General Motors Death Watch 227: The Elephant In the Room
GM can fix its own problems. Really. They don’t need a miracle cure or a piece of technology fabricated at MIT’s advanced labs. They don’t need a new financing scheme developed by the alchemists on Wall Street. Nor do they need Nancy Pelosi & Co. to fashion tnier future. What they need to survive can be summed-up in two words: truth and honesty. If GM would be honest about its products, finances, dealers, marketing, reliability, (lack of) executive talent, and on and on– it could begin to resurrect itself. Until and unless GM gets glasnost, the automaker will remain forever stuck in the quagmire of its own making, relegated to the support of the taxpayers, always looking for its next fix. To understand the possibilities, compare and contrast GM’s perfidy with “One Ford”….
Like GM, FoMoCo was a company headed for extinction. Sales, market share, profits, product competitiveness, branding– Ford was outclassed, out-maneuvered and out of gas. Unlike Rick Wagoner and his Board of Bystanders, Ford CEO and Chairman Bill Ford and the Ford family admitted the inevitable. In the summer of 2006, they looked outside the company– and the industry– for a well-seasoned executive to replace the family scion. Ford brought in ex-Boeing exec Alan Mulally to clean house.
Ford’s hopes for survival didn’t– and don’t rest upon CEO Alan Mulally’s engineering or union-wrangling expertise. It’s Mulally’s leadership, his impact on Ford’s culture that will leave the automaker the last man standing.
Under Mulally, Ford has publicly acknowledged and accepted the fact that the days of owning 25 to 30 percent of the U.S. new car market are gone. Profitability must come at just 15 percent. To achieve this new, more limited goal, Mulally has attacked Ford’s culture of complacency and infighting. By all accounts, Mulally demands a “truthful and honest” assessment about the company’s health. And he demands that his managers demand it.
We’re seeing the realization of this new paradigm. Ford cars more-or-less equal Toyota and Honda products’ reliability. Ford is also matching factory production to actual demand–rather than bogus sales forecasts from marketing and finance. And although Ford is talking-up an electric car that they don’t have, they understand that their survival doesn’t depend on a “leap of faith” technology. They’re looking for single, double and triples, not home runs.
GM remains stuck in its past. Whether it’s the Volt or a Volt-based Cadillac or HUMMER’s non-prospects, everything they do is shrouded in a fug of hype. Lies, half-truths and deceptions are perpetuated upon journalists and the public until they become the truth– within GM. Every statement they make– whether by marketing, dealers or top executives-– is inherently suspect. Even when the hype is demonstrably false, GM clings to the spin like grim death. Literally.
To wit: today’s NYT runs a piece by Bill Vlasic entitled “Wagoner Says G.M. Is Working on an Overhaul Tied to the Bailout.” In the story, CEO Rick Wagoner states that GM is focused on meeting the requirements of the bailout loans. He asserts that GM can become financially viable via labor cost reductions, debt swaps and reductions in brands/dealers. Wagoner provided no specifics, no proof, no concrete plan. This despite the fact that he has less than 40 days to submit the plan to Obama’s as yet unannounced car czar.
Wagoner leaves a decade of devastation in his wake. He has destroyed GM shareholder value, shed tens of thousands of high-paying jobs, sold-off once-valuable assets, lost billions on misguided foreign entanglements, failed to assure proper accounting practices and placed his company in the hands of politicians. And yet even now, he can’t tell the truth.
Rick Wagoner knows that GM can’t possibly meet the federal requirement for the $13.4b– and the rest– worth of taxpayer loans. With Uncle Sam’s wallet wide open, the mandated sacrifices will not occur. Period. Why not tell the truth to the company, its dealers and suppliers, and, above all, the American taxpayer?
If GM is to survive, Rick Wagoner should come clean. He should tell everyone that Saab, HUMMER and Saturn are toast. (How much “strategic review” do you need to figure that out?) That it’s impossible to negotiate a complicated debt-for-equity swap for $63b in two months– outside of a courtroom. That there are significant problems in amending an existing labor contract– outside of a Section 1113 motion in bankruptcy– that would overturn decades of hard-won labor gains. Wagoner should admit that GM will need additional government assistance in 2009.
The simple truth is that aGM bankruptcy was, is and will be the only path to resurrection. As a smaller company, shorn of most of its debt and burdensome labor agreements, GM can be a smart and strong competitor in North America and around the world. But everyone at GM needs to be honest and speak the truth. The truth will set you free. Just ask Alan.
More by Ken Elias
Comments
Join the conversation
I work at General Motors and am an Hourly worker. I can tell you what GM needs. What GM needs is to shed itself from giving their salary workers company cars for one. Then they need to do an audit and eliminate salaried workers that do not know the car business. We have upper managers that were trained in college to be electronic wizzes in charge of production areas and we have salay workers that no nothing at all an were brung on do to their parent was salary. In simple terms we have alot of nepotism and alot of wasted monies. The workers now work in tems as the japanese we have adopted all their strategies,but, if managers cannot manage then its a waste. Also all special appointed jobs should be eliminated. GM needs to do a plant to plant audit. and look at themselves. The hourly worker has bled enough.
Given the steady year-by-year decline in GM's market share and balance sheet, how has Wagoner held on? Would he still be there if there had been a credible replacement? Was bringing in Lutz a brilliant move to improve GM's products or a brilliant move to preserve his position even while failing? Jack Welch has said that the number 1 priority of the BoD is to have a strong successor in place. Of course who picks the BoD? Wagoner has failed every stake holder other than himself, but he has served himself very well indeed. A well worn practice of incompetent CEOs is not allowing a credible successor to exist. This practice has been used by royalty for centuries; England is a good example. I'm not as pessimistic as others here about the political reaction to GM's coming farce of a viability plan. Even without existing wide spread public doubts about the bailouts, both banks and Big 3, there will be lots of opportunity for grandstanding Republicans to jump in front of the cameras and spout off about their new-found concern for deficit spending and the threat to the American way that unions represent, even without bailout money ripped from the desperate grasp of non-union tax payers.