The Truth About Cars » Renaissance_Man The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sat, 19 Jul 2014 17:00:13 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Renaissance_Man The Case Against Akerson, Part 3 of 3: Loss Of Confidence Fri, 08 Mar 2013 16:08:27 +0000  

After part 1: Breach Of Trust,  and part 2: Lack of Strategy,  now the long-awaited final part.

In his book Car Guys vs. Bean Counters, GM’s best-known executive, Bob Lutz, describes the task facing newly-appointed CEO Dan Akerson:

“Akerson has inherited a company headed for success… Akerson does not have to “fix the business.” His role is not to run the operations but to set the overall direction, inspire the troops, and make sure the product development momentum continues… Akerson’s largest contribution could be to become the respected and liked spokesman, the personification of General Motors. Making GM more open, more human, more accessible and more likable is the last, great unfinished task.”

Lutz knows of what he speaks: after all, he was long the likable, humanizing public face of GM’s upper management. More importantly, he established the revamped product development system that has produced GM’s most competitive lineup in the modern era. However, Lutz knew and knows cars and the car business. Akerson knows how the telephone works.

Nobody, inside GM or out, has expected Akerson to radically reform GM’s core business; his only task was to provide a public face that inspired confidence in America’s automaker (Lutz offers Lee Iacocca and Alan Mulally as examples of auto executives who have played this role well). And yet, Akerson has not only failed to provide GM with a likable face, he has needlessly exacerbated public criticism of GM and inflamed internal divisions within the company.

Had Akerson taken Lutz’s advice, he would have focused on a few key issues: stabilizing GM’s executive ranks after Whitacre’s purges, supporting GM’s immensely talented product developers with the resources and respect they deserve, allowing PR messaging that supports attempts to revamp marketing, and distancing the company from its boot licking “Government Motors” stigma. Instead, Akerson ran his new marketing boss off for personal reasons (after he had been promised autonomy within the company), pushed his engineers into decisions with self-destructive results that he simply didn’t understand, put telecom cronies into positions they aren’t qualified for, promised to produce Volts in unsustainable (but political goal-supporting) volumes and inspired a wave of embarrassing leaks. In short, Akerson has managed to embody and amplify the product-ignorant, self-aggrandizing, morale-busting politics-over-market leadership that make up the worst stereotypes of GM managers, some of which may never have been true until the day Akerson took power. Lutz may have conquered the bean counters, but their destructive influence has been revived by the new telecom crowd. The bean counters knew the sometimes baffling mathematics of the auto business, the phonies know nothing.

This presents a fundamental danger to GM, if only because organizational culture begins at the top. But to make matters worse, Akerson is actively adding to the ranks of his loyalists, shutting out the profound expertise embedded in GM’s professionals in favor of sycophants and snake-oil dealing consultants. To be sure, the ranks of GM’s traditionalists still suffer from perennial turf battles, rivalry and misplaced loyalties; as a result, GM still needs a strong leader. But it needs a leader with credibility, both internally and externally. It needs a leader that knows when to push past parochialism but still knows when to trust the experts. A leader that understands his employees, his competitors and his customers.

Akerson’s profound disconnect with the business he is in, and thus the people he needs to work with him to make GM successful, is best encapsulated by his stated goal for the company. When Lutz was revamping GM’s product development program, and refocusing the company on the core of its business, the mission statement was adopted: “design, build and sell the world’s best vehicles.” Though simplistic, this motto provided GM with the kind of focus it had long been missing, not entirely unlike Mulally’s “One Ford” program, and it inspired a sea change in GM’s products. Now, not only is Akerson bashing his current portfolio of “aging” products, he has taken his eye off the ball by giving GM a new goal that seems ripped from the firm’s ignominious past: become the most valuable automaker in the world.

This uninspired non-goal can be met by any company. GM could declare victory tomorrow – as long as value is not measured by market cap.

This goal speaks mostly to Akerson’s shallow pomposity: having pushed himself into the top spot at GM without the first idea of what to do with the company, it makes sense for him to set a goal defined only by ambition. But it also displays his profound ignorance of the business: GM’s employees don’t need the “what” of a goal, they need the “how”… an insight that Lutz grasped and Akerson clearly does not. GM’s glorious past is inspiration enough, constantly reminding GM’s employees of the kind of market dominance that is possible. What GM needs is a leader who understands how companies develop ever-better products, how to earn the love of consumers by delighting them with quality and innovation, and how to compete head-to-head with the most fearsome global competitors.

Now that it is clear that Akerson is not that leader, now that he has lost the confidence of his employees and prospective customers, the question is “what comes next?” The answer: replace him as quickly as possible. Akerson’s predecessor, Ed Whitacre, has revealed that he nearly chose his head of North American operations Mark Reuss to be the next CEO, only rejecting him because of a perceived lack of seasoning. Instead of a young and experienced Reuss, we received an old an inexperienced Akerson, who, frankly, looks and acts older than he is.

Reuss commands respect within General Motors and the automotive community and the media at large. With a background in engineering and product development he is, more than anyone else at the top of GM’s management, the heir to Lutz’s product revolution. Meanwhile, whatever advantage Akerson’s age supposedly gives him has yet to produce a single notable accomplishment.

Despite his profound failures of both strategy and execution, Akerson has not yet fundamentally crippled GM. It remains chock-full of talent, it is well-positioned in various important global markets, and it is on the cusp of dramatically rehabilitating its reputation for uncompetitive product. In short, like Akerson himself, Reuss would be inheriting a company with a lot of things going for it. The key is reviving the company’s self-confidence and image with the public, tasks that the youthful and relatable Reuss has proven his ability at. But most importantly, the key is getting Akerson out before another crucial product launch is botched, before another strategically unwise investment is made, before GM’s reputation and unity is finally destroyed, turning GM into America’s Opel.

Part 1: Breach Of Trust. Part 2: Lack of Strategy.

Editor’s note: Renaissance_Man is a nationally and internationally known industry analyst who prefers to remain anonymous

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The Case Against Akerson, Part 2 of 3: Lack Of Strategy Wed, 06 Mar 2013 15:43:37 +0000

In the first part of this series, we looked at Dan Akerson’s problematic relationship with the truth, focusing on the gap between his stated intentions and his actions. Akerson is hardly the only example of an auto executive to indulge in personal myth-building or ego-driven dissembling. Analysts, employees and shareholders can forgive all kinds of personal shortcomings in a chief executive so long as he has a clear plan for success and the proven ability to get results. Unfortunately for GM, Dan Akerson brings nothing to the table in this regard that might outweigh his negatives.

The depth of Akerson’s strategic failure is nothing short of stunning, encompassing almost every element of GM’s global footprint.

From China to North America, from Europe to the developing world, General Motors is not only failing to take advantage of its fresh start, it is mortgaging its future at every turn. Changing the culture of a company the size of GM would be difficult under the best circumstances, but when the boss is completely in over his head it becomes a task of sysiphean futility.

Akerson’s lack of strategic vision for GM is probably best encapsulated by the unfolding mess in Europe.

With its US operations newly profitable, fixing its long-troubled European operations should have become an overriding priority for GM after its IPO, if only because every analyst cited it as cause for bearishness. Over two years after the IPO, GM’s plan for Opel (if in fact one exists) is as inscrutable as ever. Negotiations with unions are stuck on the ground floor, and while competitors like Ford are taking bold action to cut capacity, GM’s executives talk about a “product-led” Opel turnaround in a market that likely won’t ever return to past levels.

It would be bad enough if Akerson simply didn’t have a plan beyond waiting to see if Opel’s problems solve themselves, but instead he has doubled down on GM’s European problems by spending $400m on a stake in Peugeot-Citroen. That investment needs no special criticism, as about $200 million of it had to be written off after less than a year. But beyond the sheer tactical stupidity of investing in a vulnerable automaker in the midst of an industry shake-out, doubling the company’s exposure to the very problems that were plaguing Opel stands alone in terms of sheer strategic failure. Clearly Akerson missed the pre-bailout debate over a possible GM-Chrysler merger, which ended with the consensus that combining two companies with the same problems is a bad idea.

Unable to convince anyone that there is a plan to solve GM’s European mess (or that there was any logic behind the PSA alliance), Akerson has floated the notion that the French automaker will somehow help as a partner in developing markets. Beyond the fact that PSA has few accomplishments worth mentioning in developing markets (not coincidentally one of the reasons it’s in trouble), the move throws GM’s relationship with its previous developing-market partner SAIC into question. Having forged extremely tight ties with SAIC, which helped arrange a Chinese bank loan to fund its overseas operations in 2009, GM is now being led away from its Chinese ally. There might be some rationale for Akerson’s move away from SAIC if it actually made GM less dependent on its Chinese partner, but GM will continue to rely on its Chinese partner for growth in Asia and low-cost technical development. Meanwhile, the fact that one of the world’s largest automakers won’t expand into developing markets beyond China without a partner (which would eat into already-low developing market profit margins) is nothing short of baffling.

In China itself, Akerson has overseen a period of relatively strong volume growth. However, with the overall market slowing, the emphasis is moving towards the profitability of the luxury market, and here GM is losing ground to the competition. Despite its early advantage, Buick has been stuck in neutral, and Cadillac is losing relevance as German luxury brands attack the market. GM’s volume growth, on the other hand, has all come from its Wuling low-cost commercial vehicle operation, which offers only miniscule profits per vehicle. With profit opportunities few and far between in the current global climate, and blessed with a Buick brand that has been beloved in China for decades, GM could be making a lot more money in China. Adding insult to injury, GM’s aggressive joint technical development also means SAIC is already debuting technology like dual-clutch transmissions that GM doesn’t even offer in developed markets. Without brand equity now or a clear technological advantage going forward, GM’s future in China is hardly being guided with care.

But if it’s important for GM to squeeze more profits out of China in the short term, the same is doubly true for the North America. The US market is projected to supply a huge percentage of global profits over the next several years, making it a major priority for every automaker. Thanks to the bailout, GM almost can’t help but make money in its home market, but Akerson and his team have shown no ability to lick GM’s nagging problems. Market share is not only stagnant at best, it continues to closely track incentives. Last November, GM’s incentives as a percentage of average transaction price fell below the industry average for the first time, resulting in its worst monthly market share since bankruptcy. With inventory levels remaining stubbornly high as well, it’s clear that Akerson has made no progress on any of GM’s persistent profit drags.

Worse still, Akerson’s underwhelming results in GM’s most important market are further undermined by his strategic decision to back an aggressive push into subprime lending. Having acquired Americredit, the new GM Financial has rapidly become a leader in subprime auto lending, helping GM move cars out the door but introducing new financial risks to the company. GM Financial’s default rate is pushing up, and is already higher than any other in-house lender in the business. In short, Akerson is taking GM back to the bad old days of “redlining” sales with big inventory, big discounts and subprime financing, but still can’t change the company’s momentum on market share or profitability.

For all the open wounds, impetuous alliances, self-destructive dependencies and lost opportunities scattered across GM’s global empire, the strategic mistake that underlies all of Akerson’s failures as CEO has to do with product. As a board member, Akerson was famously critical of GM’s cars; as CEO he has only hurt the product renaissance that was underway when he arrived at GM. From his well-documented decision to rush the new Malibu to market, crippling what was arguably GM’s most important car, to a signing off on a batch of too-conservative trucks, Akerson has proven repeatedly that he simply does not understand the business that he is in. And yet, despite his clear ignorance of even basic facts of the car business, he has developed a reputation for making rash decisions to “shake things up.” This fits perfectly with the pattern described in Part One of this series: Akerson is driven by ego rather than strategy.

The car business is hugely unintuitive. It looks easy, at least to the many neophytes who try their untrained hand in the field, only to go down in flames, taking investor money with them. Running a multinational car company probably is one of the most complex tasks in the world. Your research won’t bring fruits for ten years, or never, but you must spend billions on it. Your products must be right for markets and economies 5 years from now, all over the world. You are up against companies like Toyota and Volkswagen, run by CEOs who have cars in their genes, who have been around cars all their lives, and who know how to direct and lead armies of engineers, marketing and finance people into victory. The competition won’t call for Akerson’s head: The longer he is in his job, the more assured is their victory.

We were made to believe that GM was saved by the government. In reality, it was the American automobile industry that was saved from certain annihilation by foreign carmakers, and we should thank the government for it. In truly Washingtonian fashion, they win the war and lose the peace by putting the American car industry in the hands of an utter amateur. The man in charge of a car company must be a strategist and tactician of the caliber of Alexander the Great, leading from the front, knowing when to dismiss his advisers, knowing when to do the unexpected, having a sixth sense for a sudden opening in the ranks of the opposition, intuitively knowing how to ruthlessly exploit a weakness.

Akerson was put at the helm of GM by politicians who know even less about the car business than an Akerson. As the politicians sell their shares in GM and leave, they should take their man with them. If Akerson is replaced with a CEO worthy and capable of guiding GM, the stock will surely bounce, making the exit less painful.

The real tragedy of all this: the deep reserves of talented people at GM do know how to make quality products, and the company had been making real progress towards a brighter future. Now it is being wildly misled in nearly every aspect by a man who bullied his way to the top of a company he doesn’t understand in an industry that he doesn’t understand. As we will explore in Part Three of The Case Against Dan Akerson, this has led to a complete loss of confidence in the carpetbagging telecom man and his cronies, jeopardizing GM’s new lease on life. For the good of the company, it’s time to replace him with someone who understands the business… or at least understands when he doesn’t understand the business.

Previous: Breach Of Trust. Forthcoming: Part 3: Loss Of Confidence.

Editor’s note: Renaissance_Man is a nationally and internationally known industry analyst who prefers to remain anonymous

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The Case Against Akerson, Part 1 of 3: Breach Of Trust Fri, 01 Mar 2013 16:59:59 +0000

Author’s note: When the government rescued General Motors from certain disaster, it was a chance at a fresh start. A chance to not just slow GM’s half-century of market share loss, but truly return America’s largest automaker to its place of pride. With debts erased, unions tamed and coffers restocked by the government, all things should have been possible. And yet, first under Ed Whitacre and now Dan Akerson, General Motors has consistently failed to live up to its true potential. Only new leadership can give the people of General Motors, to say nothing of the American people, an automaker they can be truly proud of.

Like every individual, every organization wants to present its best face to the world; it’s why the PR business exists, and why your 14-year-old daughter spends hours manicuring her Facebook presence. But when the desire to be seen in a positive light becomes too strong, individuals and organizations often end up hurting themselves as much as helping. Put in simple terms: if you misrepresent who and what you are too many times, you lose credibility. This seems to be what is happening to GM’s CEO, Dan Akerson.

From the very first instance of his involvement with General Motors, the story of Dan Akerson shot through with contradictions, conflicting stories and confusion. In interviews, Akerson has cast his coming to GM as his answering a “call to service,” comparing it to the motivations taught at the US Naval Academy and saying he never thought he would lead the automaker. But rather than being “called” by the government from among the nation’s CEOs, Akerson himself lobbied to be put on GM’s board. Naval Academy connections, rather than Naval Academy values, explain why Dan Akerson was “asked” to serve on GM’s board.

From this initial misrepresentation, a pattern quickly emerges. Upon becoming CEO, Akerson maintained that it was all a big surprise, and has unequivocally stated for the record that “I didn’t seek this job. The board asked me to do it.” Yet, as with his appointment to GM’s board, Akerson takes far too little credit. According to his predecessor as GM’s CEO, Ed Whitacre, Akerson volunteered for the job after earning a reputation for being one of the board’s most “consistent critics.” Whitacre writes in his book, “Dan wanted to be chairman and CEO from day one.”

Of course, the most ambitious people often take the greatest pains to conceal their ambitions, and if Akerson were simply wrapping his desire to run GM in the trappings of national service, the sin could be overlooked. Unfortunately, his entire tenure has been characterized by consistently problematic relationship with the truth.

One of the most egregious examples of this involves GM’s decision not to sell Opel. Early reports indicate that Akerson was one of two board members in favor of selling Opel, and unnamed sources even explained his logic to Reuters thus: “Europe was a market of national champion automakers — VW in Germany, Fiat in Italy and Renault in France — and pan-European luxury brands like BMW and Daimler AG’s Mercedes, a person familiar with Akerson’s thinking said. Opel is neither and Akerson believed it would be a long, uphill battle to fix it.” Then, as Europe’s economic downturn deepened and Opel emerged not only as GM’s main source of losses but as a drag on its stock price, Akerson apparently changed his story. Suddenly the NY Times reported the exact opposite story: that Akerson was one of two board members who voted to keep Opel.

The fact that Akerson has allowed these two mutually-exclusive stories to linger without clarification isn’t just a sign of his duplicity, it indicates the extent to which he lacks a strategy for General Motors. But that argument deserves its own essay, and will be explored in the second part of this series.

Thus far, the pattern of Akerson’s deception paints a clear picture of a man driven to place himself atop GM for reasons of personal gratification rather than because he had the skills or strategy to turn the automaker around. This impression is confirmed by his latest truthfulness challenge, which involves his alleged request for a pay raise. When CNBC obtained documents showing GM had requested a 20% pay raise for Akerson, GM’s official communications team hit back, denying the story and asking media outlets to “correct the record.” But, despite GM’s claims that it had not officially requested a raise for Akerson, an earlier report by the Special Inspector General for TARP revealed that GM had in fact requested pay restriction exemptions for Akerson and other executives, but had been rejected. The SIGTARP’s finding was that many of GM’s top-level executives’ compensation, including Akerson’s, were already “excessive” even before GM requested exemption from restrictions.

Men engaged in “national service” don’t typically make millions of dollars each year or request 20% raises, and in order to preserve his image as a selfless leader, Akerson used GM’s resources to imply that government watchdogs lied about his un-servant-like behavior. As a result, Akerson didn’t just hurt his own credibility, he hurt GM’s as well. But then, Akerson’s willingness to sacrifice the image of the company he is supposed to be reviving in order to preserve his personal legacy has already been established.

When Akerson suddenly and unexpectedly fired his Global Chief Marketing Officer, Joel Ewanick, he argued that Ewanick had agreed to a Manchester United worth hundreds of millions of dollars without his approval (even though Ewanick had been hired with the promise of “autonomy”). Akerson went on to sign the deal anyway, and what followed was an embarrassing series of leaks and counter-leaks that undermined confidence in GM’s already rapidly-rotating executive ranks. When the dust settled the picture was fairly clear: Akerson simply didn’t like Ewanick. But in order to hide his true motivations he put GM’s C-Suite through an unnecessary and morale-sapping public ordeal.

From his first involvement with General Motors, Dan Akerson has sought to wrap a personal ego project in the banner of national service. And as his tenure has dragged on, the disconnect between his stated intentions and his actions have created a credibility problem not just for him but for the entire company. Indeed, Akerson has been consistently willing to weaken GM in order to preserve his own legend. And, as every student of corporate culture knows, the longer this dynamic goes on unchecked, the deeper it will be embedded in GM’s culture.

Of course, if this were an isolated issue, the talented people of General Motors might be able to overcome the self-destructive behavior of its selfish and deceptive chief executive. But Akerson’s self-serving duplicity is intimately tied to his utter lack of a vision or strategy for General Motors, a topic that will be addressed in Part Two of The Case Against Dan Akerson.

Forthcoming: Part 2: Lack Of Strategy, Part 3: Loss Of Confidence.

Editor’s note: Renaissance_Man is a nationally and internationally known industry analyst who prefers to remain anonymous

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