By on August 2, 2008

15 months ago: GM Group Vice Chairman and Chief Financial Officer Fritz Henderson, right, gestures as Joseph Peter, GM Asia Pacific Vice President, looks on during a press conference in Seoul, Tuesday, April 17, 2007. Henderson Tuesday said General Motors Corp.\'s South Korean unit has become a major contributor to the company\'s global operations since being acquired in the aftermath of the Asian economic crisis. (courtesy AP)Journalism professors counsel aspiring scribes to avoid deploying numbers in the first paragraph. It’s a sensible prohibition. Although statistics (a.k.a. facts) give journos the imprimatur of authority, nothing’s more narcoleptic than naked numerology. Which is just as well. My math skills are only slightly better than my ability to pilot a Gulfstream IV. But I know a man who regularly rides in the back of one of these airborne ego-carriers, and he’s an accountant. And the CEO of GM. For the weekend, anyway. The question is, who’s next?

Now that GM CEO Rick Wagoner’s mob have reported a $15.5b second financial quarter loss without offering a concrete, coherent plan to recover the company’s lost market share or staunch the arterial spray of red ink, Wagoner’s time’s up. COO Fritz Henderson is generally tipped for the top slot. While the financial community likes Fritz, handing Wagoner’s hand-picked successor the keys to the not-so-magic kingdom would be yet another monumental mistake.

Henderson is, nearasdammit, a Rick Wagoner clone. Though Henderson’s five years younger at 50, both men are accountants. Both men have Harvard MBA’s. Both men occupied GM’s Beancounter-in-Chief (CFO) position (i.e. managed GM’s inexorable decline). Both men can read a spreadsheet like walking a dog, but can’t spot a dog [product] if it pissed on their highly polished brogues. 

Bottom line: Wagoner and Henderson define the world through numbers. While Global Product Veep Bob Lutz’ epic fail indicates that GM needs a red-blooded “car guy” at the helm like they need another Lambda-platformed crossover, now is the time for big ideas, not big numbers. (God knows there are plenty of THOSE hitting the fan.)

One of the big ideas that GM needs, as it goes into and through bankruptcy, is change. If Rick Wagoner’s tenure has taught us anything, it’s that GM’s business model is completely busted. The artist once known as the world’s largest automaker simply can’t continue designing, building and selling vehicles as they have for the last 100 years. Bureaucratic fiefdoms, union intransigence, crushing overheads, lackluster products, over-generous executive compensation, scattershot marketing, superfluous brands and more— EVERYTHING must go.

The salient fact here: Fritz Henderson’s worked for GM since Michael Jackson burned his scalp for Pepsi (1984). He is, in effect, a GM lifer. In terms of the old debate about whether radical reform is best accomplished from within or without, give me a break. The chances that an executive born of GM’s corporate culture will completely destroy that culture are about as great as the chances that Zimbabwe’s Robert Mugabe will suddenly champion genuine democracy.

Like Ford CEO Alan Mulally, The General’s next general should be ready, willing and able to abandon vast swathes of territory. In fact, GM’s leader must accept the fact that The General’s global dominance is dead, and it ain’t coming back for the next ten years (at least). By word and deed, he or she must communicate to the remaining employees that any aspirations in that direction are a dangerous fiction.

The new (yes new) goal: a return to profitability, whatever it takes. If GM must reduce itself to two brands, if GM must constrict until it can make its nut on a 10 percent market share, so be it. A piercing glimpse into the obvious, perhaps, but the wider point is that GM must experience a cultural revolution.

As always, real revolution starts with chaos. To liberate the talent locked-up within GM, the new CEO must fire ALL the suits nurtured by GM’s existing entropic structure. If Bob Lutz and Fritz Henderson are reluctant to unfurl their golden parachutes, the new CEO must push them out of RenCen's executive suite with extreme prejudice. As Machiavelli counseled, the cuts must be deep and profound, leaving not a single member of the old guard to undermine reform.

Many of TTAC’s Best and Brightest have suggested that GM should move its corporate HQ from Detroit to the left coast. This is exactly the kind of take-no-prisoners thinking GM’s new boss must bring to the job. Wagoner and Henderson are oblivious to symbolism’s importance to GM’s future, and the need to communicate forcefully and effectively to all of GM’s stakeholders. Unlike Ford’s Mulally or Chrysler’s Nardelli, GM’s new broom must be a great communicator.

Ultimately, GM’s slide into disaster is a story of personal failure, of board members and CEOs who couldn’t tell their ass from a hole in the ground.  If the American automaker emerges from C11, it will be a story of the personal triumph of its new CEO. GM’s survival is not a question of numbers on a screen. It’s a question of leadership. Fritz Henderson is no more the man of the hour than Rick Wagoner. So, who is?

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49 Comments on “General Motors Death Watch 191: On the Fritz...”


  • avatar
    RoweAS

    It might be worth looking at former high level GM engineers who were “forced” out because of differences with the current Execs.

  • avatar

    The mistake lies in that these guys are looking for a miracle model to save their bacon.

    They have to rethink the personal transportation equation.

    What’s the most energy efficient way of transporting people, while helping them retain a sense of freedom of movement?
    While at the same time improving walkability scores of the areas in which their products operate …
    And what’s the most efficient and environmentally sound way of solving the logistics of expediting goods along considerable distances?

    The company that answers these stands to reap enormous benefits.

    Rather than writing paragraphs here – I invite you to have a look at Seattle’s live public transport display (you need to disable any pop-up blocker):
    http://tracker-map.metrokc.gov/tracker-map-launch.jsp

    I can put that in my iPhone.

    Car making is no longer an apt description of what we expect from the companies that solve our transportation needs. The other day, Toyota PR sent me this, which is as close to a rip-off of the Segway as you can get, but they’re getting the idea.

    There’s some irony in the fact that we may end up with Toyota providing the solutions … (pdf download)
    http://www.toyota-media.com/ems_corp_v1_glen/Images/Toyota%20Develops%20Personal%20Transport%20Assistance%20Robot_tcm318-808883.pdf

  • avatar
    dastanley

    How about the Bush/Cheney team? Hell, may as well. Cheney probably won’t enjoy the speaking/book signing circuit, and Dubya won’t be able to wipe his aXX without Dick anyway.

  • avatar
    Runfromcheney

    GM needs a Lee Iacocca right now. They need a leader who has balls the size of boulders, understands where the market is heading, and has the ability to communicate well with both the workers and customers to again give them confidence in both the company and their products. That is exactly what Lido was/did with Chrysler.

    Or, they could use a Carlos Ghosn, as a leader of his type would be best when they go C11. Ghosn is the ultimate proof that you can cut your way to profitability if you know what you are doing. Ghosn’s turnaround of Nissan was essentially simple: He cut away all of the dead weight within the company that was doing nothing but sucking up money, and streamlined the automaker to be lean and efficient. He didn’t care that Nissan can’t do all the shit that Toyota or the peers can do. The company makes competitive cars, that sell at a profit. Very simple.

    However, the major thing crippling GM is that unlike Alan Mulally and Bob Nardelli, Rick Wagoner and his peers can’t accept the fact that the Japanese have won. Times have changed, and the American auto industry is now just a shadow of its former self. Mulally is willing to accept that Ford will no longer by a big time player in the US market, and he is willing to make the company shrink to adapt to its now smaller market and customer base. GM seems to want to stay #1 at all costs, no matter how many billions they lose. They refuse to kill any of their brands, despite the fact that they are working with less than a quarter of the US market.

    GM needs to file. They need to kill every brand except for Chevrolet and Cadillac. They need to shut down all of their dealers except for a third. Perhaps they can revive Oldsmobile as a mid brand between the two, as they can sell it on its heritage of innovation. As with Mercedes-Benz, Oldsmobile can shine a nice halo on Chevy and Cadillac as well, as long as it has unique, innovative models that live up to Olds’ history.
    GM can emerge from C11 as just a shadow of its former self. To do this however, they must accept that they lost, they will never again be a big time player in the US market, and that they will now only be a niche player while Toyota owns the throne at which the General previously sat.

    They need an outsider. Every time an ailing automaker was turned around to profitability, it was done by an outsider. Lee Iacocca came from Ford. Carlos Ghosn came from Renault. Sergio Marchionne came from a number or niche Italian
    companies. And Alan Mulally came from Boeing. Yes, Ford isn’t fully turned around yet, but I know Mulally will make them profitable again.

    GM needs a new outsider CEO, and to file C11 if they want even a hope in hell. All I know is that they shouldn’t install Fritz as the CEO. They would do less harm to themselves if they installed Jeffrey Skilling as their CEO. They need an outsider who knows about turning around troubled companies. Hell, I think they should look into Steve Miller. (The guy who turned around Delphi, no the “Fly Like an Eagle” guy) to perhaps replace Rick. He would at least do better than Fritz.

  • avatar
    Dynamic88

    I don’t think it matters who the next CEO is, unless he’s going to push the big red C11 button. W/o that, GM just isn’t going to recover.

    I took me a long time to come around to this way of thinking, but I now accept it as necessary. Short of C11, there is no way to get a better deal from the union. There is no way -within GM’s budget- to get rid of brands and dealers. No money to invest in plant improvement. No money for product improvement.

    I disagree with the -heads must roll- philosophy. Deming always said “Drive out Fear”. GM needs to get serious about the Deming philosophy. As serious as Toyota is. That’s where they’re getting beat. Toyota makes mistakes, but it can analyze them and learn from them. Did the head man in charge of the Tundra project get fired because the truck isn’t doing quite as well as predicted ? No. It’s not that I have much empathy for the suits, it’s just that creating a climate of fear to replace the climate of apathy doesn’t really help.

    I know GM has quality circles, and six sigma, and ISO 900X, and so on. But they aren’t serious about it. Or at least they aren’t serious enough.

    I won’t go through my customary long harange about 2 divisions, I’ll just say one is enough. Just Chevy. GM can’t do two things at once, and if you think they can then you have to prove they can’t do 3 or 4 things at once in order to draw the line at 2. They can retain the rights to the brand names, so when and if health is restored, they can always bring some brands back from the dead.

    GM has to focus on product. American styling themes- alone- aren’t going to be a winning strategy. Sighted people by Accords- Enough said about styling. You have to have the reliability and overall value, and to get it they have to get serious about Deming.

    IMO changing the locale of the corporate HQ is just another way of blaming external factors. There’s real work to be done and gazing out the windows at mountains or oceans isn’t going to get it done.

  • avatar
    CliffG

    I think it is obvious that if GM installs another CFO as CEO we are not talking about ch, 11, but ch 7. Yes, it is that dire. Remember 35mm film? I have an entire cupboard of 35mm cameras and all of the rest of the assorted paraphernalia. Nice to look at, but I haven’t shot ‘em in years.

    GM is at the Kodak crossroads, their method of making money for a century is dead. Now what? Until the BOD recognizes the fundamental shifts going on in their business, they will continue to manage decline. Alas, there does not seem to be a Takeo Fukui standing on the sidelines (although Takeo really needs to lose his fascination with F1). So GM needs to go outside, but I would argue that Carlos is not the answer any more than Alfred Dunlap is. Cutting your way to prosperity through cutting alone is not going to work. Just like confusing schooling with education GM can no longer afford to confuse the institution with the product. While I worry that a left coast fixation is dangerous because of the huge anti-car fetish of the ruling elites out here, leaving Detroit is a great idea RF. Memphis anyone?

  • avatar
    toxicroach

    You aren’t going to get people to believe in GM again if the managers can run the company into the ground and still keep their jobs!

    Just not going to happen. They need to Rospierre it up in management.

  • avatar
    jolo

    They need to put someone who has experience with chapter 11. Yes, Steve Miller would do, but he’s still at Delphi. Although, if GM does chapter 11, Delphi does chapter 7, so he could service both industries and add them to his resume.

    Does Fritz has chapter 11 experience? Of course not, he’s a GM lifer. They do have a bankruptcy law firm on staff, just tap the highest person in the group. At least everyone will know they’re filing.

  • avatar
    Happy_Endings

    If Wagoner steps down or is forced out any time, Fritz Henderson will be the next CEO of GM. Period. While GM should look to an outsider, they won’t. Putting in Henderson will buy them precious time before they have to file for C11 or C7. If the next few quarters are even a little better, they’ll pat each other on the back and shout “See, we put in the right guy!”. If things don’t improve in the next few quarters, they’ll say “You have to give Fritz time to adapt to his new role.” or “He’s still cleaning up Wagoner’s mess.” (the last statement would be unlikely, however). Whatever happens, there is a ready made excuse/reason.

  • avatar
    TR3GUY

    Sad to say but products do have lifespans. Lot’s of reasons, poor management etc. A wonderful swiss watch company “Universal” had many firsts but it’s just another minor quartz watch that noone knows about but thheir history. As Runfromcheney says As Times have changed, and the American auto industry is now just a shadow of its former self. . Live with it and move on I say. Anytime a company dwells on their history (SAAB from jets) and doesn’t talk about what you have done for me lately has a problem. Like a mental breakdown or persoanl BK you might come back bigger than ever but maybe you’re just going to do something well and develop a loyal market. I thought that was the original Saturn idea. They were OK, basic cars treated people ok and tried to design a mystique then threw the plan away.

  • avatar
    folkdancer

    True, Henderson’s resume seems terrible. But let’s give the guy a chance. Who knows he may like cars.

    Obviously as he moved up through GM’s bureaucracy he had to keep this a secret.

  • avatar
    Robert Schwartz

    I’ll take the under.

  • avatar
    Pch101

    Frankly, I think that shutting down brands or product-based renaissances or relocating the HQ to somewhere outside of Detroit are a bit late at this stage in the game. It’s a bit like advising a heart attack victim on life support to get more exercise and eat less fat — we’re well passed that, now we’re just trying to keep the patient from dying.

    What’s frankly wrong at this very moment is that GM does not appear to have a proactive, specific path for completing a successful Chapter 11 filing, so that it can perform radical surgery as part of a reorganization.

    At this stage, it doesn’t have the money to kill off brands, so that isn’t currently a solution…unless they file bankruptcy and terminate their franchise agreements as part of a reorganization.

    Likewise, they have problems attracting new talent, and will continue to do so…unless they can put the company on a track to improvement through a viable turnaround plan, and have budgeted enough money to do it.

    People talk about bankruptcy as if it is cancer, but Chapter 11 is good for businesses who are this badly broken. It provides an alternative to complete failure and the chance for a fresh start.

    I believe that GM management is in absolute denial of filing bankruptcy and sincerely believes in its turnaround plans. Now THAT is a problem, because they are taking GM to the point that they won’t be able to pay for a reorganization. You can’t wait until you are penniless to file — you must have enough cash so that the creditors approve your plan, and you must have something in the bank and enough up your sleeve to make it work.

    These ongoing asset sales are a huge mistake. They should be selling those assets AFTER they have filed bankruptcy, so that they show that they have a way to pay for the turnaround plan. At the rate they are going, they will have absolutely nothing left that they can sell to raise money, which increases the likelihood that the creditors won’t agree to their plan.

    They need a new management team that isn’t in denial of the gravity of their situation. The main problem seems to be that they assume that there will always be a GM, even though there is no law that requires their ongoing existence. They seem to feel entitled to survive, but nobody can claim that.

  • avatar
    Autobraz

    I agree with Dynamic88. Chevy is enough. Especially if you envision that their market share can drop to (previously) unimaginable lows.

    Create a whole range of cars under the chevy brand, from the cheap small Korean based car to the top luxury sedan. The desirability will come from the car’s names, not the brand itself.

    The brand will (hopefully) give the overall background concept of reliability, quality and costumer service.

    By the way, don’t change the names of the cars for many years, preferably never.

    Re-reading my post before actually posting it, it sounds very similar to the Japanese way of doing it, excluding the luxury brands.

  • avatar
    psarhjinian

    GM needs a Lee Iacocca right now. They need a leader who…understands where the market is heading, and has the ability to communicate well with both the workers and customers

    Or, they could use a Carlos Ghosn, as a leader of his type would be best when they go C11. Ghosn is the ultimate proof that you can cut your way to profitability if you know what you are doing.

    This is very true. The important proviso, though, is to kick these guys out once their job is done. Neither Iacocca or Ghosn are good long-term people, and they’re made worse by the fact that they think they are. They’re fixers: let them fix things, but for God’s sake, don’t let them stay on. Crisis executives will, if given the chance, manage everything like a crisis, swinging big when a base hit is all that’s needed.

    The next step would be someone who operates like a Japanese executive: someone with experience in designing five/ten/twenty/fifty-year (yes, fifty; Sony does this) plans.

    Of course, the first step is kicking out the incumbents. With a board as incestuous as GM’s, that will be the challenge.

  • avatar
    psarhjinian

    True, Henderson’s resume seems terrible. But let’s give the guy a chance. Who knows he may like cars.

    Bob Lutz likes cars. Ferdinand Piech likes cars. Both are really bad for the health of their respective mass-market car companies.

  • avatar

    although certainly not interested in the top job, I could, without question, gain GM five points of market share and save over a billion in costs on an annual basis by implementing Return to Greatness.

  • avatar
    KixStart

    Bob Lutz likes Muscle Cars and V8 engines (or V16s) and tough, masculine trucks. Bob Lutz is a Muscle Car Guy.

    He doesn’t give two hoots about commuter cars, family cars, wagons, economy cars, minivans, 4-cylinder engines or work vehicles. And it shows. GM has nothing interesting or appealing to sell families. The Epsilon platform cars are OK but they only get really appealing with expensive option packages. GM issues ridiculously over-engined versions of the FWD Impala to plug holes in the Muscle Car lineup.

    Look at the New Camaro business. GM built a long, low, muscular appearing, often V8-equipped two-door coupe with nearly unuseable backseat and, at best, mediocre fuel economy. Ah, in fact, they built it in two flavors (Camaro and Firebird). The last iterations of the Firebird were truly aggressively ugly.

    They ended up killing it because of poor sales. They also killed its FWD cousin, the Monte Carlo, for the same reason.

    What’s coming down the pike, now? You guessed it, a long, low, muscular appearing, often V8-equipped two-door coupe with nearly unuseable backseat and, at best, mediocre fuel economy. Oh, yeah, it will look retro, which is pointless to the 30-ish and under crowd that’s too young to know about or care about a Real Camaro and is currently buying Honda Accord and Civic coupes.

    GM needs a Car Guy but they do not need a Cuscle Car Guy.

    A Contemporary Car Guy, which Lutz is not, would look at the market and design a Camaro for our times. I believe it could be done, I believe, done right, it could get good fuel economy and be fun to drive and appealing and I believe it would sell. And nothing like that is going to happen.

    The Muscle Car Guy looks at the market, notices there aren’t any Muscle Cars in it and builds some, without realizing there’s a reason there are no Muscle Cars in it. SS Cobalt, anyone? No?

    A Contemporary Car Guy would look at the market, evaluate the holes in it, consider what could be done for families in a post-SUV, $4+/gallon world and propose some other solutions.

    How about a reasonably priced RWD Camaro that is appropriate for a turbo-4 and would be powered adequately by an unboosted 4 which gets good fuel economy? That would be unique on the market.

    How about a three-row 6-passenger, high-mpg mini-minivan that is appropriate for a 4? It wouldn’t be unique in the market but Toyota and Honda currently have a hole in their lineup.

    How about the very compact pickup many TTAC’ers have suggested? That would be unique on the market.

    None of these things appeal to the Muscle Car Guy but that doesn’t mean they won’t sell.

  • avatar
    Dave

    Bases on the success of their previous turnround plans, why does anyone think that a GM C11 plan would work?

    As for who should go – the entire top tier should get the out the door, and bring in a crisis team to run the show. Keep the mid-level managers who know how the company works (systems etc), but change their package so they’re rewarded for results… oh yes, they must have clear, measurable, timely goals. Price of not achieving “goodbye”. That sends the message that times have changed …. and I guess most of those remaining would quietly cheer and then break their nuts delivering on the assignments.

    Sorry rant over – I sincerly hope the next boss is not “the same as the old boss” as there is talent in that company, they just need to be encouraged to bring forward their ideas without fear of the men in grey suits.

  • avatar
    Dynamic88

    How about the very compact pickup many TTAC’ers have suggested? That would be unique on the market.

    Until next year, when M&M bring their small truck stateside. But if GM gets started right now they could follow Mahindra by only say 4 to 5 years. Who could possibly have foreseen a market for small trucks?

  • avatar
    larryken

    Does anyone seriously believe GM won’t appoint Henderson as RW’s successor? Change will be forced on this company when it goes bankrupt and not by their own prudent actions. I’ll be very unhappy if the Fed gives them our tax dollars.

  • avatar
    mel23

    I see no reason for optimism. What GM needs is stock holders in revolt that would replace the board that would replace the CEO and then some. This board has supported Wagoner throughout the blood bath and still does. They’re utterly clueless and/or enjoying their pay and perks too much to care about discharging their responsibility. It’s only the recent front-page articles on the WSJ, and the like, that might finally get their attention; but only grudgingly and too late. The page at the link shows the top owners (what are Dodge & Cox smoking?). I feel sorry for everyone who has and will be hurt by this tragedy.

  • avatar
    ttilley

    He [Lutz] doesn’t give two hoots about commuter cars,

    I thought Bob Lutz commuted by helicopter…

    As a Left-Coaster I’m indifferent as to whether GM locates it’s headquarters on the left, or right, coast. I’m pretty sure I disagree with the Memphis suggestion…part of the point is that GM’s executives need a daily experience that reflects the problems they have selling their vehicles. If they’re going to move to friendly environs, they might as well stay in Detroit.

    Regardless of where the HQ is though, I’d start by insisting that the executives of a ground-based-transportation-company ought to commute by ground transport.

  • avatar

    GM needs an outsider fast to make a new start. Somebody like Mulally.

    Rick Wagoner has no credibility left.

    Oil prices have been rising for years and STILL their only money maker was the GMT-900 platform?
    Oil prices have been rising for years and they STILL don’t have a hybrid out that sells?
    They have a Saturn Aura, car of the year, and the Toyota Camry outsells it by a FACTOR 8?

    I think it’s going to get worse and worse for GM.
    Next year the new killer hybrids of Toyota and Honda are arriving. How are they going to compete with that?

  • avatar
    folkdancer

    “Who could possibly have foreseen a market for small trucks?”

    Everybody outside of the U.S., Canada, and Australia who has to work in narrow city streets and everybody in the U.S., Canada, and Australia who ever had to load and unload a regular pick up.

    Many thanks to kixstart, pch101, and psartijinian for your insights and knowledge. You are very informative.

  • avatar
    indi500fan

    Doesn’t Chainsaw Fritz commute from Florida?
    (Like Mark Fields and Nardelli -well actually Neutron Bob lives in Atlanta)

  • avatar
    John Horner

    “Product Veep Bob Lutz’ epic fail…”

    Bob Lutz’ reputation as a car guy is, simply put, bogus. The guy has never designed, engineered or built a car in his life. I highly doubt he knows how to use a slide rule or AutoCad. He was a fly-boy in the Marines who went on to get an MBA and hop-scotch around the industry. One of the main reasons he got kicked out of Ford was for masterminded the failed scheme to import the Merkur from Europe to the USA. His Australian GTO project was pretty much a carbon copy (Bob remembers carbon paper, do you?) of said Merkur flop.

    Lutz a car guy? Hah, that is 99% PR hype.

    To the question, I still like my old idea of firing everyone who makes over $250k per year at GM, then doing deep interviews and reference checks on the next levels down to find those brilliant but frustrated engineers and managers who have not yet been ruined by the system. Find a core team of them to promote and keep ‘em on a short leash … but with the measuring stick being the implementation of radical and effective change.

    I’m not sure who the right replacement CEO should be, but it probably isn’t a person who is presently anything close to a household name. A really good search committee should be able to find him or her.

  • avatar

    well, as a young man I dreamed of leading the country in sales, did it.

    imagined taking a store to #1 USA, did it.

    goofy as it may seem, now my goal is taking over General Motors. call me crazy, or get on board. should be interesting.

  • avatar
    Dynamic88

    Buickman

    I’ll take you over Fritz. At least you’ve got a plan.

  • avatar

    thx

  • avatar

    “GM is at the Kodak crossroads, their method of making money for a century is dead. ”

    Cliff, it is funny you mention that as Kodak’s former CEO is on the GM Board of Directors.

    Here is his excuse for driving the company into the ground: “I wish I could get investors to sit down and ask good questions, but some people are just too stupid… You call it losses, I call it investment.“

  • avatar

    at the Hotal duPont, Fisher told me that the Board would be “more than glad to listen” to Return to Greatness. he’s a lying bastard. sent letters, no response. the SOB is a crook just like RIR.

  • avatar
    truthbetold37

    Me, I’ll do it and you won’t have to pay me millions. $1 million would be enough.

    I already have the “who gets fired” list ready to go.

  • avatar
    sellfone

    Based on the success of their previous turnround plans, why does anyone think that a GM C11 plan would work?

    Great point, I agree. I think [the inevitable] bankruptcy will just be one step on the path to the grave.

    Reminds me of the relatively recent K-Mart B-filing. Did their turnaround plan rescue them? I don’t know if they are profitable again, but their stores sure seem deserted and obviously unable to compete in the marketplace against Wal-Mart & Target.

  • avatar
    menno

    Well, I’ve coincidentally just driven some 4900 miles from northern lower Michigan, through the heartland of both Canada (to Banff and up to Jasper) and now I’m one day from home, in ‘da UP, eh?’ and I have to tell all my friends, and all the best & brightest that after looking at huge swaths of both countries, and seeing almost nothing but GM, Ford and Chrysler dealers with VERY few exceptions; seeing how many dead-in-th-water new trucks and SUVs are out there in the deadzone of bad mortgages, high gas prices and after periodically catching the increasingly BAD news about the evaporation of GM’s money stash, I simply have to say a few things.

    1. I don’t believe the GM board or executives have ANY CLUE about how bad things are in the real world.

    2. I agree with one of Katie’s assessments that if GM has $27 billion minus $15.5 billion that leaves $11.5 billion, and while I’m no financial expert, it seems feasible to me that a corporation must have some money on hand in order to file for Ch. 11 reorganization.

    3. I don’t think these GM bozos will pull the trigger on Ch. 11 in time, and given the massive vote of no confidence of GM on Wall Street, I think that GM is going to be forced into Chapter 7 – total closure.

    4. As for how much longer GM can last, given the amount of losses seen in the past 90 days, and given the unstoppable huge losses over the next 2 to 3 years on leased-out SUVs and trucks, I have to surmise that tge actual death (Ch 7) of General Motors is going to be within a timeframe which will be BEFORE the Obomanation can get into office and “demand” that the Fed heat up the printing presses and “save” GM by doing what Demoncrats have done for 75 years (and what Repugnicans have learned to also do over the past 20 years) – throw our money (taken forcefully out of our paychecks or printed – debasing the value of any money we hold) at problems.

    5. I also don’t think anyone at GM is smart enough to cut loose GM Europe, GM Australia, the GM-SAIC Chinese JV, or GMDaewoo.

    Any of our B&B know how international business closure of GMNA could play out with these operations?

    In short, IF I were the CEO of Toyota, Subaru, Nissan, Hyundai, Kia or Honda, I’d have crack teams quietly checking the credentials, background of REAL customer satisfaction of the GM dealers out in “fly-over-land” and start cherrypicking the best and only in areas where the business could be viable… ‘Coz GM is soon going to be DEAD AND COLD and the general public WILL need to have the option of buying more than “Just” Fords since I likewise don’t think Chrysler will survive o January 2009.

  • avatar
    John Horner

    Doesn’t it seem as if GM’s management is simply running in circles?

  • avatar
    Rday

    What I would like to know is how GM loses $15.5B and only reduces its cash by around $3B. How is the rest of the difference accounted for? Borrowing, write off/reduction in assets/equity? Larger AP/Notes Payable. It just doesn’t disappear. And how can they keep making such huge losses and still stay in business?

  • avatar
    jolo

    menno wrote:

    5. I also don’t think anyone at GM is smart enough to cut loose GM Europe, GM Australia, the GM-SAIC Chinese JV, or GMDaewoo.

    They watched Delphi do it, they are going to use their example and run their playbook. They just need to separate GMNA a little more cleanly than their cooked books are showing so they can leave their overseas divisions out of the chapter 11 and/or 7 filing. Then move their HQ out of Michigan and this country altogether. One of their overseas HQs will suffice.

  • avatar
    jerry weber

    How do the high handed managers pretending they are masters of the world, adapt to their new role as also rans in the auto industry? I guess, they don’t. Deep in their patina is the idea that GM and the US car industry is going through a rough patch but profits and glory are at the end of the tunnel (not the light of an oncoming train).It worked in every other period of depression didn’t it? Wagoner & company are capable of that type of thought. They are also bean counters who will take every possible step to go into a holding pattern waiting for the light at the end of the tunnel. What they can’t do is think outside of the box or as others said think new paradigm. It is not in their chemistry, and for this reason they will be talking about more sales of assets for cash and loans right up until the sheriff padlocks their offices.

  • avatar
    psarhjinian

    Deep in their patina is the idea that GM and the US car industry is going through a rough patch but profits and glory are at the end of the tunnel (not the light of an oncoming train).It worked in every other period of depression didn’t it?

    The last time GM was this close to the wall, the investors who bailed them out made a stipulation of canning founder William Durant.

    Did I mention that it’s coming up GM’s centennial, and that they’re planning celebrations in Durant’s honour? And did you know that Durant brought GM to the wall by:
    * Buying insolvent brands and companies without any thought to growth (then: Sheridan, Scripps-Booth; now: Saab, AM General, Daewoo)
    * Rebranding existing models across divisions (then: Olds, Buick, Cadillac and Chevy more or less sold the same car with a few inches of wheelbase and different grilles. Sound familiar?)
    * Chasing niche markets (racing, farm equipment) and ignoring the mainstream.
    * Having zero contingency plans in the event the economy sputtered.

    My goodness, is the cycle of history ever a brutal thing for those who refuse to learn from it.

  • avatar
    Rday

    I thought that it was too late to split up GM into divisions. Didn’t the law change on that? That is why I though Delphi filed when they did..to beat the new law on bankruptcies. Please correct me if I am wrong.

  • avatar
    jerry weber

    psarhjinian, good history and Bill Durant did all of the above.

    First a genious in assembling nameplates into one holding company and then getting overextended in the financial downturn after WW1. We should also give credit to a bean counter that had talent. Al Sloan, for forty years the iron fisted “controller”/chairman of GM. Yes he was a business exec with accounting abilities from outside the car kingdoms, but he had an undertanding of the auto business. If a brand became irrelevant, Sloan would axe it like LaSalle (it was too close to cadillac).

    In the forties and fifties his chevy, pontiac, olds, buick and cadillac were staples of the American diet. If you couldn’t tell them apart from a city block you were car deficient. Chevy’s had six’s and powerglide (2 speed autos) well into the fifties. Pontiacs were straigh sixes and eights with hydromatics (3 speed autos) olds had V8′s and were the runners of the group.

    Buick was conservative with it’s portals (the more the better your buick) but also straight eights and dynaflow (gearless autos). Then the styles were imprinted in your mind. chevys were well pleasant, pontiacs had chrome stripes down the hood and trunk with iluminated indian heads up front.

    Olds was sort of round at the grille and had a rocket motiff to let you know how fast they were. We mentioned buick, but caddy, they were elegant looking. Huge bullet like bumper extensions and egg crate grilles, with p38 tail fins with integrated lights one of which you put the gas in. None of the upolstery, dashes, doors hoods and trunks were interchangeable. Sloan wanted you do truly have a different car when you traded up (or down). The cars changed a little every year and were majored every 3-4 years.

    Sloan wanted your last years model to start looking dated by the following September when the paper came off the showroom windows and the public swarmed in to see the changes for the following year. Somehow, Wagoner, Lutz, Henderson, don’t seem to me the type who could ever reinvent that excitement.

  • avatar
    npbheights

    Wouldn’t it be something if they asked you, Mr. Farago, to take the helm of the General Motors Corporation and gave you carte blanche to do as you see fit to make it a viable producer of world class automobiles.

  • avatar
    RetardedSparks

    All good points.
    The issue is CULTURE. The people running GM are indoctrinated in a way of thinking from the beginning. They literally cannot see the problems or solutions because the conceptual framework for perceiving those things does not exist in them. And culture is a hard thing to change (I work in a 200 person company, and it’s hard to do at that scale!)
    Cutting off the head(s) and moving the body is what it would take to shake things up. And I think the west coast would be good – it is the biggest market in the US and has a real car culture and design culture.
    And just to get things going, I think there is one guy in the US to hire for this task – Steve Jobs!

  • avatar
    Stu Sidoti

    Running a car company well requires a very diverse set of skills; you have to understand the MBA side,you have to understand the product side, and you have to understand the marketing side of the business and have ‘that elusive feel and touch for the game’ that so few auto execs seem to have.

    Heck, many auto execs don’t even like cars, don’t collect them, don’t go to car events, and many have never so much as worked on one as their myopic privileged lives simply do not require them to even so much as wash their cars-yes folks for those that don’t know…at the VP level and above, the OEMs have ‘little people’ to handle such ‘tasks’ as washing and detailing their cars, picking up the dry cleaning, making sure their car is started and warm on cold days, indoors of course in the executive level garage…Yeah-it’s like that, especially here in ‘The D’…many automotive execs have very little sense of the ownership experience, especially when you are given a new car every 3 months with a gas card, thus the price of gas is pretty much a non-issue for you personally, which leads us to another discussion, but I will digress for now

    Okay, I’m getting off-topic here…my question for the panel here is: ” If an automotive company is looking to draft some outside-the-industry talents to fill the CEO role and other executive ranks, what industry do you suggest they look to?”
    I’d like to read your thoughts-please consider the issues I’ve raised in the first part of my prattling-on about what kind of skillset it takes to be a top of your game automotive CEO and comment as you see fit.

    My first WAG at it would be the consumer electronics industry because in order to be successful like Apple, Nintendo,Google and the software companies, you have to be brilliant, you have to have lots of Engineering prowess, you have to understand the market, society and where society ‘will be’ in 1-2 years. You have to be fast, nimble and dedicated to get your products out faster than your competitors and you have to understand the MBA-side too-you have to make money…but that’s my guess, let’s hear yours…

  • avatar
    toxicroach

    For a source for new management… it’s my understanding Caterpillar is doing quite well for itself. Similar heavy industrial companies, success at making an American industrial company thrive, sounds pretty good to me.

    Hell, Caterpillar is still posting increased profits even though this isn’t a good time for construction companies.

  • avatar
    CarnotCycle

    I think you can equate reliability to patience in the corporate culture making the widget. “Perfect” products do not come out of the gate…the rare one that does is an instant classic.

    The editors and commentators here are on to something when they talk about how Honda and Toyota have been making cars with the same model name (Corolla, Accord, etc.) and target demographic for basically my entire lifetime (I’m 32). Honda and Toyota have been wringing out what people want, what they don’t, and how to build it, for that long and it shows. Simple as that.

    Detroit has tried some kind of a clean slate approach with the passenger-car business for decades…even cooking up whole new brands. Each time it doesn’t work, and everyone runs for the hills and feels they need a new(ish), clean slate to start again.

    Ironically, the only car GM has made over the same period of time is the Corvette. Just like the Accord and Camry, there have been some examples better than others, and the current example is evolved to be exactly what a Corvette is supposed to be: big displacement natural-breathing eight popper with the motor in front and the guy your racing in the rear.

    Detroit trucks are also long-lived and very focused on what the CUSTOMER wants in his truck. They focus on the want and slowly wring the glitches out, and it works – the GMT-900 platform is a world-class product in its category, compared to foreign or domestic competition. It took Toyota two tries to figure it out, and even then they don’t make a category-thumper like in the passenger car biz, just something that a buyer could respectably cross-shop.

    Nissan took a page out of GM’s playbook by introducing a supposed world-beater in form of the Titan into the truck-biz, getting their butts kicked, forgetting about that part of their business, and then high-tailing it out of town. Kinda like GM and the Cobalt. If GM made trucks the same way they make cars, they would have been done in by 1990.

  • avatar
    Potemkin

    Anyone who thinks that getting rid of Wagoner and the top execs will change GM hasn’t worked for them. GM is a failed organization from the top of the Ren Centre to the shop floor. Wagoner and his ilk have had 30 years to place like minded bullshit artists throughout the corp. These no talents owe their jobs to their no talents bosses who owe their bosses and so on all the way up the ladder. These peole are so entrenched in their fiefdoms that any turn around CEO will find backstabbers at every turn. Nothing short of a purge at all levels will change the culture. Sometimes you have to tear it all down and start over.

  • avatar
    Redbarchetta

    Potemkin YES YES YES YES YES YOU ARE SO RIGHT. I have been trying to tell people that simple fact for years now and keep getting branded as unamerican, and insensitive and crap. If GM can fundamentally never be fixed why should we keep propping it up? Have we finally crossed that line and become a communist society and I didn’t know it.

    Some times you have to just throw away the old and start fresh and brand new, no matter how painful it may seem, it’s fo the best in the long run. Especially sinc this organization is irrepribly damaged.

    Why don’t we spend the money we would be wasting on a bailout for the clown that is GM and set it aside as start up capital for true visionaries to make a great american auto business from the ashes of what is left. I would gladly let go of my tax dollars for that, there is a much better chance of long term success than continuing down the same path. Of course the entrenched powers that be would fight this to the death to keep their old and useless ways.


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