General Motors Death Watch 184: Rick Wagoner’s Resignation
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Tomorrow marks the start of a three-day weekend. Given the increasing
awareness that GM’s toast, it could only be a matter of hours before GM
CEO Rick Wagoner tenders his resignation. Wagoner will claim he’s making
way for “fresh blood,” execs ready to “build on the new foundation” and
pursue "the next exciting phase” in GM’s "turnaround." Red Ink Rick will
step aside for his clone, COO Fritz Henderson– putting paid to any idea
of genuine change at the top. This will happen either tonight, or next
Friday. Anyway, soon. Though not soon enough.
Obviously, Wagoner doesn’t want to be GM's CEO when the artist once
known as the world’s largest automaker (a.k.a. the world’s most
profitable company) files for bankruptcy. Common sense suggests that
Wagoner wants to be IN the lifeboat BEFORE the women and children (i.e.
assembly workers) make egress… problematic. Or, preferably, he'd like to
be watching the ****p sink from the safety of a tax-free tropical island.
Remember that Wagoner’s banked well over $100m in pay and benefits
during his tenure at the top. And no, they can’t take that away from
him. (His pension is bankruptcy proof.) So, really, all Wagoner has to
worry about is his “legacy.” As he’s proclaimed that GM has enough
liquidity to make it to end of ’08 (woo-hoo!), Rick's either got to quit
now before Drop Dead Day, or raise some money– say, $15b or so– and quit
later. I’m sure he’d prefer the latter, but there’s a problem: who’s
going to lend GM $15b?
There’s only one way that GM could secure that kind of EXTRA money:
hocking its foreign operations. In a way, that’s already happened.
Instead of plowing overseas profits back into overseas operations to
fend off increasingly strong competition, GM NA have been using foreign
income to prop-up, indeed, justify, the overall cor****ate bottom line.
We don’t know exactly how much, from where and when this transfer has
occurred, but we do know that GM NA sucks. Cash, that is.
Putting a lien on GM Europe, Latin America, et al. would be seven kinds
of stupid. Although the same old management mistakes are beginning to
take their toll (overlapping brands, too many brands, non-competitive
products), GM’s foreign empire is in relatively good shape. But the
bottom line is that the money raised by the loan would only stave-off a
GM NA filing, not prevent it. GM has no high-profit replacement for
light trucks to pull its ass out of the fire. When the inevitable
occurs, the whole Empire would crash and burn.
Would Wagoner sacrifice the fate of millions of workers on the altar of
his own ego? Been there, done that. But despite GM Board of Directors’
paralysis regarding Wagoner’s gross incompetence and lack of public
transparency, it’s highly unlikely they’d let Wagoner’s mob pawn the
whole schmeer. There are powerful fiefdoms involved; they will move to
protect their own.
All of which leaves us where we started, 183 episodes ago. GM still
needs to be broken-up; dismembered for its own good.
Back at the beginning, I argued that all eight GM brands could be hived
off into separate companies. Since then, Wagoner’s decisions have sucked
the life blood (cash, distinctive models, brand equity) out of HUMMER,
Buick, Saturn, Saab, Pontiac and GMC. What’s worse, he’s rearranged the
main company’s structure to further blur their identities. At this
point, no automaker, no private equity firm, no “management buyout”
group would dare touch ANY of GM's brands.
These days, Cadillac and Chevrolet are GM’s only viable brands, and not
convincingly so. Does anyone really think Caddy has what it takes to
compete with BMW, Lexus and Audi? Even GM’s fiercest sup****ters are
beginning to understand that the Volt will not be enough to rescue The
General. Will the plug-in gas - electric hybrid even be enough to rescue
Chevy in the face of the well-established Toyota Prius? The Honda
Accord? Hyundai? Anyone? Bueller?
I used to believe that a better, stronger GM would arise from the ashes
of Chapter 11. I am now resigned to the fact that it's too late. To use
Car Czar Bob Lutz' terminology, all of GM's brands are damaged beyond
recovery. Still, some good WILL come of this. Someone will sell
something worthwhile in GM's stead.
Meanwhile, THIS is Rick Wagoner’s legacy: an enormous automobile company
without a chance at survival. That pays $1m a week to its employees not
to work (not including benefits). That pays $250m a month in interest
payments. That bought car divisions it didn’t need and sold cash cows it
did. That sank from 29 percent of U.S. market share to less than 19.
That wiped away tens of billions of dollars from shareholder value. That
lied to itself and the world that it was better than it was.
--
Civis Romanus Sum
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