General Motors Death Watch 35: Rick Wagoner, RIP
God knows where Rabid Rick Wagoner got his reputation for being clever. Obviously, you don't get to be the CEO of the world's largest automaker by being stupid. The GM Empire is so vast that simply remembering who does what would vex Jeopardy maven Ken Jennings. But smart is not the same as clever; clever men make the right decisions at the right time. By that standard, Wagoner can't cut the mental mustard. He's consistently failed to grasp the proverbial nettle– from slicing UAW benefits and pensions (come what may) to axing the forest of deadwood cluttering GM's product portfolio. He's long on assurances, short on results and devoid of courage. And as of Monday, he's toast.
When GM's third quarter financial numbers are released, when stockholders learn that GM has failed to staunch the billion dollar arterial spray, that the Employee Discount For Everyone program was a textbook case of robbing Peter to pay Paul, that sales have declined more than 50%, that there is [still] no substantive deal with the UAW over health care costs or pensions, Wagoner will admit only that times are tough. Aside from some mention of gas prices, Rabid Rick's piercing glimpse into the obvious will not be accompanied by excuses. Instead, he will rely on his usual stock in trade: promises.
We're streamlining engineering and production, saving the company some $1b per year! We're importing cheap cars from foreign lands, without paying UAW labor costs! We're importing cheap parts from communist countries, without paying UAW labor costs! The UAW is playing ball! Hybrids are coming! Crossovers are coming! Once again, Rabid Rick will be singing The Chairman of the Board's classic hit 'Give Me Just a Little More Time' when he SHOULD be quoting Simon and Garfunkel's summation of Benjamin Braddock's tryst with Mrs. Robinson: any way you look at this you lose…
Rabid Rick's Eternal Sunshine of the Spotless Executive speech wasn't true when he took control of GM, and it's not true now. But it was effective. Rabid Rick understood that GM's stockholders viewed the auto industry as show business. Supposedly, The Big Three carmakers are never more than a 300C away from salvation. With a seemingly inexhaustible supply of 'new' cars just around the bend, Rabid Rick has repeatedly sold the Powers That Be the old 'light at the end of the tunnel' bill of goods. Even as GM's health care costs top $5.6b a year, you can STILL hear the mantra coming from RenCen: product, product, product. Combine the hype with the average investor's five-minute attention span– G6! Solstice! New Tahoe! Saab crossover!– and you can understand how Rabid Rick's public pledges have allowed him to maintain power despite his monumental timidity against the enemies within.
Thanks to a combination of Delphi's bankruptcy, the UAW's foot dragging and the cataclysmic loss of sales, market share and cash; Rabid Rick's promises will now, finally, ring false. Even the most dim-witted investor will understand that GM's business is deeply, fundamentally flawed. Union contracts and bureaucratic bungling render them incapable of building the vehicles that consumers want, in quantities that reflect demand, at a price that guarantees an adequate profit. Anything Rick says about rescuing GM that doesn't include unilateral cuts to the UAW's compensation, a dramatic downsizing of GM's production capacity and the immediate termination of lackluster brands will be [rightly] perceived as too little too late.
Of course, nothing Rabid Rick could say would soothe the savage beast known as Kirk Kerkorian; an investor who's as determined to reap profit from the break-up of GM as Rabid Rick is to maintain the automaker's integrity. There's no doubt whatsoever that Kirk and his pals rely on an ancient Italian principle when analyzing the reasons for a company's financial failures: the fish stinks from the head down. It's an especially apt principle in this instance; assuming as it does that the fish is dead. And just in case you think our reports of GM's demise have been greatly exaggerated, there is a growing school of thought which says that GM should declare bankruptcy NOW, before the UAW's inevitable strike drains The General of its remaining resources.
Imagine if Rabid Rick Wagoner made THAT move on Monday. Declaring bankruptcy would be a preemptive strike against the UAW that would give GM time to re-imagine itself. To create an entirely new business model of ad hoc suppliers, manufacturers, marketers and service technicians that can respond to market trends with confidence, clarity, flexibility and speed. That sort of company would be more like a series of interlocking partnerships than a vast fiefdom run a benevolent dictator. Which is, ultimately, what not-so-clever Mr. Wagoner is fighting so hard to protect. Which is, ultimately, why he can no more win this battle than he can save his career.
More by Robert Farago
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