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Business > Politics and Prejudices

Why GM failed

 

Published 4/1/2009

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Politics and Prejudices, which I began writing 16 years ago this month, comes out this week on — Ta da! — April Fools' Day. Traditionally, columnists who hit the streets on April 1 often, especially if they are feeling lazy, write tongue-in-cheek "spoof" pieces that pretend to reveal something impossible to believe, such as that former Vice President Dick Cheney actually has a heart.

Or if they want to be really absurd, they pretend that either Jennifer Aniston or Rachael Ray or Elizabeth Hasselbeck or the Octomom or John Boehner or Sarah, Track, Trig, Twit or Harvey's Bristol Cream Palin have ever uttered three words worth hearing.

That's what you might see this year. But imagine that I had wanted to write an April Fools' column back when I started. What if I had written this:

April 1, 2009: America's first African-American president today insisted on the resignation of the head of General Motors as his price for continuing to prop up the failed automaker, which has lost millions of dollars every hour for the past four years.

Incredibly, there were some who still defended Rick Wagoner, who first drew notice outside Detroit when he insisted on being flown to Washington in his corporate jet last December to beg for a bailout. Outgoing President George "Dubya" Bush agreed three months ago to pour $13.4 billion of taxpayer cash into GM, whose stock is now worth less per share than a Big Mac.

Meanwhile, the president said Chrysler has 30 days to merge with Fiat, or die.

Well, I wouldn't have written that even if I had thought of it, for one very good reason. Satire, to be effective, has to have some connection to reality. None of this would have been imaginable in that far off, Neolithic world of 1993, any more than the thought that then-President Bill Clinton would fail at health care, but go on to give cigars, blue dresses and sex a bad name.

Yet everything in my mock April Fools' column came true this week. Back to a serious look at what really happened and what we are facing here in Motown, where our core industry and economy have been crumbling faster than our buildings.

As I am writing this early Monday, the media is casting the forced ouster of Wagoner as a quid pro quo — the government demanding his head in return for 60 days and another sack of cash. That may in fact have been true in one narrow political sense. True, and totally justified. If you thought the insular Detroit press wasn't still in bed with the tone-deaf, dull-witted automotive industry dinosaurs, you only need leaf through the Detroit papers.

Oops, forgot; you probably can't today, since they won't deliver them to your house most days any more. But the world's first money-losing monopoly was still slinging fish wrappers daily back when President Obama's auto task force came to town last month.

The Free Press didn't even pretend to be a newspaper; it turned itself into one giant begging bowl and house ad for the auto industry. The Detroit News wasn't as bad, but it ran a remarkably hypocritical and naive editorial last Sunday criticizing the president for bashing the auto industry. Hypocritical, because the faux free-marketers of the News editorial page would be screaming if Obama suggested bailing out any other industry not centered in Detroit.

Naive, because it was clear that the president had decided to give the auto industry more time and money, and needed to at least cuff the welfare-seeking bastards around a bit. What he actually said was "there has been a lot of mismanagement in the auto industry over the last several years." That's putting it mildly.

General Motors has lost $78 billion during Wagoner's four years running it into the ground. He apparently was a nice guy who got along well with everyone else in the old-boy network. That, and he evidently figured out a way to sell Buicks in China.

China! Matter of fact, they now sell more of them in China than in this country. I understand that, since I was once unlucky enough to own one here. Wagoner showed how much he and his whole insular, inbred industry hadn't learned when he had himself flown in his corporate jet to Washington to beg for money.

Over the last few months, he demonstrated that he still hadn't learned very much, as he dragged his feet on doing the necessary and drastic things needed to give his company a chance to survive.

If you want to know why that was, just read David Halberstam's magnificent book The Reckoning, which is a history of Nissan and Ford, but is really about what's wrong with the U.S. auto industry.

What's wrong, in a nutshell, is that it is a narrow, insular culture. Those who make it to the top of the heap, like Rick Wagoner, tend to be white Anglo-Saxon Protestant males who have worked at the same company their entire career, and have come up with the same set of buddies. Sort of like the Delta Tau Delta fraternity Wagoner joined when he was in business school.

It is very hard to fire your old pals or even do things to make them uncomfortable. A couple years ago, Ford Motor Co. was in danger of being run into the ground by the latest puddin'head descendant of old Henry. But, to their credit, they went out and hired an executive and engineer from Boeing (Alan Mulally) who has found it easier to make the tough decisions, presumably because he doesn't have 30 years of history with incompetent old Bunkie in finance.

Halberstam's book came out back in 1986, but evidently little has changed. What's even more astonishing about the fall of Wagoner is that all of this happened much more recently at GM.

General Motors was losing billions back in the early 1990s, not as much as now, but enough that the usually comatose board of directors became alarmed. They gave then-CEO chairman Bob Stempel some time to fix it, but guess what?

He couldn't fire his buddies. So the board staged a revolt, fired him, and installed John Smale, a one-time toothpaste salesman who rose to head Procter & Gamble, as chairman of the board. He hung around for three years and guided a new CEO, Jack Smith. The company recovered, for a time. Ironically, that revolution marked the beginning of the rise of Rick Wagoner, who became chief financial officer as part of GM's 1992 coup.

Sadly, in the end, he seems to have been a smart guy with no vision beyond whatever pieces of paper lay in front of him. Three years ago, he actually conceded that his worst mistake was killing the EV-1 electric car program and "not putting the right resources into hybrids."

Unfortunately, he was too dull to comprehend why. "It didn't affect profitability, but it did affect image," he said. Talk about not planning for the future! Wacky old Henry Ford I once said that if he had asked consumers before starting out, they wouldn't have said they wanted an automobile at all. "They would have said they wanted a faster horse."

Now, General Motors has a little less than two months to try to invent a future, in a corporate culture where vision has mostly been punished.

For all of our sakes, good luck with that.

Jack Lessenberry opines weekly for Metro Times. Contact him at letters@metrotimes.com.

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