General Motors Death Watch 47: Happy Days

Robert Farago
by Robert Farago

When historians analyze GM's collapse, searching for the precise moment when The General jumped the shark, it will be like trying to pinpoint the onset of Alzheimer's. The world's largest automaker has been screwing things up so spectacularly for so long that even a $2b payoff to FIAT for signing the wrong bit of paper seems like a bump on the road to oblivion. What's more, GM's management is still busy making monumental mistakes. The Board of Bystanders' decision not to admit Kirk Kirkorian's proxy into their midst is only the latest and greatest example.

Unfortunately, I don't have any inside info on the failed negotiations between GM's largest private investor and The Powers That Be. I only know that last Tuesday, after GM's Board rebuffed Captain Kirk's nominee Jerry York, the billionaire investor sold 12m GM shares. The move cut his stake from to 9.9 to 7.8 percent and sent GM's stock into freefall (down to an 18-year low). Some financial experts see it a tax dodge. Others look at Kirk's on-again, off-again romance with MGM and predict his return. TTAC's Deep Throat figures this is it: Kirk's outta here. In any event, Kirk has sent both GM's board and the markets a clear message about GM's future, or lack thereof…

When Kirkorian began his buying binge, GM Car Czar Maximum Bob Lutz displayed his usual penchant for mindless optimism: "He smells a turnaround." Meanwhile, the octogenarian investor was, sensibly enough, plotting to wrest control from Lutz and the other corporate officers who'd mishandled GM's mighty engines, limiting the ship's maneuverability, condemning it to a Toyota encounter of the iceberg kind. Equally obvious, a seat on the Board was the only way Captain Kirk could oust Rabid Rick Wagoner from the bridge, and maybe, just maybe, save the ship from a watery grave. (For those of you keeping metaphorical score, the Titanic had an antiquated rudder.)

And why not? You don't have watch all 357 Dallas episodes to know that a company's future depends on the character of the people running it– or that some people will do anything to maintain control. Wagoner's "I'm going to bring Bobby down if I have to destroy Ewing oil to do it" response to Kirkorian's play was predictable enough, but the Board of Bystander's negative reaction was surprisingly [Cliff] Barnesian. Clearly, they excluded Mr. York to protect Wagoner's mob– which is a bit like backing a flyweight boxer and his fawning entourage over a highly decorated lieutenant commanding a heavily armed, battle-scarred SWAT team.

Now how did THAT happen? You'd be forgiven for thinking that the simple fact that GM's stock price has dropped $20 (and counting) since last January would have motivated The General's Board of Bystanders to activate Rabid Rick's bankruptcy-proof retirement package, STAT. Again, we may never get a clear picture of Rabid Rick's anti-York maneuvering (never mind view the incriminating negatives). But at least we can get a little insight into the Board's myopia, thanks to Slate's Daniel Gross.

Gross recently reported that GM's Board has two gold-standard retired CEO's: Sara Lee's John Bryan and Northrop Grumman's Kent Kresa. And then… Philip Laskawy ran scandal-plagued accountants Ernst & Young. George M.C. Fisher, former chairman and CEO of Eastman Kodak, failed to reverse his company's declining market share. Former Compaq CEO Eckhard Pfeiffer did so well during his tenure that company founder Ben Rosen bought a full-page New York Times ad to diss him. And former ABB head Percy Barnevik was recently forced to return 60% of his $88m pension.

GM's board also includes five active execs: Armando Codina (Republican fixer, Board of Directors-aholic, Florida real-estate maven), Erskine Bowles (ex-Clinton Chief of Staff, twice failed senatorial candidate, President of the University of North Carolina), Ellen Kullman (safety minded DuPont Veep), Karen Katen (Pfizer Drug Lord) and Stan O'Neal (Merrill Lynch's cost-cutting 'Mr. Ruthless'). Other than Rabid Rick Wagoner, Stan the Man is the only CEO in the bunch who's run a publicly held company. He's also the only GM Board member to have revived a publicly held company. And, one surmises, he's the only board member with an ounce of common sense.

After all, this is the motley crew who believe it's a good idea to keep Rabid Rick Wagoner in the Gulfstream G5 style to which he's become accustomed. More to the point, these are the same group of misadventuring misfits who can't recognize a good man when they see one. Well, OK, maybe York's not a "good man" in a Grosse Point golf club kinda way. But he's a devastatingly effective corporate leader: a West Point grad that kicked IBM and Chrysler's ass into shape by paring waste, reorganizing resources and asking questions no one else dared ask. Turning down York's guidance to thwart Kirkorian's ambitions and protect Wagoner's ass was a– if not "the"– seminal moment in GM's long, sad saga. One the company will not live to regret.

Robert Farago
Robert Farago

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