I had an interesting conversation with PCH101 about New GM’s governance. Like many observers, the TTAC commentator is not ready to dismiss The Presidential Task Force on Automobiles (PTFOA) out of hand. I, of course, am. Have done. Will do. But before I do (again), consider PCH101’s logic. He credits the PTFOA for clearing out the deadwood: finally ridding the failed automaker of the troublesome man who guided the company on its final descent into bankruptcy. He also believes that the 25-member PTFOA is a better bet for GM than the original plan for federal oversight: a car czar. “I remember a study in B-School that concluded a committee of managers without any direct experience in an industry made more effective decisions than a single autocratic insider.” With all due respect, crap. And completely irrelevant.
What’s GM’s single largest problem? Uncompetitive vehicles? Yes, well, there is that. Dead brands? Sure. Too many dealers? Doesn’t help. But it’s executive torpor that’s the root cause of the automaker’s longstanding inability to take in more money than it spends. The automaker has far too much bureaucracy, and all of it’s deeply dysfunctional. Ipso facto.
In fact, GM’s management ethos is so obviously broken it’s become a PTFOA talking point. Despite President Obama’s semi-pledge to kinda keep his distance from GM’s [hand-picked] executive team, PTFOA jeffe Ron Bloom recently promised to tackle GM’s moribund culture in a non-interventionist way (presumably).
Good luck with that. Before we calculate the odds, let’s be clear about the problem.
The majority of GM’s executives don’t care about the customer. They may pay lip service to the people paying the bills (before the U.S. taxpayer stepped in). But their day-to-day decisions are not motivated by a desire to provide GM customers with the best possible products and services.
Their single, over-riding concern is . . . themselves. Their career. Every decision that GM’s suits make is made with an eye to protecting and (perhaps) extending their territory within the automaker’s byzantine structure. CYA is their modus operandi. “Yes” is the operative word.
No surprise there. That’s how they got where they are in the first place. Case in point: VP of sales and marketing for GM North America Mark LaNeve.
From 1981 to 1995, LaNeve worked his way up Cadillac’s executive ladder. When he assumed the General Manager’s job, LaNeve knew Caddy’s survival depended on remaining resolutely upmarket. “Young people should aspire to owning a Cadillac,” LaNeve said back in the day. “They shouldn’t be able to afford one.” And then LaNeve joined the corporate mothership. He did what had to do: “modify” his beliefs. Go along to get along. STFU. Entry-level Caddies arrived without debate or delay.
Actually, it’s worse than that. GM’s suits don’t even care about the company. Yes, even now. Especially now. If anything, Chapter 11 means they’re even LESS motivated than before. Think of it this way: if GM’s overlords screw the pooch (again), what are the feds going to do? Declare bankruptcy?
PCH101 believes the PTFOA will, eventually, clean house. Even if we accept the idea that all the president’s men kept a GM insider at the helm in order to fire him in favor of a genuine reformer who will eliminate and/or replace, say, 25 percent of GM’s upper management, the bigger picture still sucks.
“Hands-off” or not, the 25-member PTFOA adds another level of bureaucracy above the existing GM bureaucracy. If each PTFOA member fires off fifty emails a day, that’s 1,250 more internal comms per day. The PTFOA also has a staff. Meetings. Agendas. Targets. Reports. Memos. The federal quango is a shadow governing body for a company that needs less management, not more.
True story: New GM is inherently worse than old GM. And it’s going to get worse from here.
At the moment, Ron Bloom and Steve Ratter are running GM well. I freely admit that President Obama’s minions are outperforming GM’s previous administration. (Of course, Captain Kangaroo could do a better job than the last mob, and he’s dead.) If the PTFOA orders the night of the long knives at RenCen, if they clear the forest of deadwood, I’ll publicly acknowledge the appointees’ collective wisdom.
And then what? By the time the PTFOA’s new brooms fail to sweep GM to a rapid turnaround—a virtual impossibility given the depth of GM’s decay and the car biz’s timelines—Bloom and Rattner will be long gone. Leaving . . . what? Administrative kudzu.
If President Obama wanted to save GM, he should have let it fail. There’s only one way to change deeply-ingrained habits: pain. GM’s management will not change its slavish devotion to its fundamentally inefficient way of doing business until and unless it’s more painful for them to keep doing what they’re doing than to do something else.
By making bankruptcy painless for GM’s upper echelons, by adding complexity rather than removing it, the President has effectively sealed GM’s fate.
94 Comments on “Editorial: General Motors Zombie Watch 5: Cross-Eyed and Painless...”
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General Motors’s biggest problem is it attitude. It has a seething, searing, burning hatred for its suppliers, dealers, and customers.
GM doesn’t much care for cars or trucks either.
Nothing since the Chapter 11 has indicated any change in that view of its world.
I think the plan is to “postpone” GM’s death until the economy improves. If (and it’s a big “if”) we get to the point where the economy is humming again, people are back at work and spending money, GM’s final gasp won’t be quite as big of a headline.
RF, please elaborate on your statement, “If President Obama wanted to save GM, he should have let it fail.”
What would that failure look like? Would it involve a liquidation? Would all U.S. factories close? Would all of the assembly lines be unbolted from the factory floors and shipped to China? Who, by law, would pay the pensions? Who, by law, would pay the unemployment benefits and health benefits? How much would this cost? How would this impact home foreclosures in the affected areas? How would it impact banks?
Tell us all about your idea to set an uncontrolled fire in the current economy and let it burn.
When will GM do something extraordinary to sell automobiles…?
This does not answer my question about how much it would have cost to let the company liquidate now, or if it would have saved anything.
Which other money losing industries should we let die?
carlos.negros
Without failure, there is no accountability. Without accountability, there is no failure. It’s an endless loop of mediocrity.
To pull out of this death spiral, you have to introduce accountability. You have to allow failure.
If I’m not mistaken, you’re asking if a “controlled” GM failure—as some believe this bailout to be—is better than abject failure.
Worst case scenario: Chapter 7.
Would all of GM have disappeared in a liquidation? I doubt it. Would the companies that picked up GM’s bit and pieces for pennies on the dollar have ended management complacency? Perhaps. Probably. Yes. Either that, or the companies employing them would face extinction.
Will the government do the same? The government? PCH101 and others think so. I think not. So far, I’m right. And I’m saying that even if there IS a short term ass kicking by the feds, long term, same old, same old. Only worse.
Capitalism—the worst of all possible economic system except for all the rest—is “creative destruction.” Whatever this is, it isn’t capitalism.
And if we’re modifying the free market principles that made this country great for the sake of expediency (not my first, second or third choice), we should at least do so with a modicum of efficiency. How about paying every UAW member $500,000?
In fact, if you’re asking me to prove a negative, how about you convince me that there wasn’t a better way to do this?
As for “letting industries die,” it’s not for the feds to “save” industries by nationalizing them. As the Supreme Court told Harry Truman re: U.S. Steel.
Churchill said, “It has been said that democracy is the worst form of government except all the others that have been tried.”
Churchill said nothing about Capitalism. Capitalism does not require democracy, as China has demonstrated.
To whom do you attribute your quote?
carlos.negros:
Myself. Paraphrasing.
Now, can you address my queries?
Robert: That was terrific, and spot on.
Through me the way to the city of woe,
Through me the way to everlasting pain,
Through me the way among the lost.
Justice moved my maker on high.
Divine power made me, wisdom supreme, and primal love.
Before me nothing was but things eternal, and eternal I endure.
ABANDON ALL HOPE, YOU WHO ENTER HERE.
These words, dark in hue, I saw inscribed over an archway.
From Part I “Inferno” Canto III Lines 1-11 of the “Divina Commedia” by Dante Alighieri (1265-1321).
None of it matters. The “problem” long since ceased being about what GM does or how they go about it per se but what they represent; loads of jobs at a time when rising unemployment must be kept at bay.
Whether you have 1 government official as the all seeing eye or a group of 25, it doesn’t matter. The end result is pre-programmed. The slide may very well be controllable, however.
The GM break up in a year or two will hive off the PRODUCTS that are profitable because they are compelling and that’s all she wrote (or needs too). Every other limb, bureaucrat, over-paid exec, bond-holder, stock-holder lost control years ago.
Meantime, and I really really hope this is so, someone with the necessary political capital (POTUS?) will take control and say; those people of Michigan need a new direction. Auto manufacturer is NOT it. The industry won’t ever be as large as it once was ever again.
Along the way, the USA needs to rediscover that money changing is a service, not an “industry” of itself that people should aspire to. Banks should service productive/expansive capital investment or functions, not speculation for 10% retained.
OK, here’s a practical problem: Let’s say we all agree to thin out the deadwood in GM’s executive ranks. Exactly how do you identify which of perhaps 500 executives should get the boot? Remember, the decision-making (non-making?) system and culture has operated for decades to blur lines of accountability. I suspect you’ll find each chair-warmer claims “Oh, I had great ideas, but my proposals always got smothered in some committee.”
Well, the PTFOA could just have the managers draw straws. Or adopt the policy, “fire them all; let God sort them out.”
What was the effect of Marchionne’s, ah, march through Chrysler, besides the 2 folks mentioned ? Total body count, please. Based on the march taking one week, maybe PTFOA could borrow him for a cleaning of GM. Recorders ON. If Marchionne’s action is effective, and PTFOA does nothing, the distinction in performance (no mo’ money) will serve to highlight by clear and time-correlated example the exact effectiveness of the PTFOA.
@ PeteMoran
Now that capital flows are slowing due to the global recession, there isn’t as much cheap Asian money sloshing around in US banks. I think the American people are going to learn about the limits of this industry when they try to apply for credit for purchases they would have taken for granted just 2 years ago.
@ Robert Farago
Same as it ever was….
Robert Schwartz :
June 13th, 2009 at 11:15 pm
+1
Who should we describe with this quote? Obama, Henderson? Who?
OZYMANDIAS
I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter’d visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp’d on these lifeless things,
The hand that mock’d them and the heart that fed.
And on the pedestal these words appear:
“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.
- Shelly
RF – I am on board with you as far as realizing the necessary feedback to make capitalism work, but I think the primary motivation behind people who support the bailouts or who feel that the government should intervene is that the destructive effect that you’re talking about has a social and economic cost that companies and individuals beyond e.g. GM have to bear, and it is precisely this cost that we are literally paying to avoid. “Too big to fail” is, in my mind, shorthand for “too high a cost to anyone involved in this company too fail.”
The interesting thing is, I am not saying anything you aren’t aware of — in fact, you probably know more about this than just about any of the commenters here, and definitely know more than I do. Which is why I wonder how you’d approach all of the repercussions of an all-out GM liquidation, and if I’m not mistaken, I believe this is carlos.negros’ question too.
And if we’re modifying the free market principles that made this country great for the sake of expediency
This country has only experienced short-lived bursts of a truly free market, and it never worked in its ideal form. Capitalism encourages companies to make as much money as possible no matter what and in the short-term only, and so corporations discovered that they could make quite a bit of cash by logistically obviating competition. Rather than fighting competition with better products (which is hard, and expensive), they outright shut them out. Hence the rise of the monopolies and resulting trustbusting.
Remember, government intervention is a feedback mechanism itself — regulation doesn’t typically pop up at the whim of some bureaucrats bent on bloating the govt. It is a reaction to some problem in the market that the market and its players cannot fix themselves. It typically happens when capital interests clash with what’s best for the country.
So, really, the Big Question here is on how to meter out regulation and intervention in order to secure a mostly capitalist economy. It’s one of finding the right balance, and I think RF and bailout opposers think this is too much (for good reason).
(FWIW, I’m not terribly pro-bailout, but I do understand the need to mitigate the damage that GM’s failure would have caused. The philosophical damage of setting a bad precedence in the government, however, is another debate.)
maniceightball, that’s it exactly. Anyway, I asked first. :)
GM and all the banks that gambled instead of invested should have failed. I agree with Robert. The profitable pieces of businesses would have been picked up by someone else looking to make more, and the unprofitable pieces would simply go away like the in-home funerals did.
However, since we are ALREADY bailing these guys out shouldn’t we at least learn from it. How about keeping companies smaller? “Too big to fail” could be a litmus test we use when we break companies up for national economic security reasons.
“And if we’re modifying the free market principles that made this country great for the sake of expediency …. ”
Just like was done to win WWII. Command and control of the entire economy top to bottom from government boards in Washington was how it was done.
Not to say that I’m all for the government running everything. My point is that this notion of a once upon a time in America everything was about free enterprise is simply not supported by the historical facts.
Another example: High tariffs on imported manufactured products were the rule of the day during decades worth of the early industrial revolution as a way to support and encourage the development of US based manufacturing instead of continuing to rely on the at the time more advanced industrial manufacturers of England.
The only reason the government got involved is because a politically powerful group (UAW) was threatened. GM should have been pieced out in bankruptcy court, not had money tossed at.
What’s the end game? How are they going to take on the rest of the market?
All I’ve seen is them throw the same ‘ol cars and some political favorites (*cough* Volt *cough*) at us. If they weren’t viable before, how are they viable now?
I know this has all been said before, but it amazes me how the politicians justify this and pretend like everything is going to be hunky dory.
maniceightball Said:
“regulation doesn’t typically pop up at the whim of some bureaucrats bent on bloating the govt.”
You and I have been watching two different ball games for a number of years. Mostly these things regulate perceived problems. It typically happens when someone in the halls of power has a cousin who needs work, or there is a budget shortfall and we need to get out there and collect some “regulatory fees.”
Getting rid of Docherty, LaNeve, and Peper (just read his Fastlane webchat) sure couldn’t hurt anything.
Dieseldude, I have to strongly disagree. This is a most cynical opinion, and one that would be difficult to support. But, since this is “watercooler” talk, I will take it in that spirit.
RF: “Without failure, there is no accountability. Without accountability, there is no failure. It’s an endless loop of mediocrity.”
This sounds like our health care system, our educational system, our food supply, and our FDA. Our national voting system seems pretty bad too. To that we can add our (former) investment banks, mortgage brokers, SEC (Bernie Madoff), war contractors and the list goes on.
Which U.S. company or sector is your model for accountability and success? And, by the way, do they build cars?
It seems you have a romanticized and sanitized view of capitalism. Capitalism is about amassing money and the means to make more of it, and the power to hand it out to create more power and influence. Political influence is a natural outgrowth of this power. Keeping the government weak makes it easier for powerful corporations to break employment and environmental laws, misstate their earnings to the markets, and make and take bribes. All which are profitable, none of which are ethical.
Bringing this back to cars and democracy. Barak Obama campaigned precisely on the issue of whether he would allow U.S. companies to be liquidated and unbolted from the factory floor and shipped to China. He won an election fair and square. He is keeping his promise.
PCH101’s committee vs. autocrat argument is wrong on several levels:
1) GM isn’t being run by a 25-member committee of managers; it’s being run by a 560-member committee primarily composed of non-managers = PTFOA + Congress.
2) There’s nothing wrong with autocrats as long as you have a good one; not only that, there are times when autocrats are essential. I’d put Lee Iaccoca – a single autocratic insider – up against the PTFOA anyday when it comes to running a car company.
3) If autocrats are such a bad idea, why did the PTFOA just hand Chrysler + $6 bil over to one – Sergio Marchionne?
4) The wrong PTFOA is running the American auto industry. IMHO the Private Tea Factory Owners Association would do a better job.
Hmmm. Between an overly powerful government that seeks more control of what it’s people do, or overly powerful corporations that seek more money I think I’d be happier with the corporations. I can always boycott a corporation, but if I decide not to “buy” what the government is “selling” I get put in jail. I’ll take a hundred people that just want to be richer over one single solitary politician that’s seeking power to enforce his idea of “the common good” any day. (Even if I agree with the politician.)
reclusive_in_nature :
I seem to be a contrarian tonight, but so it goes. When a business/person wants to maximize profits, bad things can be done in the name of profit, and not buying from that company might not protect us from it.
I used to work for a great guy, a scout leader, who would have us burn dangerous chemicals because it was cheaper than safely disposing of them. We were to dump waste in streams instead of taking it to landfills. It is tough to boycott air and water that has been polluted by profit seekers.
When I asked him about his actions, he just said “Business is about making money.” This was small scale stuff; I can only imagine what a powerful company might do.
Watching the whole GM saga is like reading Louis Carroll. It just keeps getting stranger and stranger. I wonder what everybody is smoking. I can hardly believe it when I see Fritzie-boy telling us that we are all retarded because we don’t buy GM’s wonderful products.
Last year I bought a Honda Accord EX 4 cyl 5 speed manual. I drove everything before I plunked down my own cash on a car. GM apologists can wail all they want but the Accord is better than anything GM makes. Yeah, sure, I could have had a Malibu for $5k less. But the Honda is worth the extra money.
Doesn’t anyone at GM get this? Has anyone at GM ever driven an Accord? It’s poetry in motion. It is smooth to its 7100 rpm redline. It has wonderful resale. Blah, blah, but my point is why can’t GM do this? Why can’t they either come up with real product or admit their cars are simply cheap knock offs of cars people really want to buy.
GM stopped being a car company many years ago when they quit selling “cars” and started selling “units”. GM is among the many US-based companies that can’t be bothered to look past the next quarter, and what profits there are to be made.
50merc: Exactly how do you identify which of perhaps 500 executives should get the boot?
Exactly the thought that is my stumbling block. GM has a lot of smart people, but they are forced to conform to a terribly wrong system/culture. You can’t stand out. You can’t say no. You can’t take a stand for what’s right. You can’t make a decision. How can you sort them out?
Further, most have been promoted beyond their skills, their interests, to a level of incompetence. GM is a 100 year old company being operated by 5-year (or less) employees, in skill, hire date, or job duration. That certainly explains a lot, doesn’t it?
Via the downsizing, GM has already fired most of “the troublemakers.”
Basically, GM “leaders” (cough-cough) are there for the easy cash and benefits.
Detroit-X:
Didn’t you hear? Fritz has formed a committee to examine GM’s failed culture (excluding themselves, presumably)
ruckover :
When I asked him about his actions, he just said “Business is about making money.” This was small scale stuff; I can only imagine what a powerful company might do.
Think you might be surprised. After retiring from the Navy, I spent over twenty years in sales to the large pharm and chemical process industries – the large companies were as clean as a whistle. Not saying that this is all altruistic, but they certainly do not want bad publicity.
“I remember a study in B-School that concluded a committee of managers without any direct experience in an industry made more effective decisions than a single autocratic insider.” With all due respect, crap. And completely irrelevant.
You have a study to cite which comes to the opposite conclusion? Or are you just waving your magic ipso facto wand? Again. Still.
Cross-eyed and Painless by The Talking Heads — (Edited for effect)
Lost my shape-trying to act casual!
Can’t stop-I might end up in the hospital
I’m changing my shape-I feel like an accident
They’re back!-to explain their experience
Isn’t it weird/looks too obscure to me
Wasting away/and that was their policy
I’m ready to leave-I push the fact in front of me
Facts lost-facts are never what they seem to be
Nothing there!-no information left of any kind
Lifting my head-looking for danger signs
There was a line/there was a formula
Sharp as a knife/facts cut a hole in us
There was a line/there was a formula
Sharp as a knife/facts cut a hole in us…
Facts are simple and facts are straight
Facts are lazy and facts are late
Facts all come with points of view
Facts don’t do what I want them to
Facts just twist the truth around
Facts are living turned inside out
Facts are getting the best of them
Facts are nothing on the face of things
Facts don’t stain the furniture
Facts go out and slam the door
Facts are written all over your face
Facts continue to change their shape
I’m still waiting…I’m still waiting…I’m still waiting…
From “Remain In Light”, a great one.
So far GM is still following the same goal they have had for decades. If I see action that doesn’t match the old goal, then I’ll get interested…
Old/Current Goal:
“To maintain the status quo by doing just enough for every group (internal and external) that interacts with GM to keep them from demanding any significant change.”
Dynamic88
PCH101’s reference was without attribution—he was making a main point rather than arguing stats. So I couldn’t investigate the methodology involved. Define effective. Sample size? Similar industries? Etc.
Nor did I want to stop the flow to discuss what I considered to be a side point: PTFOA vs. Car Czar. How about no federal oversight vs. any oversight? (Assuming that the feds hadn’t take a stake in GM.)
I believe that corporate structure is not as important as the organization’s dedication to the company’s BRAND. The promise the company makes to its customers.
A subject for another zombie watch, but I might as well raise it here: where’s the movement on the branding front?
The decision to keep GMC and Buick (a channel unto itself) was wrong. As the B&B know, Buick is a dead brand stateside and GMC is nothing more than badge engineering.
Killing the two brands would have RADICALLY downsized GM AND its income. But why not? The company’s bankrupt. Living on the federal dime. Might as well use this opportunity to sort everything out.
That’s not the GM way. Their “once and for all” is “now until next time.” Check out the dealer cuts. They’re already talking about round two. And reversing some cuts. Encouraging appeals. Someone lost his copy of Machiavelli: they should cut their excess dealers once and cut deeper than they need to. Take no chances. Leave no enemies behind. (A crap dealer is GM’s enemy. Always has been.)
GM singularly, spectacularly fails to make the wholesale, painful decisions they need to make to survive. Instead, it’s a death by a thousand tiny, ineffective cuts, as usual.
At some point during this fiasco, someone at GM needed to stand up and say “Gentlemen. We need $200 billion and ten years to sort this out. Otherwise, forget it.”
Not to put too fine a point on it, the company has no balls.
PS I do not wield my “ipso facto wand” to suggest something is true because I say it is. It means that something is true because the evidence is both obvious and incontrovertible.
GM’s biggest problem isn’t management, its culture, or its structure. It’s the fact they lose money on every vehicle they sell. That fact is only going to get worse in bankruptcy. People in market for a car are going to smell blood in the water and drive the prices down. Unless and until this changes, everything else is irrelevant. In order to be profitable enough to have a decent future, GM needs to sell their cars for at least $2,500 more and perhaps as much as $4,000 more. Does anyone really think this is going to happen?
Your point in the article about having 25 people sending out 50 e-mails per day, for an aditional 1250 e-mails is key here.
It looks like the company is currently run, simultaneously, by:
CEO
Board of D.
Management
PTFOA
Congress
President
President’s staff
The amount communication, e-mails, copies & faxes between just these people would be difficult for a small team of auditors to track down.
It must be stiflingly difficult for a decision to get made now, in and of itself. It seems to me that no other successful company in the world is run anywhere near this top heavy, so why try it here? Apple – a couple people in charge. GE – very clearly structured and one of world’s largest co’s. Microsoft – pretty much one guy. RIM – Two guys in charge. Exxon – CEO.
Shouldn’t they have a short list of key objectives, say 5-10 and an exacting timeline to execute, with 1 person in charge & accountable? Wasn’t setting this up the role of the PTFAO?
I agree, they are more screwed now, with more people, no plan and no way to MAKE a plan.
The only reason the government got involved is because a politically powerful group (UAW) was threatened.
How do you explain the government involvement in the banking sector? No UAW there as far as I know. And it was Mr. Paulson who rode to their rescue, and it was W who made the first move in the auto sector. Since this ‘explanation’ of Obama’s motivation comes up so often, it would be interesting to read how this all fits together from someone who seems to see what others can’t. I’m not holding my breath for a response to this.
As for the many benefits of capitalism, it might be worthwhile to review the history of Microsoft and their impact on the PC world. Recall they were sued by the DOJ in Clinton’s time with the decision rendered late in Clinton’s term. Microsoft was to be broken into two companies; one for the OS and one for applications with criminal penalties for breaching the separation. After a one-on-one, Ballmer to Cheney, the suit was effectively dropped and Microsoft walked away with a wrist slapping and we’re still under their control with most competitors dead or permanently maimed. Reading the Findings of Fact from the case gives lots of examples of how capitalism works in unrestrained forms. We’ve put up with years of software crap from MS due to their killing anything that looked like competition through whatever means available to them.
http://www.usdoj.gov/atr/cases/f3800/msjudgex.htm
PCH101 believes the PTFOA will, eventually, clean house.
Well, let’s clarify that. I believe that the task force is trying to find a new operator that will clean house.
I think that you need to look to what happened with Chrysler to get a sense of what they’re trying to do with GM. They filed bankruptcy, to get rid of debt and some of the excess dealer network. They found a new company to run it, and it’s the new business that will make the management changes.
If you assume that an effort is being made to find a new operator for GM (Nissan), then you have to accept that the new owner is going to hire and fire the management. There’s no point in the task force doing it, because Carlos Ghosn is going to make his own decisions, anyway.
Nobody outside of GM would take the CEO right now, because nobody wants to take the job for a few months. Until it’s clear what is going to happen with GM, you have to assume that Henderson is just a placeholder, just as Nardelli became once the Fiat deal was being put together.
My main point here has been that the GM situation is a work in progress, and it’s a bit early to judge the management outcome. If it is Nissan’s job to fix it, then the task force has to stay out of making management selections until Nissan takes over. That’s what happened with Chrysler, and heads began to roll before the ink had dried on the transition paperwork.
If the Nissan deal dies and there is no Plan B operator to come in, that’s when you will be able to start judging what is going on with GM management. Until then, I think that you’re jumping the gun.
I just finished re-reading Going For Broke – a book written in 1981 about Chrysler’s decent into disaster and the beginnings of the Iacocca revolution. This book should be required reading for anyone interested in today’s GM mess. I draw 3 main points from the book today.
1. The Chrysler of early 1979 reminds me a lot of the GM of 2008. Chrysler developed a management structure and culture that completely prevented success. It was much worse on the inside than it appeared to anyone on the outside at the time. The descent of the US economy into an economic disaster sealed the company’s fate. Fixing it required fresh blood and lots of it, led by someone who knew what he was doing. Iacocca basically had to rebuild the company from the ground up.
2. It is also instructive that in 1981, GM was still believed by everyone on the outside to be an impregnable fortress. It still held a market share of about 45% and had oodles of money for new product at a time when Chrysler’s (and Ford’s) continued survival was in doubt. The lesson here is that while Chrysler and Ford had to remake themselves between 1979 and, say, 1983, GM continued along the same trajectory.
3. Finally, How times have changed in the last 25-30 years when it comes to government assistance. Chrysler went for help during the Carter administration and a Democrat dominated congress. Direct aid was out of the question, and a loan guarantee package which required a herculean effort by Chrysler in order to meet its requirements was the only possible option. Chrysler was saved with no outlay of federal money.
RF, I can’t believe you dissed Captain Kangaroo on this one. The guy was brilliant. He always set up Mr. Greenjeans to take the heat, which was a hail of ping-pong balls, using a puppet moose as the foil.
Now, if that isn’t the PERFECT metaphor for the PTFOA, then I really don’t know what is. Meanwhile, Grandfather Clock will keep running, and running and running as Bunny Rabbit keeps chiseling Captain Kangaroo out of more and more carrots.
carlos.negros: This sounds like our health care system, our educational system, our food supply, and our FDA. Our national voting system seems pretty bad too.
It seems you have a romanticized and sanitized view of capitalism.
Only problem is that not one of these represents pure capitalism in operation…and anyone who holds our government-run education system out as an example of capitalism in action needs to learn something about how it really works. It is as far away from capitalism as one can get.
carlos.negros: Bringing this back to cars and democracy. Barak Obama campaigned precisely on the issue of whether he would allow U.S. companies to be liquidated and unbolted from the factory floor and shipped to China.
In which case, he was doing nothing more than using hysteria and voters’ ignorance to gain votes. GM and Chrysler were never going to be shipped to China. Parts of them are still viable – just not under present management, or with the UAW contracts in place. The rest are worthless. Not even the Chinese want them.
I place that number two behind the retiree problem.(of course they lose money because they have less than 50k people working and a million more collecting benefits while adding no productivity)
They were losing money on every vehicle even before the retiree problem is added in. Their operating expenses were $5B more than their total revenue in 2007.
Geeber, your usual selective quoting.
The next thing I said was, “To that we can add our (former) investment banks, mortgage brokers, SEC (Bernie Madoff), war contractors and the list goes on.”
Let’s at least try to be honest.
And you said, “he was doing nothing more than using hysteria and voters’ ignorance to gain votes.”
Nice. I see how much you respect democracy. Now you are calling the American people ignorant because you disagree with them.
The last time I looked, Obama still commands a clear majority of support. Those, like yourself, who want to see him fail, represent a fringe.
They were making massive retriee payments in 2007. This has been hurting them for a long time.
No society or company can afford 30 years work and then a rich retirement.
Those retiree payments had nothing to do with operating expenses. On top of that, those retiree payments are largely out of GM’s hands now. But those operating expenses aren’t changing much.
It’s as simple as this; if it costs you more to produce your product than what you get in return, you have huge problems. At this point, everything else is secondary.
Would someone please provide an accurate P&L with supporting documents for GM? In my naivete I believe that we could easily trim the fat if we just knew where all the money went.
Everything Chrysler and GM is selling is at a loss. So Ford is going to need to match the price and they will also be dragged down.
There is one problem with this argument. The fact remains that consumers are still willing to pay more for what they perceive as better product, something that gives them real value for their money.
For example, here in Canuckistan, you can get a nicely equipped Cobalt for $6k less than a Civic. But the Civic is still the most popular car in Canuckistan and has been for years. People willingly pay the difference and Chevies have such a stigma attached to them that most owners are embarrassed to drive them. The only reason they do is easy (government sponsored) financing.
This is an extremely difficult dilemma for GM; they are going to have to come out with a car that consumers want just as much as said Civic. It has to perform at least as well, be as least as reliable and cost much less. Hardly a recipe for profits.
GM has absolutely destroyed it’s reputation. How many times have we heard about the “New GM” and it’s latest “Import Fighter?” This is not something that GM is going to fix with PR and ad campaigns.
Unless you think the government giving GM tens of billions takes the retiree payments out of their hands. Government Motors still needs to make those retiree payments and it is the main reason they won’t be able to make a profit.
So what? They’re losing money before retiree payments! It’s irrelevant. They’re losing money on each vehicle sold because it costs them more to make than what they get in return. Losing money on top of that doesn’t make any difference, it’s just a higher number.
Government Motors still needs to make those retiree payments and it is the main reason they won’t be able to make a profit.
If you actually took the time to look at GM’s financial statements, you would see that this is an inaccurate statement that caters to your hatred of unions, rather than actual facts about the business.
GM already has costs below those of its competition. Its main problem is that the products and branding have been poor enough that they can’t sell cars at high enough prices to clear their operating costs. Most of those operating costs consist of parts, not labor or benefits.
It’s hilarious to see Wagoner et. al. drag on about legacy costs, while completely ignoring the incentives gaps and the discount pricing. Domestic incentives are typically a few thousand dollars above those of Honda and Toyota. GM has to sell its luxury 8-cylinder sedans for less than what BMW, Mercedes and Lexus charge for 6-cylinder equivalents. If you can’t see that pricing is a critical problem, then you just don’t want to see it.