By on March 7, 2008

sp32-20060402-234543.jpgIn 1968, a book called The Peter Principle argued that large organizations promote employees past their proven abilities, until they reach their natural “level of incompetence.” As a remedy, Dr. Laurence J. Peter suggested a rigid corporate caste system. For example, a talented accountant could rise within his field to become the company’s The Chief Financial Officer (CFO). And that’s it. Promoting the successful beancounter to the head of the company risks evoking The Peter Principle, and threatens disaster. Or, in the case, of GM, creates it.

It’s ironic. As a Harvard-trained MBA, Rick Wagoner possesses the exact forensic accounting skills needed to prove that he's been a lousy Chief Executive Officer. While we can debate whether or not GM's former CFO has “set the stage” for GM’s “turnaround,” any halfway decent pencil pusher will tell you that General Motors’ financial health has deteriorated rapidly during Wagoner’s administration.

When Rick Wagoner became GM’s CEO in June 2000, the automaker’s market capitalization was $36b. The previous year, it banked a $6b profit. Today, GM’s market capitalization is $19.21b. Last year, the company lost $38.7b. Yes, the majority of the ‘07 red ink spray was a “paper” loss involving deferred tax credits (which will never be taken). So call it a $1.6b hit. And don’t forget that GM has lost billions of dollars over the last three years while selling off billions of dollars worth of assets and adding tens of billions of dollars in debt. GM’s currently paying more than $2.6b per year in interest. 

When Wagoner took the helm of what was then the world’s largest automaker, the company’s North American market share stood at 28.2 percent. GM’s freshly-minted CEO promised a return to a 30 percent U.S. market share. In the last eight years, GM’s piece of the American pie has shrunk to 22.7 percent. If you remove sales to rental fleets, government agencies and customers within the GM “family,” GM’s American market share may well be in the teens.

And speaking of shares, yesterday afternoon, GM was trading at $22.35 per share. That’s down 48 percent from the $43.20 per share peak set after the “landmark” United Auto Workers’ agreement. Taking a longer term perspective, in May 2000, GM was trading at over $90 a share. At the turn of the last century, GM paid stockholders dividends worth .50 a share. Since 2006, GM has paid its stockholders .25 a share.

This series has chronicled the myriad of missteps during Wagoner’s tenure at the top. Lackluster products. Incoherent branding. Mistimed, muddled marketing. Production problems. Catastrophic supplier relations. Abject capitulation to union demands (including a VEBA worth more than GM's market cap). Suffice it to say, Wagoner has never publicly declared a hard target for GM’s return to profitability. He is the unaccountable accountant.

GM apologists maintain that Wagoner’s made the best of a bad situation not of his creation– forgetting that his minions missed the switch from SUVs to CUVs and cars. Instead, they point to the CEO’s relentless cost-cutting, a handful of “proper” cars (e.g. Cadillac CTS, Chevrolet Malibu) and forthcoming Hail Mary (e.g. the Chevrolet Volt). The fact that Wagoner’s radical downsizing hasn’t realized any savings and the new products haven’t stemmed GM’s market share slide is, supposedly, a short term issue.

Without a target for profit, who can argue the point? Is it even worth arguing? Ultimately, a company’s culture– not numbers on a balance sheet– determines its long term success or failure. 

Rick Wagoner began his career as an analyst for GM in the New York Treasurer's Office in 1977. He has hasn’t worked a single day outside of General Motors. So it’s no wonder that Wagoner hasn’t had any impact on GM’s corporate culture. The automaker is still a nest of vipers. Well, dozens of nests of vipers; all competing with each other for resources. The company lacks teamwork, coordination, esprit de corps and, I would suggest, a strong moral foundation.

That’s the GM Rick knows. That’s what he protects. After all, it’s protected and rewarded him. Just yesterday, GM’s Board of Bystanders re-raised Wagoner’s annual salary to $2.2m. He will also receive 165,563 shares from GM’s “long-term incentive plan,” 500k stock options and 75k restricted stock units. The board also agreed to pay Wagoner an addition $3.52m under GM's Annual Incentive Plan– if the company achieves an unspecified performance target. And then there’s Wagoner’s bankruptcy-proof pension, health care, cars for life, etc.

By any reasonable metric, Rick Wagoner has been a disaster for General Motors. By appointing ANOTHER Harvard trained GM lifer and former CFO to replace him, Wagoner has assured a legacy of upwards-failing executive incompetence. But it would be completely unfair to say that Rick Wagoner has been a failure as GM’s CEO. He’s the single best example of The Peter Principle of our time.

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50 Comments on “General Motors Death Watch 166: The Unaccountable Accountant...”


  • avatar
    Bunter1

    The only defense for Rick is that he was trained by the guys that created the mess. His mental image of “doing a good job” was formed by people destroying a company.

    Yes, the culture, the structure, the system.

    Not a tune-up. Not an over-haul.

    Frame off restoration is needed.

    Oh, and there never was any “turnaround”.

    Bunter

  • avatar

    Dear Rick,

    Can we agree on something, I know it’s controversial, but it’s just the way it is:

    GM is not a car brand. That’s right! GM is not a car brand – it’s a corporation. All the screw-ups that have resulted under the GM umbrella comes from an absolute failure to understand this very basic fact.
    GM is a steward of brands, but you and yours forgot this, and instead began pushing GM as a brand I was supposed to buy into. Everywhere we would come across GM communication, GM advertising, the GM portfolio.

    Forget about it! GM is not a car brand.

    Saab’s a car brand. Cadillac is a car brand. I can buy into those, and your other actual brands, for a variety of reasons. Each one of them should have been allowed to develop independent of your bean counter need to create “cross platform synergies.”

    Saab’s not a platform. It’s a brand.

    It’s tragic. I go to the GM site, and I find an invitation to buy. And when I click that, it says Shop for GM vehicles – 87 vehicles to choose from. What happened to the brands? Because, you see, GM is not a car brand, and there shouldn’t be any GM vehicles to shop for at the GM site. That’s where you screwed up. You sucked the soul out of those cars, and turned them into a commodity, instead of brands.

    Your bean counter attitude to the brands you were placed in charge of have destroyed them, because you refused to accept what should have been obvious: brands have soul, purpose and a following. You can’t mess with those, you can’t transplant the soul from one brand to another, you can only strengthen or weaken it.

    And you weakened those brands, boy did you ever. And having Bob Lutz around didn’t help any – being in denial probably isn’t the best mode of operation if you’re running an umbrella corporation such as GM.

    Anyway, it’s too late now. That supertanker you’ve been running for years, at full speed, through endless night and fog? It’s headed for the shoals.

    GM is not a car brand. The car brands you were in charge of, and which you have destroyed, are Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Oldsmobile, Opel, Pontiac, Saab, Saturn and Vauxhall.

    Go to your own site, http://www.gm.com/shop/

    Look at it, let the realization of what you have done dawn on you, and be deeply, deeply ashamed.

  • avatar
    Bunter1

    PS- Of course the “defense” doesn’t cut it.

    Can’t blame the teachers, at this level you should, make that MUST, be able to think for yourself. Grow, learn, adapt to the new environment.

    Or your toast.

  • avatar
    RayH

    Robert,
    I’ve always found this series interesting and insightful, and I find it very educational to verify (95%+) accuracy of anything you say from roughly DW54 or so.
    It takes years to develop a car from scratch, and a lot of times, market conditions change by the time a car gets to market. Given there’s probably a 75% of gas prices staying staying high/staying the same/getting higher, it seems to me every resource should be thrown into developing a competent, non-ugly, abover average quality,fuel efficient small car. I speak from what I know, and I know there’s a Trailblazer plant that’s in my neck of the woods that’s going to probably close in 2010 when they stop making the TB. Why not spend a billion developing that small car (or hell, copying a mazda 3/civic/even corolla) and making it there?
    It’s frustrating, because GM needs to take some risk, and that seems like a very safe bet. And yet, other than shipping over Astras, they don’t seem to be focused on small cars at all. I think putting diesels in 1/2 tons is going to help, but there’s no telling when for sure that’s going to happen, or if GM is going to get there first.

  • avatar
    Dynamic88

    Rick is indeed the unaccountable accountant, and I’m not defending him – but,

    ” In 1968, a book called The Peter Principle argued that large organizations promote employees past their proven abilities, until they reach their maximum “level of incompetence.” As a remedy, Dr. Laurence J. Peter suggested a rigid corporate caste system. For example, a talented accountant could rise within his field to become the company’s The Chief Financial Officer (CFO). And that’s it. Promoting the successful beancounter to the head of the company risks evoking The Peter Principle, and threatens disaster. Or, in the case, of GM, creates it.”

    If I recall correctly, the Peter Principle doesn’t apply just to accountants. Therefore, who could possibly become the CEO? Certainly not an engineer, because paying attention to the financial conditions is necessary and at the same time well outside an engineer’s feild of expertise. Is there someone at GM who is both an engineer and an accountant? And a lawyer? And a marketing expert? And ….

  • avatar
    starlightmica

    And just below this Deathwatch article in the RSS reader were these Automotive News headlines: “GM says 10 more plants to idle for strike” and “GM Restores Wagoner’s base salary”.

    Coincidence?

  • avatar
    craiggbear

    Uh…it’s not just Wagoner. This GM propensity for Peter Principle (and accountant) leaders seems to have begun with Roger Smith (of Roger and Me fame). Let’s see: Limited career background beyond GM, a narrow-minded financial focus, an inability to see the true market direction/trend, and an arrogant attitude towards advice. Yep – this has been going on in GM for 3 decades now. Poor Roger has gone to that great ledger in the sky but his legacy lives on. It’s a wonder GM is even still around.

    I chuckled when I read one of his “permanent” benefits is a car for life. Might that not be a punishment someday?

  • avatar
    KatiePuckrik

    I think deep down, Rick’s a genius.

    Think about it, this guy is getting paid MILLIONS, getting a bankruptcy proof penison, cars for life and stock in the company regardless of performance. Be honest with yourself, we’d all like a job like that!

    GM’s problem is its lack of vision. In the old days, Mr Sloan laid out GM’s mantra; “A car for every purse” (Or something like that, I don’t remember. I studied the “Industrial Revolution” at school). But somewhere in the 1970’s that vision got lost and the degeneration started. Today, GM is just a shrinking company, going nowhere and has no destination. Without focus GM will continue this route.

    But lack of vision has also affected GM’s turnaround. No tangible goals have been stated (ergo, can’t be achieved). GM are scared to make a statement and work to it. I keep coming back to Mr Ghosn and Nissan about how Mr Ghosn stated that if he couldn’t make Nissan profitable after a year, he’d resign. After he achieved that, he started on restructuring Nissan. Then he moved Nissan to having sustainible profit growth. At each point, he conveyed clearly what he intended to do. GM could learn a lot from that gameplan.

    Until GM can come up with a turnaround plan with clearly stated goals, a timeframe with which they are to be achieved and a manager willing to execute this plan, nothing much will change. In short, GM’s turnaround plan needs a vision. Instead, what do we have at GM’s top? 2 beancounters and a senile “car czar”. You’ll note, there’s not many hardcore engineers there. Not exactly what I’d call a “recipe for success”! Even the management have lost focus (unless their management is trying to say to the world that only money counts at GM and not cars!).

    Even GM’s brands have lost focus. Marques which stand for nothing. Buick, SAAB, GMC and Saturn produce (well, badge engineer) cars which fight with each other rather than the competition’s cars. Nowhere is it more clearer than in GM’s branding how disastrous a lack of vision can be.

    It may be in GM’s corporate DNA, that they are scared to commit to anything for fear of achieving it or failing. But more has been lost by indecision, than bad decisions……

  • avatar

    As I recall the Peter Principle, you are only promoted until you reach your *first* level of incompetence, then you either stay at that level, adapt or get fired. I might be an excellent, painstaking carpenter. But promoted to foreman, I might tend to treat my people as if they were router bits. So I’d suck as a foreman, but since companies usually don’t demote people (officially anyway) – I’d either stay as a bad foreman (on the worst jobs), learn to deal with my workers better or get fired.

    Peter envisioned entire companies with people promoted into, then stuck in, positions they weren’t really doing well.

  • avatar

    Donal Fagan:

    My use of the word “maximum” in the lead was misleading.

    “In 1968, a book called The Peter Principle argued that large organizations promote employees past their proven abilities, until they reach their maximum ‘level of incompetence.\'”

    I’ve changed the text to read “natural.” As you’ve pointed out, an employee’s maximum level of incompetence is also their first.

  • avatar
    jerry weber

    On a balance, Wagoner doesn't get nearly what Mallaly at Ford brings down. Further, if he was left anything to work with, he would be an adequate administrator of GM. Given the disaster that's been brewing, administrate doesn't work at GM. First, both Ford, and GM are not treading water after sinking since 2000. They are trading profitable sales of trucks and suvs into sales of smaller less or no profit vehicles. It's not for nothing all domestics have for fifty years resisted getting heavily into econo cars. They have never been able to make a profit there, and today is no different. when you can let your pickup plants go idle and not worry, (for the wrong reason) of having too many on the dealer lots already, you are in trouble. With the large Suv's dying, and the crossover suv patch so overcrowded that no one will dominiate this category, where will the $10,000 gross profit per vehicle come from? I will tell you now, not from a sub $20,000 economy car imported or built here. This is the box Wagoner and his minions find themselves in. You will know how good they are this summer when gas goes to and stays around $4.00 per gallon.

  • avatar

    jerry weber :

    Further, if he was left anything to work with, he would be an adequate administrator of GM.

    Excuses, excuses.

    First, a CEO is not supposed to be an Administrator. He or she’s supposed to be a leader.

    Second, to quote an expression from the Peter Principle era, if you’re not part of the solution, you’re part of the problem.

    Third, Rick’s had eight+ years to change GM’s direction. They denied, delayed and missed the ship sailing from port. The retread of the GMT900’s was a seminal moment in missing seminal moments.

    Fourth, are you really trotting-out the old argument that there’s no money in small cars? Tell that to Toyota.

    And lastly, any executive who refuses to set goals is neither a leader NOR a good administrator.

  • avatar
    windswords

    Dynamic88:
    March 7th, 2008 at 8:21 am

    “… If I recall correctly, the Peter Principle doesn’t apply just to accountants. Therefore, who could possibly become the CEO? Certainly not an engineer, because paying attention to the financial conditions is necessary and at the same time well outside an engineer’s feild of expertise. Is there someone at GM who is both an engineer and an accountant? And a lawyer? And a marketing expert? And ….”

    Lee Iacocca started as an engineer for Ford before swictching to sales and marketing. He made some mistakes at both Ford and Chrysler but he had a grasp of the fundamentals of producing a car. Tom Gale (the best CEO Chrysler never had) was an engineer before he moved to design. This helped him to produce concepts that could quickly be turned into production vehicles and gave him a great relationship with Francois Castaing, the head of engineering. There is no reason you can’t develope at least two disciplines over your career.

  • avatar
    crackers

    This discussion points out the obvious fact that senior management at GM are typically long-time employees. This has created a highly incestuous environment with no genetic diversity that breeds for the worst organizational traits. What is the remedy? Would a complete replacement of senior management be appropriate? Will it require Chapter 11 to accomplish this? Leaders at the major car companies tell us that the auto industry is unlike other industries in that it takes a lot of specialized industry knowledge to run a large automaker. Is this true, or is it an attempt to make themselves indispensable?

  • avatar
    frontline

    I remember when my Dad started selling Datsuns around 1969. Both Dad and I agreed that they were ugly, “tinny” little cars. Over time I would hear conversations around me about what a good little car Datsun made. What could have been worse than the B 210 ? Tires would go in 15,000 , brakes {on a automatic car} would go in 10,000 but , for 1975 dollar value , it was a good little car and through “word of mouth” people came to these converted gas stations and bought a lot of these ugly little cars because they were a good value.

    It repulses me that GM spends millions advertising product they don’t even have to sell!

    I would bet the farm that if GM created a high quality, high mileage product that was the talk of the town , it would be very successful. That is without advertising, special branding or exclusive showrooms.

    Darn it! The only reason I walked into a Mini showroom is because I read 50 different articles praising the car.

    There is no way around this mess without creating great product!!

  • avatar
    KatiePuckrik

    “This has created a highly incestuous environment with no genetic diversity that breeds for the worst organizational traits.”

    Like the Osmonds……?

    Thank you! I’ll be here all week!

  • avatar
    johnny ro

    So, is there a person out there who has abundant competencies that include everything needed of a CEO to save GM? Any writer on this board? If so step up and take the position. Required competencies include skills and positioning needed to seize the position.

    I fail immediately because I am not a contender to start with. I am 1,000,000 miles from that playing field.

    My only relevant skill is to sporadically identify challenges they face but I don’t have solutions and have no idea how they can survive long haul.

  • avatar
    KatiePuckrik

    Johnny ro,

    People, myself included, point out many of GM’s problems and the solution to it. GM’s over reliance on big trucks and SUV’s, the emphasis on bureaucracy, top heavy management, too many golden parachutes etc.

    But at no point did Rabid Rick take the bull by the horns and wrestle it to the ground. For years, they hid behind the “UAW” is too inflexible” excuse. So, when the UAW gave concessions, they were stuck for an excuse. Now’s it’s “The credit crunch is hitting us all”. Hmmmm….Nissan seem to be expanding and Honda; Toyota are maintaining an even keel.

    GM can survive, if they stop daydreaming and work out a vision which they can work to. That is one of GM’s underlying problems.

  • avatar
    geeber

    The basic problem at GM is the mindset that, at the end of the day, the world still revolves around GM.

    Mr. Wagoner is a product of this mindset, but he is not the only one at GM who displays it.

    Hence, GM’s belief that the new Malibu will once again make Chevrolet a powerhouse in the family sedan market. Never mind that today buyers regard the Accord and Camry as the gold standards in that segment, and are inclined to stick with those models for their next vehicle (and the Honda and Toyota brands if they want to move up to, say, a crossover).

    Sad to say, but 25 years of vehicles ranging from awful to mediocre have removed Chevrolet from the shopping list of many buyers. Buyers have “moved on” from Chevrolet in this segment. The new Malibu is a very nice vehicle, but I’m not seeing anything that will convince a satisfied Camry or Accord owner to switch brands, especially given Chevrolet’s checkered past in this segment.

    Does GM really understand this?

    (This mindset was also displayed when Cobalt team leader Lori Queen fired a salvo at Consumer Reports for its unenthusiastic review of the new Cobalt. Granted, the new car was a big improvement over the Cavalier, but how could anyone aside from a GM loyalist really believe it was better than a Civic or Corolla, or even a Focus? Or really believe that anyone – aside from the dwindling number of GM loyalists and the purchasing managers of Avis and Alamo – was breathlessly waiting for a new small Chevrolet?)

    GM still believes that customers perceive a difference between its various brands, and that it can create images for said brands based on advertising campaigns. Never mind that most people regard Chevrolet, Pontiac, Buick and Saturn as virtually interchangeable. Cadillac does manage to distance itself from the pack, although that could be in spite of, not because of, GM’s efforts.

    Again – does GM really understand this?

    (It’s amusing to read the comments of GM loyalists on cheersandgears.com and GMInsidenews.com, as they explain the differences among the various GM brands. Only problem is that those differences exist largely in their imaginations! Most buyers have simply “moved on.” Talk about living in a bubble. Perhaps GM management is posting on those sites?)

    I believe that one day we will look back on the hiring of Alan Mullaly as a milestone moment among the Big Three. From all accounts, he is bringing a desperately needed new perspective to Ford, and is working to change the corporate culture that is hobbling the blue oval. He seems to understand that the world does not revolve around Dearborn, and that Ford is going to have to hustle on ALL fronts (engineering, design AND marketing) to stop the bleeding of market share and sales.

    When one strips away all of the rhetoric, corporate culture is what is destroying these companies, because a company’s products reflect its culture.

    It may be too late for old Henry’s company, but somehow I don’t get the impression that I am watching a corporate Titanic head straight for the iceberg when I observe Ford.

  • avatar
    crackers

    johnny ro wrote: So, is there a person out there who has abundant competencies that include everything needed of a CEO to save GM?

    My view is that replacing the CEO is not enough. Rick is certainly a major part of the problem, but bringing in a new CEO won’t necessarily help. The organization has too much mass for one individual to institute change. It would need a complete replacement of the entire top layer to make a difference.

  • avatar
    baabthesaab

    It has long been my estimation that Rick’s and the Board’s goal is to ease GM into failure, while pocketing the cash and appearing to the casual observer (with help from the media) to have “tried everything”.
    Then they will announce that it simply isn’t possible to continue building cars in North America.

  • avatar

    I believe that one day we will look back on the hiring of Alan Mullaly as a milestone moment among the Big Three. From all accounts, he is bringing a desperately needed new perspective to Ford

    Isn’t Big Al an engineer? If so, wouldn’t he be the exception to the Peter rule?

  • avatar

    In case my “cri de coeur” wasn’t clear enough. Rick Wagoner, as the editorial states, brought an accountant’s mindset to GM’s direction.

    http://www.gm.com/shop

    Need I say more? He’s spreadsheeted the cars.

  • avatar
    jthorner

    Honda puts passionate engineers in charge. Toyota puts passionate manufacturing people in charge. GM puts corn-fed finance people in charge.

    A sad, sad story. Like I have said before, this is just like watching the once proud UK based auto industry impload was.

    Katie said: “Think about it, this guy is getting paid MILLIONS, getting a bankruptcy proof penison, cars for life and stock in the company regardless of performance. Be honest with yourself, we’d all like a job like that!”

    Not me. Real self esteem, which is what happiness is all about, doesn’t come from a bank account, it comes from knowing that you have done a worthwhile job well.

  • avatar
    jthorner

    “The organization has too much mass for one individual to institute change. It would need a complete replacement of the entire top layer to make a difference.”

    How about a radical experiment. Fire everyone making more than $200k per year and then give battle field promotions to the best and brightest of the relative youngsters working for them. There have to still be a handful of competent change oriented people around GM who have enough experience to know how to get things done but not so many years under the millstone as to have lost all perspective and drive. Guys and gals who went to work at GM because they love cars and maybe still have a glimmer or lights on behind the eyeballs. It couldn’t get any worse than it is. GM is headed straight for train wreck city, but might have to get in line behind Chrysler for it.

  • avatar

    Can we agree on something, I know it’s controversial, but it’s just the way it is:

    GM is not a car brand. That’s right! GM is not a car brand – it’s a corporation.

    Wasn’t it GM that once said “we don’t make cars, we make money”? Funny, now they don’t make money.

    John

  • avatar
    geeber

    Samir: What he really brings is an outside perspective. He knows that the world no longer revolves around Detroit. I’m sure that there are quite a few engineers at GM, Ford and Chrysler who still haven’t figured this out yet, so merely putting an engineer in charge is not enough.

  • avatar
    BuckD

    I promote Rick to a position I know he’ll thrive in: CJO — Chief Jack-officer.

  • avatar
    William C Montgomery

    The Peter Principal was developed in an era when corporate advancement gave far greater deference to tenure than merit. Most modern U.S. corporations try to reward accomplishment and promote people with demonstrated leadership potential over time on the job. Of course, I’ve seen examples of employees with terrific technical skills being promoted into administrative positions where they struggle. But on the whole it’s much better than it used to be.

    However, there are some pockets of old school businesses that have yet to modernize their internal leadership development practices. These holdouts are in key industries that have been wildly successful due to market conditions, not from corporate competence.

    For example, I worked intimately with several large oil companies during the seven years I lived in Houston. The demand for petroleum products has been so great over the last century that they have been profitable despite themselves. Their working conditions and benefits were way out of step with “normal” corporate America that is constantly tightening its belt and of necessity keeps a sharp eye on operating expenses. Sure, the industry got a bit of a wakeup when oil prices plummeted to untenable levels during the mid and late ‘90s. But at current levels of crude consumption the party’s back on.

    Oil company executives ardently adhere to archaic corporate traditions and are terrified of making changes, even toward adopting technologies and business practices that have been proven in other industries.

    The same is true of the domestic auto manufacturers. Demand for the automobile has been so strong that there has never been a need to clean house or keep pace with lean and competitive companies. The confounding thing is that as the Big Three have been in a pronounced and obvious death spiral, especially over the last twenty-five years, they haven’t taken any steps to radically change their corporate culture. Instead, the same old group of misfits are desperately trying to build better cars. As we are seeing, until their change their culture and business practices any successes they have will be sporadic and fleeting.

  • avatar
    Dynamic88

    windswords

    “… There is no reason you can’t develope at least two disciplines over your career.”

    Any reason this doesn’t apply to accountants?

  • avatar
    detroit1701

    I see GM’s perceived failure in North America somewhat differently. Mainly the bottom line is that the Big 2.8 failed to keep up with the Joneses — even though they do elsewhere in the world.

    In Europe, automakers tend to be on the same “wave” — i.e., in a fiercely competitive market they tend to deliver similar products in similar classes around the same time. There are defined segments in Europe, and everyone has a similar offering with similar performance / features. Take a few examples:

    CUV: Ford Kuga, VW Tiguan, Opel Antara, Honda CRV, etc.

    Urban: Ford Fiesta, Opel Corsa, VW Polo, Honda Jazz, etc.

    In North America, since the Big 2.8 insisted on producing “North-American only” designs, they did not apply to lessons they learned elsewhere in the world. Now they are playing catchup in segments that they FAILED to define in the U.S.. Look at the Rav4 and CRV — the Big 2.8 failed to have an answer until the new Saturn Vue (an Opel btw). Ford still does not have an answer. Take a further example: Yaris and Fit — GM had again to import that segment (Saturn Astra), and again, Ford has nothing. Mid-sized sedans are the same case, the Altima, Accord, and Camry had no competitors — and look what GM and Ford did — GM had to re-engineer an Opel sedan platform for the Aura and Malibu. Ford had to refit a MAZDA platform for the Fusion.

    The Japanese, facing rising fuel costs in North America, already had an arsenal of world cars in European-defined segments ready to go. In fact, they took a big RISK by putting out small unprofitable cars and the Prius before gas spiked.

    It is not that GM or Ford have “failed” — because when they do (eventually) respond it is usually a very competitive product (Vue, Fusion, Malibu, Astra). Since the Japanese were using world platforms and existing vehicles, GM/Ford have been forced to do the same. They are late to the game and almost a generation behind.

  • avatar
    geeber

    detroit1701: Now they are playing catchup in segments that they FAILED to define in the U.S.. Look at the Rav4 and CRV — the Big 2.8 failed to have an answer until the new Saturn Vue (an Opel btw). Ford still does not have an answer.

    The Ford Escape debuted for the 2001 model year, and is still selling pretty well. It was a direct response to the Toyota RAV4 and Honda CR-V. So Detroit was late to the party, as you say, but Ford has fielded a response, and for several years it was the best-seller in its segment.

    detroit1701: Take a further example: Yaris and Fit — GM had again to import that segment (Saturn Astra), and again, Ford has nothing.

    The Chevrolet Aveo, imported from South Korea, is a more direct competitor to the Fit and Yaris. And while Ford currently has no entry in this segment, it plans on producing the just-released European Fiesta (a beautiful car) in Mexico and selling it here within the next two years.

  • avatar
    whatdoiknow1

    OK, it is time to stop laying all the blame at the feet of Rick and Bob. In all honesty they are just two men who are tasked with an impossible job.

    Rick and Bob will NEVER have the power to overcome the entrenched interest at GM. At the end of the day they have very little to no say over such matters as the dealer network and state franchise laws, the power that the UAW has with government and other national interest. The demands of too many brands that they CAN NOT make disappear without a major COSTLY fight.
    Oh, there is also the matter of all of those shareholders, you and I included if you have a 401k.

    Face facts GM simply has/had grown too large for it to function as an effective corporation anymore. The burrecratic structure is too large for clear decisions to be made and policy implemented.

    GM CAN NOT create unique products for all of its brands nor can they make the unnecessary ones go away. The dealer network CAN NOT make money with so many overlapping dealers in the same geographical locations. The UAW considers itself a partner and will not work for less than a given amount.
    The marketshare that GM is designed to support WILL NOT return yet GM is forced to maintain a production infrastructure that appears geared towards WWII levels of production.

    In all fairness Rick, Bob, and GM are stuck in this situation until OUTSIDE forces come into play. As long as everyone involved in this mess needs to be paid; UAW, dealers, supplier, shareholders, etc, there will NOT be any major changes because the machine MUST keep running. It cant stop. If any one of these players were to decide to go “Postal” the game is over for all involved.

  • avatar
    truthbetold37

    Turning GM around seems so simple to me.

    – Build better products (obviously)
    – Reduce layers of management (fire them I say)
    – Cut Finance/Marketing Staff by 1/3 and work leaner
    – Sell Saab
    – Close Saturn

  • avatar

    The CEO needs to come from that company’s/industry’s area of core competency or technology. Whether its engineering, business development, sales, software development/engineering, etc.

    Finance/Accounting guys should not be running manufacturing, engineering, or other technologically focused organizations. I don’t care if they went to HBS or University of Phoenix online. They can run a wall street firm or bank, that’s it.

    And that’s coming from a finance guy.

  • avatar
    ktm

    “If I recall correctly, the Peter Principle doesn’t apply just to accountants. Therefore, who could possibly become the CEO? Certainly not an engineer, because paying attention to the financial conditions is necessary and at the same time well outside an engineer’s feild of expertise”

    Best explain that to Toyota, Honda, etc., or how about Google and Microsoft (not engineer’s, but they are closer to engineer’s than accountants).

    An engineer can learn enough about accounting to make business decisions. I do it all the time in my field of work.

    An engineer can go to school following his BS and earn an MBA. The same can not be said of an accountant earning his MS.

    You give engineer’s far too little credit.

  • avatar
    Ingvar

    One question to ponder is, Does GM have to have complete line-ups of all their brands? Do they have to have 5 differently branded CUVs based on the same platform?

    Once upon a time, there was a GM brand for every purse, from Chevrolet to Cadillac. But the brands had fewer cars, on fewer platforms, and no overlap. Could GM go back to that thought, and use their brands for specialty niche vehicles only?

    Say that Chevrolet had the biggest and most completed line-up, from the korean imports up to Corvette. That means that GM could have Cadillac on top, Buick and Saab in between, Saturn as an import fighter, GMC and Hummer for the SUVs. And well, Pontiac, for what? Rebadged aussie-imports?

    The point is, Buick doesn’t have to be a full car-maker. Think “Buick”. What springs to mind? 1948 Coupe. 1963 Riviera and ’72 Boattail. Mid-50’s Roadmaster. Luxury Woodie Wagons. Coupes are not out-moded, the buyers just quit bying the domestic coupes. Nowaday, they buy BMW 3-series, Mercedes CLKs and Audi A5s. All nice-looking coupes. Buick could make a luxury coupe to fight the Mercedes crowd. The Enclave is the modern day luxury woodie. And a big sedan in between. All in black, as Buicks look the best in black. Scrap the rest.

    The point is, all GM Brands doesn’t have to have individual retailers, they could share showroom floor. Buick could effectively be a one-car carmaker, as long as Buick was the only GM brand that sold that particular car in that particular segment. And no overlaps. All GM brands could be sold at the same place. Except for Cadillac, which would have to have their own.

    Scrap the entire Pontiac line-up, and concentrate on the Pontiac core value. What is “Pontiac”? It is GMs sporting brand, wanna-be muscle car and BMW-fighter. Scrap the entire line-up, and concentrate on that. Make ONLY Pontiacs that could give some BMW:s a match. The rest is unimportant.

    What is GMC? Does GMC have any virtues, that any other GM Brand can’t offer? If it haven’t any, scrap GMC. They are in fact just some tarted up Chevys. They could be sold as that, as Chevys luxury line of SUVs, at a Chevrolet dealer.

    What is Saab? Saab is the practical mans Citroen. Or the thinking mans Mercury. Saab could have filled the role as GM:s experimental brand, always new with intelligent solutions. Hybrids, Haldex, and so on. Tested and tried, and then developed for the rest of GM. The point is, Saabs has always been favoured the most by intelligent and educated people. Well, concentrate on that, and give the Ivy League their own brand. Two cars, or even one, could be enough to fill that role, as long as they had intelligent solutions and semi-quirky traits.

    Scrap the superflous dealers, scrap the superflous overlaps, scrap the “all cars for all brands” soultions. That’s not what GM is about. GM needs to have a line-up of brands, with unique line-ups of cars, suited to all tastes and purses. No overlaps. I may have to say this again: No overlaps. Unique offerings at every brand. No overlaps. No overlaps.

  • avatar
    yankinwaoz

    whatdoiknow1…

    Very good point. It is damn hard to be in a business where you have almost no control over the manufacturing or the retail distribution of your product.

  • avatar
    whatdoiknow1

    Fire unnecessary management
    Close down unprofitable Dealers
    End production of unpopular brands
    Improve quality
    Create new products.

    All of that is easier said than done. I think most of us are missing the point. If you really look at GMs recent history you will see that there have REAL attempts to do all of those things. The problem is to do successfully accomplish any of these GM will/ is coming up against some serious resistance from some powerful entities.

    The UAW is not going away

    The Buick, Pontiac, Saturn, SAAB dealers are not going away without a major fight and a shitload of $$$$$$$$$$$$$$$$

    The current crop of half-ass supppliers have contracts with GM that can not be voided overnight.

    GM can’t simple shut down lines of production that are not meeting expectation because the brands and the dealers that are making sales require the products coming off of those line, just not in the numbers that they are.

    The money making auto segements in America are the BORING segements so GM can’t simply make exciting products that no one will buy. They need to make better car that do compete directly with Accord and Camrys. Yet we Americans demand to pay less for them.

    Folks love to beat up on Roger Smith but they refuse to acknowledge that he was actually trying to move GM into the 21 century in terms of production. If I understand it correctly one of his main goals was to automate and robotize as much Gm production as possible. This was also a move to limit the power of the UAW as well as lower the number of UAW employees on GMs books.
    Needless to say he was NOT successful because the UAW was too powerful.

    Any CEO at GM must deal with a diverse dealer network where each brand appears to be demanding a product line equal to Toyota. Remember it is the DEALERS that DEMAND badge engineered cars NOT GM upper management.
    If one Pontiac dealer can sell 1000 G5 while the next Chevy dealer can only sell 200 Colbolts should GM not meet the first dealer demand?

    I think it is important to remember that even Buicks still sell in relatively large numbers but it is the overall business model at GM that saps all profit out of the business.
    Also remember that a small rural Buick dealer with only 10 sales a month can still be profitable while a large Buick dealer in a major metro area that is selling 70 cars a month is money loser. Now lets also consider that there still are many very profitbale large Buick dealers in the USA.

    Rather than make wild claims as to what a CEO at GM can do why dont we call out the other parties.

    Hey UAW why dont you void all existing contracts and end union repesentation at GM. Ask all UAW members to take a pay benefit package that is comparible to what Toyota offers in the USA.

    Hey GM retirees, I know GM made you guys some big promises but times have changed. Go on medicare already!

    Hey oboslete Dealer why dont you do GM a favor and just close up shop. Who care if you are still making a limited profit!

  • avatar
    Potemkin

    GM has gone beyond the Peter Principle. What do you do when you have a manager/exec who has reached his level of incompetance. You don’t want to admit you promoted a dud so you dress them up, promote them and move them to another division. Judging by the decisions coming out of GM the people running the place have been promoted beyond their level of incompetance. They are not just incompetent but now they are dangerous.

  • avatar
    Potemkin

    Competance is not a commodity you can easily find in the current corporate landscape. Regardless of whether he or she is chosen from outside the company or promoted within the story is the same, they prove to be more show than go. If these guys were as good as their resumes why do they demand golden parachutes. The way to fix a failing company is to reward the people in power based on the company's real profits. If they don't increase real profits they don't get paid. The problem is shareholders look for guys who slash costs and deliver profits but they realize too late that the guy they hired has no talent other than selling parts of the company to boost profits. Lack of leadership and vision becomes obvious when there is nothing of worth to sell and the CEO actually has to lead. The suggestion to fire those earning more than $200k won't work either because in GM there is a culture of promoting yes men whose talent is to agree with the boss. At every level from shop floor to the exec offices disagreeing with the boss even if he's wrong is not tolerated. This culture has stifled the inovative free thinking people GM desparately needs. When GM does hire from outside these people only stick around long enough to see that smooze trumps performance.

  • avatar
    Detroit-Iron

    GM, brought to you by the same guys who brought you the Viet Nam War.

  • avatar

    Detroit-Iron :

    GM, brought to you by the same guys who brought you the Viet Nam War.

    Actually, that was Ford.

  • avatar
    hltguy

    Detroit-Iron: It was Robert McNamara from Ford, one of the supposed “Whiz Kids”. Yep they sure managed that war well didn’t they. The Americans essentially won every battle and lost the war, and America has never recovered from it. Then we got the Pinto.

  • avatar
    Kwanzaa

    It’s one thing to say Wagoner is “unaccountable”, but the facts which have been pointed out clearly state something a little more sinister…

    Rick Wagoner has Deliberately(!) destroyed GM.

    Yes, unreal, unbelievable, unconscionable, and unfathomable…

    …yet TRUE!!!

    Rick is being paid million$ to destroy GM. We need to look at the facts, and well, we also need to look at who profit$ from all of this.

    The “Board of Bystanders” know full well what is going on. They condone it, they endorse it, they support it!!

    I mean, from 1977 to 2007 and all you have to show for your effort is the new Cobalt SS sedan? For a hefty 22-large?

    Whatchu talking ’bout sista??? Is you crazy or what??

  • avatar
    Vega

    Kwanzaa :

    Robert J Hanlon:

    Never attribute to malice that which is adequately explained by stupidity.

  • avatar
    Queensmet

    Vega,
    so true so true

    kwanzaa
    Sounds like a conspiracy theory. What facts support your theory vs Vega’s, that stupidity reins, not inteliignet destruction

  • avatar
    Kwanzaa

    Well, take a good look at that wax-faced photo up above.

    IE, the fact that Rick Wagoner is STILL in power is all that needs to be said!!!

    If you think otherwise, I have a niiiiice Cobalt SS to sell you….for a paltry $22K!!! :D

  • avatar
    Busbodger

    GM quietly goes broke and they are out of a line of contracts longer than a Chevy Silverado crewcab.

    Then they ditch the UAW, they ditch their retirement programs, and the ditch the dealer program which demands they build the same car or truck or SUV under 5 different name plates so all of the different dealer tracks have competitive (with each other) products.

    I say that Saturn selling Opels (ditch the Saturn name please) is the division with the best potential future if GM could change their business model to generate some profit. No-haggle pricing, clever/interesting/frugal cars straight from European Opel, and an existing dealer network and the least number of rebadged vehicles in the company if you don’t count Opel to Saturn as rebadging.

    They ought to expand the vehicles they sell in the USA under the Opel brand so that we get a more diverse range of vehicles – from the bigger Vue to the Zaphira and Astra, to the retractable hardtops down to the Corsa. Include the commercial versions too (delivery white vans and cars).

    And then, offer the WHOLE lineup to all of the GM dealers. Eventually dealers would become GM dealers selling all the GM brands. I don’t go to a Sony store or a Nike store or a Schwinn bicycle store… I go to a store that sells many brands. The good dealers will prosper, the bad ones will fail. Good.

    Lastly attempt to unify the safety and pollution standards with the other countries that their divisions operate in so that their other divisions’ products can be sold anywhere. I guess that will not likely work b/c they WANT us to buy big…

  • avatar
    jthorner

    Straight across imports of Opels into the US would likely do no better than VW does in the US with it’s largely imports. Hardly worth the trouble.

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