It’s time for GM’s board to fire Wagoner

Posted by Marc Hodak on December 12, 2008 under Politics | 2 Comments to Read

Richard Wagoner, the CEO of General Motors, played politics with his company and lost. For the last couple of months he has been going around telling the American public that if GM went into bankruptcy, no one would buy its cars. That’s tantamount to telling the public “If GM goes into bankruptcy, you shouldn’t buy our cars.”

One of the key roles of any CEO is chief sales officer. The CEO is supposed to believe in his company’s products 100 percent. If he doesn’t who else should? Even if it’s plausible that under certain conditions one’s products might not be as desirable, it’s not a CEO’s role to point that out. That’s the job of the competition and the critics. The CEO is supposed to be a cheerleader. When the home team is down 30-7, a cheerleader doesn’t turn to the fans and say, “If we don’t score on this next drive, we might as well all go home.”

So why has Wagoner gone around telling customers that if GM went into bankruptcy, they might as well buy a Toyota? Because that was his brinkmanship strategy to shake taxpayer dollars out of Congress. He was trying to scare them with an apocalyptic story that went, “if we go bankrupt, no one will buy our cars, which will lead to…economic depression!” What’s bad for GM is bad for America.

It’s important to note that Wagoner was making this cheer apart from his board. The board has responsibly maintained throughout that all options are on the table. They must know that their leader could have embraced the argument that a reorganized, stronger GM is exactly the kind of company car buyers could have confidence in.

But that was not the tack taken by Wagoner. Wagoner chose instead to put all their marbles on a bailout. He pitted GM against the taxpayer in a bold grab at the public treasure. What has that done for GM’s reputation with the 60 percent of the public that was against the bailout? He lost by playing his hand arrogantly and incompetently. Worse yet, he lost playing against the sensibilities of a board that must have known that if he lost, GM would be closer to liquidation than if he had not taken this tack. I don’t know why Wagoner played it the way he did. Maybe he knew his job would not survive bankruptcy, and so he personally had nothing to lose by aiming GM toward the cliff with his foot on the accelerator.

At this point, the board’s credibility is at stake. They need someone who can deftly drive GM through bankruptcy, packaged as best as possible, able to salvage whatever one can for bondholders, workers, and suppliers. They need someone who can reclaim from the customers the trust that Wagoner deliberately undermined.

Update: It appears that Bush is ready to throw the Big 3 losers a lifeline, and that the union seeing Bush standing on the deck with a lifeline in his hands emboldened them to balk at a Senate deal that would have forced them to be competitive. In other words, the Bush administration, which has never owed anything to the unions, is ready to cave in to them again, just as he did with the steel companies early in his administration, almost certainly with the same, dismal political and economic outcome. Or he’s dumb enough to believe the “sky is falling” rhetoric of his CEO buddies. Either way, I find myself counting down the days that Mr. Bush settles back into a nice Dallas retirement.