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Car Guy
Should Rick Resign?
Should the head of GM -- Rick Wagoner -- be asked to step down as a condition of any taxpayer-funded bailout?
It's hard to see how he keeps his job -- if the concept of accountability matters anymore. GM's problems are many and certainly not all of them are Wagoner's fault. Several of them trace their origins back decades, to bad decisions that laid the groundwork for today's difficulties -- such as the failure of the company to simplify and consolidate its brand structure as market share dipped from 50 percent to the current 20-ish percent.
Pontiac, Buick, GMC, Chevrolet, and Cadillac are venerable institutions but may no longer be viable as more or less independent, full-line divisions.
But that's not Wagoner's doing; it's something he inherited. Still, he didn't do much about it. And during his tenure, GM actually expanded its roster of brands (Hummer) and pumped money into perpetually money-losing Saturn (originally conceived as a way to rehab GM's then-iffy image for quality by "starting fresh" but which today has been rendered irrelevant by GM's much-improved quality).
It's certainly unfair to go after Wagoner for "not anticipating" the surge in gas prices that made SUVs overnight pariahs. Toyota didn't anticipate it, either. Ditto Nissan. Both were working diligently on hulking V-8 SUVs and full-size trucks that were actually bigger and even more wasteful than GM's (or Ford's or Chrysler's). Titan, anyone?
The larger, more substantive criticism that does stick isn't that GM lacked small fuel-efficient cars. It had those, plenty of them. They just happened to be clunky and cheap-feeling in comparison with the best import equivalents like the Honda Civic and Toyota Corolla. Those two are perennial big-sellers and have been for years, in good gas times and bad. They gave Toyota and Honda not just a fallback if and when the big trucks and SUVs went sour. They also created an enduring buyer base -- composed almost entirely of former GM (and Ford/Chrysler) customers.
GM, therefore, was caught with its pants down when the SUV/truck market collapsed.
The Chevy Cobalt (and probably even more so the forthcoming Chevy Cruze) is a very good little car. It just ought to have been here much sooner. The Cobalt didn't replace the awful, completely obsolete Chevy Cavalier until 2005. That is certainly somebody's fault.
Rick?
A new guy might not be able to do any better, of course. But he would begin with a clean slate -- and that is no small thing. Rick Wagoner and the other Big Three CEOs are inextricably bound up with the current difficulties. If they do not go, there will be resentments -- not unfounded -- as well as a growing sense of the disconnect, at the highest levels of our country's economic life, between actions and accountability. It's hard (unless you're a Marxist) to object to high compensation for high achievement. But it's even harder to countenance rewarding its opposite.
The bottom line: GM is failing. If the guy in charge of the whole operation isn't responsible for that, to some extent at least, then who is? And if the head guy is allowed to avoid any real repercussions for the disaster that is unfolding, how can we, as a country, look the average assembly line worker in the eye and ask that he accept the loss of his job, or a major cut in his pay and bennies? Keep in mind that to the average line worker, loss of the job means possibly going broke. At the every least, it means having to scramble for a new/equivalent job to keep the mortgage paid up and food on the table.
Retirement, for a guy like Rick, means just that. He goes home to the Grosse Pointe mansion in the gated community. Maybe he "consults," or just plays golf. But unless he has been extraordinarily profligate, he will still be worth millions and have no financial needs or worries whatsoever.
So even if he is let go, the meaningful consequences are almost entirely aesthetic. For the average line worker, the consequences will hit closer to home.
Is it not at least mildly off-putting?
That this is even a question for debate shows how weird things have gotten in our country. Guys like Wagoner and his counterparts at Ford and GM are paid more in a year than most Americans earn in a lifetime. Note the distinction: Paid vs. earned. Because there is no way, without raping the language, that the compensation awarded to the Big Three's chieftains can be described as earned income. And that, really, is the bottom line here. GM is failing. Which means Rick has failed. You can probably draw the necessary conclusions.
The question is, can he?
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Rocco| 12.9.08 @ 6:42AM
I am not a fan of these incompetent CEO's who continue to feather their nests in good times and bad, irrespective of the condition of the companies they run. That being said, I tend to agree with the article to this extent. Either the top guy needs to realize he is no longer contributing to the increase in value of the company, OR, the shareholders need to act on that and cashier the guy. In NO circumstances should Congress get involved. Who in the hell does this Sen. Dodd think he is, trying to dictate his? One of the major contributors to this whole mess we are in. I am damned sick and tired of these congressional idiots trying to dictate this and that, the ignorant bastards. Dodd and his ilk have never had a real job, likely never run as much as a lemonade stand, never had to meet a payroll, etc. and here they are, trying to run this economy and will make a hash of it. When will some of these CEOs look down, find a pair of cojones and tell these sanctimonious prigs to stuff it? Geez, I am sick of this. Let the system work and get the hell out of the way.
Martin Owens| 12.9.08 @ 8:01AM
Since we are hurtling toward a Sovietized society, complete with a cult of personality and a government commissar for every bank and factory; since every CEO is on his/her/its way to becoming a government employee:
let's cut to the chase and remember what Comrade Stalin used to do: when they screw up, expose them as traitors.
Then shoot 'em.
I mean, why not? What do they contribute? "management skills"? "administrative ability"? Sure . They administered with such skill that their companies are smoldering wrecks.
Lord knows there's plenty more where this bunch came from. These are corporate politicians, plain and simple. And expendable.
Think about it- what better way to restore public confidence than the grand catharsis of public punishment?
Anthony| 12.9.08 @ 9:31AM
Rocco has it exactly right. (My father's name, by the way) What ever failure that should be laid at the feet of Mr. Wagoner should have been and should be done by the Board of Directors and the shareholders; not incompetent, professional political morons, like Chris Dodd and Barney Frank. Rocco has it right about Dodd; if that fool did decide to get a real job and meet a payroll, he'd decide to sell snow cones in Alaska and have his delivery man transport them in warmers. The lure of government control over our culture never ceases to amaze me. The sheep are always ready to be sheared. The lack of will power and restraint by hack pols has not changed since the time of the Romans, but a least Nero could play a musical instrument and screw up at the same time.
Michael Roush| 12.9.08 @ 10:02AM
Martin,
Would you apply the same standared to President Bush, Vice President Cheney, former AG Alberto Gonzalez, Donald Rumsfeld and the whole host of cronies like Brownie who have performed so miserably throughout this administration? If so, we may have common ground.
Anthony,
How many boards, at the bequest of shareholders , have you seen cashiering incompetent corporate executives? To do so, they would have to admit that they made a mistake by hiring and overcompensating him/her. Occassionally, the big dogs (mutual funds, pension fund officials, etc.) force the issue. When they do, all too infrequently, the board gives the fired exec a golden parachute. You are amazed at the "lure of government control over our culture." I am amazed at the lure of dream of unfettered markets for conservatives even in light of recent events.
frost| 12.9.08 @ 11:06AM
Eric Peters also nailed it in his previous (last week or so) column about the stupid duplication of models! Then, consider this, something I read earlier: They don’t need a Bailout – they need a ShakeOut !!!
We can only wonder what the Big-3 (and, indeed, congress too) will say when Chinese automakers hit our shores in the next few years, rolling out cars that sell for 30% less than it costs Detroit to make cars for. Even at their new salaries of $1 a year, the Big Three’s top leaders are overpaid in my book.
A taxpayer-funded bailout of the US auto sector would do nothing to improve Detroit’s competitive position. Instead, the capital would serve as little more than a punitive tax on such successful companies as Toyota and Honda, just to name two of the most obvious that would suffer -- and it would also allow Detroit to come back for more money after they blow through whatever we give them now. What Detroit is actually seeking is a bailout that preserves the status quo, and that implicitly rewards 40 years of inept management, bad decisions and poor quality. But to my way thinking, it makes no sense whatsoever to throw $34 billion at businesses that are losing $6 billion a month. (Keith Fitz-Gerald 12/9/08 “Money Morning/Money Map Report”)
Tim| 12.9.08 @ 11:17AM
I don't know if he should resign or not but I do know that the Democratic Governor of Illinois Rod Blagojevich should resign since he was arrested by FederaL Agents at his home earlier this morning.
Apparently the corruption indicments are staggering including trying to sell for personal profit Obama's senate seat.
What comes around goes around. It's Karma!
Howard| 12.9.08 @ 11:49AM
Since we appear to be becoming The Socialist Republic of America, we should just appoint a civil servant to manage the Peoples Automobile Bureau. Premier Obama will understand.
Premier Obama Rules| 12.9.08 @ 12:08PM
Howard,
I wonder which administration is better in the long run: The Socialist Republic of America, with Premier Obama in charge? Or The Fascist Republic of America, With Dictator Bush in charge?
I guess we'll find out!
Ken Roberts | 12.9.08 @ 12:08PM
A much better question arises that should be answered before the questi0n of should Wagoner resign? is why in the h-- is the same people in charge of the bail out of Fannie Mae and Freddie Mac that caused the failure ?
frost| 12.9.08 @ 1:19PM
Poor Mr. O.Rules... as sorry and inept a president as Dubya is, God knows, he's sure no fascist. In fact, wish he were stronger, 'n not caving at every demented whim. A "dictator?" What a gross exaggeration.
We'll be flying down to CostaRica one week from today. Hey, I "escaped" to Alaska after the unhappy ending to the "biggest Love Affair in the Hostory-of-the-World" -- now we're seeking to escape the worst congress in history and the most socialistic leaning president ever......
Whew!
frost| 12.9.08 @ 1:19PM
Poor Mr. O.Rules... as sorry and inept a president as Dubya is, God knows, he's sure no fascist. In fact, wish he were stronger, 'n not caving at every demented whim. A "dictator?" What a gross exaggeration.
We'll be flying down to CostaRica one week from today. Hey, I "escaped" to Alaska after the unhappy ending to the "biggest Love Affair in the Hostory-of-the-World" -- now we're seeking to escape the worst congress in history and the most socialistic leaning president ever......
Whew!
Michael Roush| 12.9.08 @ 2:03PM
Tim,
The governor of Illinois should be sharing a jail cell with the former senator from Alaska as soon as possible. However, this is not Karma; it is merely the rooting out of corruption which is, sadly, the one thing left in our political life that is truly bi-partisan.
Tim| 12.9.08 @ 2:56PM
M-R,
I agree with you that all corrupt folks need to be sent up the river regardless of party affiliation or skin color or sexual orientation(Barny Frank).
I just thought the timing of this major story exposing Illinois corruption was too Rich and after resko and the the other ilk that has come out of Chicago it seems like Karma but it may very well be the flushing away of corruption in general.
Would be long over due and a welcome sight,
As they say, you can't make this stuff up.
Alan Brooks| 12.9.08 @ 6:10PM
Martin Owens has it right, shooting is a solution, don't call it Stalinist, call it common sense. And shoot the governor of Illinois, too.
Shooting is always my preference for handling these little problems.
Big Elk| 12.9.08 @ 7:08PM
No, he should not. And, who really cares about $100 million a year CEOs, anyway, except rich CEOs. Besides, Chevys suck! Big time!
Bob Stuart| 12.9.08 @ 7:49PM
Flies are drawn to offal, right? Crooked politicians are drawn to power and money. Getting the money out of the hands of government is the solution.
GWB... bleh.
Auto manufacturers or any business need to know that there is no safety net to catch them if they fail. Nothing keeps you running longer than a wolf at your back.
Tim| 12.9.08 @ 8:30PM
The government must offer loans to the Big 3 because government policies CAUSED the situation they are in now. Yes, the Big 3 made many bad decisions, most dating from the 70s and 80s. Rick Wagoner has actually done a pretty good job. GM has great products out right now and significant labor cuts over the last few years will begin to pay dividends within a few years. They simple need loans to tide over the current turmoil, until the labor reforms to pay out (and they will). They would receive these loans in the credit market, but the genuises in Congress and the Federal Reserve caused the massive housing bubble and ensuing credit crisis. They also failed to construct an energy policy of any kind. (You know, the reason the Department of Energy came into existence over 30 years ago!) Car companies can't snap their fingers and respond when gas prices go from $1.20 to $4 to $1.60 a gallon in a couple years! Not to mention the CAFE boondoggle and all the anti-human green policies coming from the ultra-left California congressional delegation. GM was just fine when the government allowed free markets to operate in the auto industry, but since they started meddling over the last 40 years, it has hit rough spots. Do not take out mistakes by government and mistakes made 30 years ago on the American worker and entire economy of today. If GM goes under, the WHOLE COUNTRY, not just Michigan or the Midwest, will enter another Depression!
Howard| 12.10.08 @ 10:54AM
Dear "Obama Rules ha ha". Regarding "Fascist Bush", he will be out of office in a few weeks. Oh, I thought fascists would not step down. But perhaps you are not aware of the fact Bush is leaving office. But, Mr. Genius, tell me when Uncle Sam is letting go of Detroit? So I would say Fascism no, Socialism yes.
McBain| 12.11.08 @ 8:05AM
Why is the author lumping Ford's CEO in with Wagoner? Ford's guy has only been there 2 years and he is turning the thing around. It is tiresome to never see Ford singled out as asking for a line of credit that they might need if one of the others go bankrupt or if the economy worsens. That is much different than saying you need cash today or you go under at the end of the month.
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