Posted by: David Welch on December 7, 2008
On CBS’ “Face the Nation” today, Senator Chris Dodd (D-Conn.) said that General Motors Chairman and CEO Rick Wagoner should “move on.” That could mean that Dodd and other members of Congress will ask for Wagoner’s resignation before voting on a loan package for GM and Chrysler next week.
In other words, Dodd could be setting up Wagoner as the scalp that Congress can show voters before inking this proposed $15 billion bridge loan for the carmakers. Well, that certainly tees up a question that has been burning for several years. Should Wagoner be fired? The problem with Dodd bringing this up is that Washington doesn’t really know anything about the auto industry. And we really don’t want politicians running car companies or anything else. Dodd isn’t qualified to make that decision. Nor is anyone else in Congress.
At the same time, Wagoner’s record is almost impossible to defend. Since he became CEO, the company blew money on things like a $1.3 billion stake in Subaru parent Fuji Heavy Industries, which yielded no cars or technology worth mentioning. He spent $2.4 billion to get into Fiat Auto and another $2 billion to get out. GM has also paid more than $4 billion in dividends. That’s almost $10 billion wasted. While squandering that money, GM borrowed some $18 billion to shore up its pension fund.
At the same time, Wagoner cut capital spending early in the decade while many product lines—except the trucks and suvs—went too long without a refresh. Brands like Saturn and even Chevrolet labored on with inadequate marketing budgets. Hybrids were stiff armed and the EV1 electric car was killed. Like his predecessor Jack Smith, he made sure he took care of shareholders while the company often lagged in product and technology.
To be fair, Wagoner was dealt a tough hand, perhaps tougher than any CEO in the country. He has raced to restructure the company since 2005, taking out tens of thousands of jobs and unwinding decades of blunders by his predecessors. But he wasted too much cash. And to say he didn’t transform GM is such an understatement that it seems silly to mention. As basic measures go, he has failed. The stock price that soared above $90 a share a decade ago is now below $5. Market share has fallen eight points to 20% since Wagoner became chairman in 2003. No top executive would keep his job after that.
With a record like that, it is time for him to move on. It will be difficult for GM to defend its Chairman if Congress wants him out. Perhaps give his No. 2, GM President and COO Fritz Henderson a shot. Maybe there is some outsider waiting to come in. Retired IBM savior Louis Gerstner recently came available.
But before firing Wagoner, I want to know the plan. Who will take over? It can’t just be his heir apparent, Henderson. The job is too big right now for one man to do it all. And if it’s an outsider, who will it be? For all the General Electric stars that Chrysler CEO Bob Nardelli has earned, he didn’t work miracles for Chrysler. Though Alan Mulally came from Boeing to Ford and has done well.
Yes, Wagoner should go. But not until the current crisis is passed or someone tells me who the new top dog will be. GM needs leadership right now. Canning Wagoner to show voters a scalp will only make matters worse, especially if there isn’t an experienced change agent waiting to take the toughest job in American business. It’s a big decision. America’s auto industry and, perhaps soon, billions in tax dollars will be riding on it. The call can’t be made lightly.