General Motors Death Watch 40: My Mother Was a Saint
If it wasn't so funny, it would be sad. GM loses billions in ill-advised overseas 'investments', produces an over-abundance of vehicles that are two model cycles behind the competition, can't build a single hybrid, completely cocks-up production of its Solsticial one hit wonder, cedes US market dominance to Toyota, plays "Let's Pretend to Make a Deal" with its union, announces its intention to sell-off majority interest in the only profitable part of the company, refuses to outline its turnaround plan, and the stock market yawns. The federal Securities and Exchange Commission (SEC) discovers GM's accountants have lost four hundred million dollars behind the couch and the stock tanks. What's that all about?
Before the SEC probe, like many other industry watchers, I was laboring under the impression that GM's stunning incompetence and epic lethargy reflected management myopia. In other words, The General's G5 corporate culture had insulated Rabid Rick Wagoner and his well-paid minions from what you and I would call reality. They honestly believe their own hype. Now, I'm not to sure. Although the $400m was "misreported" rather than "lost", there are ominous rumblings that GM's mea culpa is the tip of the proverbial iceberg. Lest we forget, the SEC's main focus was/is GM's multi-billion dollar pension and benefit schemes (vis-a-vis bankrupt auto parts supplier Delphi). Yesterday, the federal Pension Guaranty Corporation reported that Delphi's pensions are underfunded by $10.8b.
If GM's been cooking the books, people will soon wonder if Rabid Rick's secretly hired Dorian Grey's portrait painter. After all, GM maintains an entire ledger of accountants to ensure that The General's financial statements are on the up-and-up. The audit committee in charge of these pusillanimous pencil pushers reports directly to Rabid Rick. So, if the SEC finds that GM's increasingly obvious use of "aggressive accounting" tipped into pension and benefit-related GBH, the chances that the shell game was a devious plot concocted by a rogue element with The General's ranks are minimal. The discovery will reflect Rabid Rick's willingness to encourage– or at the very least tolerate– corporate duplicity.
This would put us back in charted waters: in Enron territory, watching arrogant execs manipulating the public trust for personal greed and glory. And that sucks. Because it would mean that GM is deeply, fundamentally corrupt. That all the garbage we've been interpreting as corporate "spin"– our cars are terrific, our new SUV's are high mileage heroes, we're sorting the brands, badge engineering is dead, discounts are dead, crossovers are coming, hybrids are coming, fuel cells are coming, etc.– is actually a deliberate cover-up of executive malfeasance. It's a slippery slope from PR to lies to cutting corners to criminal conduct. The SEC probe could reveal that Rick's riding a Flexible Flyer.
Sadly, it makes perfect sense. Perhaps Rabid Rick can't turn GM around because he's lost in Nixonian paranoia, struggling to maintain his administration's hold on executive privilege at all costs. Wagoner is, after all, a straight-from-biz-school boffin without any work experience outside of GM. Rabid Rick's moral and ethical compass was handed to him by GM's heavy hitters. His managerial mindset was forged by the plots and plans of The General's inept dictators. Personal power could well be his primary goal– rather than the greater good of the company, its customers, employees, suppliers and stockholders. If you want evidence of this perspective, drive a GM product and ask yourself a simple question: why isn't it better?
I know: it's a deeply cynical portrait. But GM is a deeply cynical company. After launching and vigorously defending its post-fire sale "value pricing" strategy, after going to all the trouble to retrain its front line salesman to switch from deal-making to product pushing (at a cost of millions), The General has just announced a year-end "Red Tag" sale to once-again clear its bloated inventories. At the same time, they're taking credit for building-up their inventories [supposedly] in preparation for the inevitable Delphi strike and resulting production shutdown. Is this first-class crisis management, gross incompetence or a reflection of something darker, something rotten in the heart of RenCen? I'm beginning to lean towards the third option, and so is Wall Street.
Financial analysts like Banc of America's Ron Tadross haven't suddenly "woken-up" to The General's fundamental flaws and looming troubles. They've simply begun to see that The General's generals don't have a viable plan for winning the battles– never mind the war. And like Kirk Kerkorian, they can smell imminent exsanguinations from a mile away. Each day, the likelihood grows that Captain Kirk or another similarly voracious corporate raider will swoop down and buy Rabid Rick's alma mater, sell off the entire GMAC finance unit, pocket the profits and flog the unprofitable automaking side of the business for chicken feed. Either that or just close the factory gates and walk away.
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