- The Washington Times - Monday, November 24, 2008

Rick Wagoner‘s 31-year career may fall victim to the mistakes of the industry and of his own making, even if General Motors Corp. survives.

The GM chief executive officer prompted scrutiny of his record by asking for a government bailout to keep the Detroit automaker in business. Now, his departure may be a necessary condition of any federal rescue, business leaders and lawmakers say.

“Management needs to be replaced,” said Robert Crandall, former chairman and CEO of American Airlines parent AMR Corp. “The fact is that the management as a whole has had lots of opportunities to fix this. They haven’t.”

Mr. Wagoner has run the world’s largest automaker for the past eight years, presiding over $73 billion in losses beginning in 2005. He already endured a fight with dissident shareholders and several failed turnarounds and may argue that he knows the company better than most who could take his job.

The 55-year-old executive joined GM in 1977, as U.S. automakers were fending off Japanese competitors who recognized the need a decade earlier to build fuel-efficient vehicles. Although U.S. auto sales broke records during Mr. Wagoner’s years as CEO, the three major producers - Ford Motor Co., Chrysler LLC and GM - battled high labor costs from pension and retiree health care obligations.

“There’s the feeling that next to financial services, automotive execs are the dumbest people in the world,” said Thomas Stallkamp, a former Chrysler president who joined the car company in 1980, when it received emergency government loans. “There are probably some symbolic moves that somebody’s going to ask for.”

The federal government insisted on replacing the CEOs of American International Group Inc., Fannie Mae and the Federal Home Loan Mortgage Corp. (Freddie Mac) when they received aid. Lawmakers including Sen. Sherrod Brown, Ohio Democrat, said some executives may have to go before GM and the other U.S. automakers receive $25 billion in new government loans.

“It’s pretty clear that management has made some pretty bad decisions over the last 20 years,” Mr. Brown said, adding that changing management is something that Congress must “think seriously about.”

Mr. Wagoner won’t offer to resign, he told Automotive News.

“It’s not clear to me what purpose would be served,” he said. “Our job is to make sure we have the best management team to run GM.”

The automaker, which may be replaced by Toyota Motor Corp. as the biggest at the end of the year, has dropped almost 6 percentage points of U.S. market share during Mr. Wagoner’s tenure, falling to 22 percent as of Sept. 30. GM stock, at a six-decade low, has sunk 95 percent under the Wilmington, Del.-born executive.

“It’s hard to imagine how a management team that has presided over this sort of decline would instill confidence that they can manage their way out of it,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

Still, Mr. Wagoner has shown staying power, weathering the losses and activist investor Kirk Kerkorian’s 2006 push for an alliance with Renault SA and Nissan Motor Co., Mr. Elson said.

A case can be made that Mr. Wagoner shouldn’t be blamed for GM’s travails, he said, because it has been hamstrung by the costs of providing health care to 1 million employees and dependents, an issue that should have been handled by the government.

As CEO, the former Duke University basketball player and Harvard University MBA recipient bet against gasoline-electric hybrid vehicles early on, instead focusing research on hydrogen technology. GM offered its first full-scale hybrids in 2007, a decade after Toyota introduced the Prius.

Mr. Wagoner kept GM focused on trucks and sport utility vehicles, only to press for development of the Volt plug-in electric car when gasoline prices soared. Truck and SUV sales are down 16 percent since 2004.

Mr. Wagoner used the purchase of South Korea’s Daewoo Motor Co. to expand GM’s overseas sales 51 percent to 5.5 million cars and trucks by 2007. He wrung concessions from labor unions last year, including cutting wages in half for new hires and offloading retiree health care to a union-run trust by 2010.

“We believe that we were well along to fundamentally restructuring our business before the current financial crisis, in terms of product quality, productivity, energy solutions and costs,” Tony Cervone, a GM spokesman, said. “That strategy will be what leads us to success in the future.”

Finding the right person willing to take the job may extend Mr. Wagoner’s longevity. Firing management will cause more trouble than it solves if a new team has to relearn the issues and deal with federal overseers new to the car market, Mr. Stallkamp said.

Mr. Stallkamp recalled fighting with a government board that wanted to delay investments in light trucks and minivans during the Chrysler bailout. Chrysler CEO Lee Iacocca pressed for them, and the family-friendly vans turned out to be one of the automaker’s 1980s successes.

Mr. Iacocca, known as a product innovator responsible for the Ford Mustang, was brought in to help fix Chrysler in 1978. He lobbied Congress for a bailout, and in January 1980, $1.5 billion in federally guaranteed loans was signed into law. Chrysler repaid it three years later.

“Lee Iacocca had a clear plan to return that company to profitability,” said Peter Morici, a business professor at the University of Maryland. “These guys do not.”

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