If Government Motors works I will invest all my money in flying pigs.
Thanks for the demonstration.
ong126mike
You quote of Obama has me a little at loss for words.
Why?
Because you use them against my point of the government being involved.
But a quote by the fox telling me he will not do anything to harm the chickens!
And all the while hearing chickens flying about in the barn and feathers flying out the windows…
What exactly is having the GM board reverse their plant closing to appease your disctc doing, if NOT being involved.
Now the entire Michigan clan on Washington is trying to do the very same thing.
This is ONLY the beginning.
Jesus, I suppose you believed Hitler when he said he had no intention of invading Europe.
Or the Japanes when promising not to invade the US.
What is involvment if not when telling the board what to do???
Very confused, you are.
Because you use them against my point of the government being involved.
I will quote you directly once more:
“We were told there would be “NO” government involvment.”
We were not told there would be “NO” government involvement. We were told that the involvement would be limited to fundamental decisions, and that the intention is to get out of our ownership and direct involvement in as little time as possible.
Whether that ends up being the case remains to be seen, but no one claimed there will be “NO” involvement, as you tried to assert.
And please stop fulfilling Godwin’s Law. It’s tiresome.
Is this Chamberlain????
I am sorry I used the word “involvement” when Obama used “running”.
But interfering with plant closings is what it is.
Just how many interferences do you need before you call it out?
You’re tired?
Dude, this is a car forum.
I gotta fulfill somebody’s law!
I have already proven Dawinian law…just the wrong part.
Bluecon:
Renault, Volkswagen, the aforementioned Japanese automobile industry during its growth phase.
The problems of Trabant and Yugo were way more extensive than “the government was involved, so they failed”. For starers, coming from small countries that were economic basket cases. The US has more in common with Japan, France, and (West) Germany than East Germany or Yugoslavia, stupid hyperbole and FUD aside.
# long126mike :
Yes, and that’s why Warren Buffett, noted enemy of capitalism, has been a supporter and advisor to the president, along with many others of his kind.
Actually, while Buffett supported Obama during the election, the “Sage of Omaha” has recently expressed reservations about the government’s actions in the Chrysler bankruptcy.
From Forbes.com:
Warren Buffett said last week that there’ll be “a whole lot of consequences” if the government’s Chrysler plan keeps on its current trajectory. If priorities are tossed aside, “that’s going to disrupt lending practices in the future,” he said. “If we want to encourage lending in this country, we don’t want to say to somebody who lends and gets a secured position that the secured position doesn’t mean anything.”
Tom Lauria, the bankruptcy lawyer representing the Chrysler bondholders who is taking their objections to the Supreme Court, is a Democrat and gave $10,000 to Democratic campaigns in the last election cycle.
they’re still harping on a statement she made about insights she might have due to her life experience. This country has barely survived what many regard as the worst president in our history; we might just crawl out of a huge economic catastrophe and yet large segments of our population are rooting against the guy who has been elected to fix these things. Unless we can get past being blinded by hatred based on ideology or racism or whatever the source, we’re in for a bad time, and we don’t have much room for (more) error.
It’s not just about insights due to life experiences. It’s clear that Judge Sotomayor is a racialist. For God’s sake, the lady’s been a member of La Raza, which means “The Race”. Racial essentialism is acceptable on the left when it’s a liberal being a racialist.
Tom Lauria, the bankruptcy lawyer representing the Chrysler bondholders who is taking their objections to the Supreme Court, is a Democrat and gave $10,000 to Democratic campaigns in the last election cycle.
You’re kidding, right? So if a left-wing lawyer defends a right-wing client, that means the lawyer is left-wing? Lawyers represent their clients. That’s how they make their money.
The comment about Buffett was in response to the absurd assertion that everyone in the Obama Administration “thinks business is evil.” Buffett having a difference of opinion on a specific matter doesn’t change the fact that he’s an Obama supporter and advisor, along with many other accomplished people from the world of business.
I would think that after the Clinton era this outdated notion of Democrats as being anti-business would have died, but apparently not. The myth is still very useful in constructing weak strawmen, so it lives on.
edit: that means the lawyer is actually right-wing?
It’s not just about insights due to life experiences. It’s clear that Judge Sotomayor is a racialist. For God’s sake, the lady’s been a member of La Raza, which means “The Race”. Racial essentialism is acceptable on the left when it’s a liberal being a racialist.
Omigod. Omigod.
Better get at all the “racists” at the NAACP and the UNCF, too. How dare they use a racial term in their organization’s name! We must also deal with those “racialist” Asians who call themselves “Asian-American,” particularly the racialists at the Census Bureau who use that terminology.
Don’t even get me started about Mongolians…
Such a double standard!
John Horner,
If it was up to the Japanese government, you would not be able to buy a Civic or an Accord. Japan’s Ministry of International Trade and Industry (MITI) was not happy when Honda started making cars as they saw them as a motorcycle company.
When the government owns some of the car companies, like in China, it can use its power to favor state enterprises or those private enterprises the state favors. We’re seeing that with the state media expressing disapproval of the proposed purchase of Hummer by a company not already in the car business.
In India, the trend is going in the opposite direction from gov’t involvement in the auto industry. The Indian auto industry was jump started in the early 1980s by a joint venture of the Indian gov’t with Suzuki, Maruti-Suzuki. As of a couple of years ago, though, the Indian government has divested itself of its interest in the automaker.
If it was up to the Japanese government, you would not be able to buy a Civic or an Accord. Japan’s Ministry of International Trade and Industry (MITI) was not happy when Honda started making cars as they saw them as a motorcycle company.
John made that point himself. Of course, it doesn’t do much other than demonstrate “exception proves the rule” maxim.
Japan and pretty much any developed or developing economy in Asia wouldn’t be where they are today without strong government cooperation with enterprise. It’s the result of nationalist attitudes in protecting themselves from being victims of imperialism, like many undeveloped nations fall prey to.
That doesn’t make it necessarily objectively “right” or “good,” but it’s a fact that countries looking to strengthen themselves in the world do not look to the United States as their economic model.
long126mike,
Since you have no problem with the National Council of La Raza, I suppose you wouldn’t object to the Council of the Aryan Race, right?
There’s a difference between ethnic or religious political activity and racial essentialism. Do you know what racial essentialism even means? It means that we’re constrained by our biology. Judge Sotomayor’s “wise Latina woman” who inherently judges more compassionately than a white male is just the flip side of saying that all Blacks or Latinos (whatever Hispanic and Latino really means) are criminals. I don’t have a problem with the NAACP, though I disagree with the organization’s current political agenda. I do have a problem with La Raza, which is just the kinder, gentler, more public version of MEChA, which is more openly racist and anti-semitic.
Since you have no problem with the National Council of La Raza, I suppose you wouldn’t object to the Council of the Aryan Race, right?
Could you be more predictable?
You said she is a racist because she affiliated with an organization with the term “the race” in it. Naturally, you thought you’d then pounce on me with some counterexample about Aryans, since what would a lame Internet debate be without bringing up Nazism?
Could you explain why exactly you feel compelled to be on this particular soapbox in a thread about GM’s board as it relates to its fortunes going forward?
Please go back to Freeperville or wherever you feel comfortable with these fevered notions you have.
Could you be more predictable?
Could you please address the point?
You said she is a racist because she affiliated with an organization with the term “the race” in it.
That’s an absolute lie. I never called her a racist and I demand an apology.
I called her a racialist and a racial essentialist. She obviously believes that certain attitudes and aptitudes are determined by ethnicity. That’s a philosophy I find troubling.
Like many self professed progressives you see what you want to see, not reality.
Naturally, you thought you’d then pounce on me with some counterexample about Aryans, since what would a lame Internet debate be without bringing up Nazism?
Once again you avoid the issue. Just how is the Council for La Raza different from any other racialist organization?
You’re using the “reverse Godwin gambit” in which an appropriate analogy to Nazis or Neo Nazis can be dismissed out of hand by a reference to Godwin and the internet.
Could you explain why exactly you feel compelled to be on this particular soapbox in a thread about GM’s board as it relates to its fortunes going forward?
Actually, I didn’t bring up the issue of Judge Sotomayor, it was one of the B&B’s liberals who was ranting about conservatives. You’re just deaf and blind about stuff coming from your side.
Go ahead, keep on defending the indefensible.
I’d rather talk about cars than politics, but in a thread about how the government will shape GM’s BOD, it’s impossible to not discuss politics.
Please go back to Freeperville or wherever you feel comfortable with these fevered notions you have.
More projection from a self-righteous progressive. It’s funny, though pathetic, how much stereotyping of conservatives goes on from the left. I think I’ve checked out Free Republic maybe twice. While I have libertarian sympathies, I’m hardly a freeper. I’m really a classical Jeffersonian liberal, which puts me on the right today, I suppose.
I do believe that statist nannies like yourself want to control my life, my behavior and my property. You think that everything will be cool because you’ll be the one making the rules.
Oh boy, is this a blood-in-the-water shark bait issue or what?
My 2 cents.
After 50 years of motoring towards the cliff and then over it, while having their “vision” firmly fixed in the rear-view mirror, *any* change in GM’s management would have to be really excreably inspired to do worse the previous GM old-boy management. Boy Scouts, grannies with walkers could do better.
The New York Times, on June 2, writes an editorial about democratizing BODs. http://is.gd/SVwU
SEC proposes a rule change that members/groups with at least 1% of stock can submit their own candidate for election to the BOD.
This can lead to groups proposing their own agenda but it doesn’t mean the remaining 99% of shareholders have to vote for their candidate.
Interesting article and on topic.