General Motors Death Watch 120: The Definition of Insanity

After Rick Wagoner “woke up” to the news that Toyota had replaced General Motors as the world’s largest automaker, GM’s CEO fired-off a post-Empire email to his execs. Rabid Rick admonished The General’s generals to stay focused on “further reducing our still huge health care cost disadvantage versus Toyota and other non-U.S. based manufacturers.” So Mr. Wagoner’s major dodos must sell the union on a “huge” health care cutback at the same time that regulatory filings reveal that the boss pulled down $10.2m in fiscal ’06 and just received a $370k increase to his base pay for '07 (regardless of results). Good luck with that.

You might’ve thought the prospect of life or death contract talks with the United Auto Workers (UAW) at both GM and Delphi would have convinced GM’s Board of Bystanders that austerity begins at home. Nope. They rubber stamped a CEO compensation package that makes a mockery of any reasonable concept of performance-related pay and insures the continuation of management – union conflict. If you need proof that it’s [lack of] business as usual at GM, well, there’s more.

In the same email, Wagoner was quick to assure his execs of that his “steady as she goes” management of GM’s decline continues apace. “Our sales and marketing strategy requires patience," Rabid Rick explained. "But it's working, and we need to stick with it.”

Putting aside the fact that only the most optimistic analyst could stretch the definition of the word “working” to cover GM’s ongoing financial losses, cash burn and inexorable market share slide, this forbearance-requiring strategy has taken a few knocks as of late.

We’ve already covered GM’s start – stop – start – stop Zeta platform program. Any hope that GM would carve itself a niche as a provider of large, comfortable, reasonably fuel efficient rear-wheel drive sedans (a.k.a. traditional American cars) is now in the automotive equivalent of cryogenic suspension. More worrying, the much-need refresh of GM’s small car platform is now stalled amidst union strife at their Lordstown factory.

On Friday, GM stopped tooling and other preparations for their Delta update. The move supposedly came after the UAW decided to dig in its heels over changes designed to make Lordstown more like a modern manufacturing facility and less like a feudal fiefdom. According to an unnamed Automotive News source, local negotiations to remove janitorial and truck unloading jobs from union control and limit overtime fell apart when the national union stepped in and said “No.”

For their part, the UAW claims they pulled the plug on the agreement after learning that GM had decided to postpone development of the new Delta vehicles. The dispute has widened to include GM’s Fairfax facility, tipped to produce the new Epsilon 2-based mid-sized Malibu— another vehicle upon which GM’s passenger car hopes depend. Same deal: contract talks suspended, tooling stopped, or vice versa.

Either way, on the face of it, this is old school stuff. In the run-up to national contract talks, GM threatens to take work away from the UAW. The UAW threatens to strike. GM execs blink, pay off the union and call their stock brokers with the glad tidings.

There’s not a shred of doubt in my mind that GM and the UAW will resolve this dispute in the traditional manner– save minor window dressing spun as “Historic Union Givebacks II." If Rabid Rick had the balls to stand up to the UAW or the charm to seduce them, he would have– should have– done it by now.

It’s almost inconceivable; GM’s playing what the British call “silly buggers” with the UAW and critical future vehicles when they’re hemorrhaging market share, depleting their remaining cash hoard and just passed a psychological watershed that set off alarm bells in every nook and cranny of GM’s bloated Byzantine bureaucracy. I’m sorry; the Toyota tipping point SHOULD have called GM’s multitude of minions to battle stations, but didn’t.

When will GM’s Management and its Board of Bystanders develop what longtime GM watcher Mary Ann Keller called a “sense of urgency?” In case you’ve forgotten, Ms. Keller sounded the alarm back in November 2005, when Toyota first passed GM in the U.S. market (if you remove fleet sales from the equation). At the time, Keller was convinced GM would act to address its flawed fundamentals because, well, it had to.

One wonders what Ms. Keller made of GM Car Czar Bob Lutz’ reaction to the Toyota coup. When a reporter confronted Maximum Bob with the news that GM's global reign was over, the well-paid and pensioned executive issued a terse response: “So what?”

And then Lutz, Wagoner and the rest of GM’s management went back to work, implementing a turnaround strategy devoid of stated targets or a deadline for a return to profit. If the definition of insanity is doing the same thing over and over again expecting a different result, then that's just plain nuts.