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Why It Is Time for Rick Wagoner to Go

Peter Morici

University of Maryland

Last week we learned that mistakes in GM accounting raised its 2005 losses above $10 billion. That is well over $5000 per vehicle. With Toyota earning money on its cars, GM’s disadvantage vis-à-vis Toyota must be in the range of $7000 per vehicle.

Quite simply, GM has higher costs than Toyota, and Toyota can fetch higher prices for its durable vehicles than Rick Wagoner can command for his more trouble ridden contraptions.

On the cost side, all the propaganda Rick Wagoner has been flinging about, just like the company accounts, does not add up. Repeatedly, GM officials have pointed to health care costs for retirees, dependents and employees. Toyota contributes to health care for employees too. Not as much, but I bet you can’t find much more than $1600 in the difference.

GM pays it workers a bit more, it gives them better benefits, gives them more time off, and permits them to retire sooner than does Toyota and other foreign companies operating in the United States. GM is bound by more rigid work rules and job classifications, and does not communicate effectively with its workers. It relies too much on the United Autoworkers Union, which massages and filters information.

And then there is the jobs bank for workers idled but not required to relocate. At the end of 2005, GM was paying 5200 a cool $500 million plus to play checkers, do charity work and the like. No doubt many other active employees are being sent work better done in other places but for the fact that GM does not want to add more sinecures to this private welfare program.

In addition, GM’s marketing arm is more bureaucratic than pre-Revolutionary France and equally decadent. It commits faux pas like featuring a Cadillac plowing through snow on TV ads in Miami.

GM’s design and engineering are equally screwed up. New vehicle development takes too long, and even successful GM products like the Impala go much longer without redesigns than their Japanese competitors. When new additions arrive, they often lack the latest features in core components—engines and transmissions.

In both the marketing and design departments lines of authority are so jumbled and confused, no one is accountable or appropriately rewarded. Whether you perform badly or well, chances are nothing will happen.

Not that GM does not have its hits. You can’t find a better large SUV than the Suburban or Yukon, and the Impala, while technically lagging the Camry, is reliable and delivers a lot of car for the middleclass dollar. Yet there are just not enough of those hits to maintain a market share close to 25 percent and pay GMs massive overhead.

Then there is the quality issue. Cadillac and Chevy are less reliable by miles than Lexus and Toyota. Even Hyundai has better five year reliability, and it offers a 100,000 mile warranty. If GM did that, the repair bills would likely break it.

GM’s brands are poorly aligned to key demographic groups. It does not have a credible answer to BMW and Lexus sedans, nor does it have a youth label with the pizzazz of Scion.

What Rick Wagoner needs to do is both simple but hard.

GM needs a less expensive and more flexible labor contract, less overhead and red tape in marketing and design, brands realigned to attainable markets, and a CEO who can convince employees and consumers he is serious about making good cars.

That’s tough because the United Autoworkers Union has blue collar workers believing management is bluffing, white employees are suspended in a Brigadoonean mentality, franchised dealers resist change like Soviet plant managers, and Rick Wagoner appears to lack the public confidence to speak to consumers effectively about his products.

Turning GM around requires that its CEO be candid, take on vested interests with vigor, and think outside the box about labor contracts and organizational change.

Sadly, Rick Wagoner lives inside a box and is confused by or afraid of the challenges before him.

He has never adequately enumerated what must be accomplished. Instead, GM statements and advertising seek to convince Americans GM cars are better than they are, and leave us to believe GM's cost problems could be solved by national health insurance. Wagoner appears to fear the union like a freshman fears final exams. A former Chief Financial Officer, he is neither a car guy nor a corporate visionary or strategist.

For years, as CFO, he milked the General Motors Acceptance Corporation to cover up cost problems in manufacturing. Now we learn as CEO he has been engaging in very aggressive accounting and been caught. That is hardly an example of creativity and integrity to offer employees engaged in a struggle for survival.

As Lee Iacocca used to say, “Lead or get out of the way.”

We know Wagoner can’t lead, so Rick, please exit stage left.

Peter Morici

Professor

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742-1815

703 549 4338

cell 703 618 4338

pmorici@rhsmith.umd.edu

http://www.smith.umd.edu/lbpp/faculty/morici.html

http://www.smith.umd.edu/faculty/pmorici/cv_pmorici.htm

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Rick Wagoner got in as part of the old WASP hookup. His rich Daddy promised him that one day he'd get to have his turn running General Motors, and so he did. :nono:

Back when GM had 50% market share and the economies of Germany and Japan were in shambles, it didn't really matter much who ran GM. But today GM is being squeezed, and Rick Wagoner needs to go.

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I'm sorry, i just couldn't read further after this:

...and Toyota can fetch higher prices for its durable vehicles than Rick Wagoner can command for his more trouble ridden contraptions.

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I'm sorry, i just couldn't read further after this:

It may not be accurate (as hyperbole tends to do that)...but the perception of that basic truth is what's killing GM.

They USED to make crap...now they're paying the piper...that's all this is.

Where are the media conspiracy kooks when the Corvette, GMT-900's or the Solstice get GLOWING reviews?....you guys can't have it both ways - somebody's gotta recognize the logical disconnect....

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I'm sorry, i just couldn't read further after this:

Then you missed this:

Then there is the quality issue. Cadillac and Chevy are less reliable by miles than Lexus and Toyota. Even Hyundai has better five year reliability, and it offers a 100,000 mile warranty. If GM did that, the repair bills would likely break it.

-RBB

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Back when GM had 50% market share and the economies of Germany and Japan were in shambles, it didn't really matter much who ran GM.  But today GM is being squeezed, and Rick Wagoner needs to go.

I'll drink to that.

Anyone who bitches about F-body sales when the model is 8 or 10 years old and lets the B-body get killed wiht absolutely NO plans of a replacement line of full size cars deserves the boot. I wish he had gotten fired in 1995 personally.

Perhaps today GM would have a LS-series powered line of Chevrolets, Pontiacs, Buicks, Cadillacs & Oldsmobiles! The 300C would be playing catchup to a RWD LS6 powered Impala SS and LS7 powered Impala Z11. Mean time Saturn would be dead, Saab would have been jetisoned and Subaru would be collaborating with Pontiac on a Grand Am GX/WRX Sti.

Just a thought. :wacko:

Edited by Sixty8panther

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You guys got a lot farther than me. I had problems with the FIRST LINE!

Last week we learned that mistakes in GM accounting raised its 2005 losses above $10 billion. That is well over $5000 per vehicle.

Let's see...$10,000,000,000 divided by $5,000 and you get 2,000,000 vehcies. As I recall (forgive me for not scrambling to look up the exact number), GM built over 8,000,000 vehicles. While $10,000,000,000 is a staggering number for any company and a $5,000 loss per vehicle is astounding, the real number of around $1,000 is much easier to deal with. And what's the number given to pension and healthcare per vehicle? Take that alone out and isn't there a profit?

I'm not saying that this article is off the mark, because it might not be. But when you open the article with such bad math, why should I read further?

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FOG - GO at it - I think it is called for in this case.

I just can not resist. To Hudon's point, kudos. That was the first thing I did. Seems the old Doc, did not learn basic math on his way to his Ph.D. It is a shame the education system has come to that. Even if the Old Doc. was just looking at US production, it would have been only $2000/vehicle.

I tried to link to Peter's resume, and it seems it is a dead link after a yahoo search.

If there is anything of value embedded in the drivel, here it is:

"GM needs a less expensive and more flexible labor contract, less overhead and red tape in marketing and design, brands realigned to attainable markets, and a CEO who can convince employees and consumers he is serious about making good cars.

That’s tough because the United Autoworkers Union has blue collar workers believing management is bluffing, white employees are suspended in a Brigadoonean mentality, franchised dealers resist change like Soviet plant managers, and Rick Wagoner appears to lack the public confidence to speak to consumers effectively about his products.

Turning GM around requires that its CEO be candid, take on vested interests with vigor, and think outside the box about labor contracts and organizational change."

The rest of the words are a bunch of mis-facts, errors, opinion, rhetoric, propaganda – I did not have to guess who posted the article.

Edited by evok

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You guys got a lot farther than me. I had problems with the FIRST LINE!

Let's see...$10,000,000,000 divided by $5,000 and you get 2,000,000 vehcies. As I recall (forgive me for not scrambling to look up the exact number), GM built over 8,000,000 vehicles. While $10,000,000,000 is a staggering number for any company and a $5,000 loss per vehicle is astounding, the real number of around $1,000 is much easier to deal with. And what's the number given to pension and healthcare per vehicle? Take that alone out and isn't there a profit?

I'm not saying that this article is off the mark, because it might not be. But when you open the article with such bad math, why should I read further?

I think that math assumes that other areas of the company (i.e. the staggeringly profitable GMAC arm) made money, thus the auto operations dragged down the entire economic picture, although either way, its impossible to agree with or refute the premise with the information given.

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I think that math assumes that other areas of the company (i.e. the staggeringly profitable GMAC arm) made money, thus the auto operations dragged down the entire economic picture, although either way, its impossible to agree with or refute the premise with the information given.

No it is faulty math - According to GM's 8K released in January 06, GM lost (net income)11.3 billion in 2005, just in their auto operation. You would think the econ prof would know how to read a cash flow summary. The 11.3 billion does not factor in GMAC, VEBA withdrawals, and one time charges. Just automotive.

As for the latest financial numbers, GM has not released their revised data.

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This article is the typical propaganda the BM likes to post. The BM likes the words for what they have to say, not that they are accurate.

"The bigger the lie the more people believe it."

I forgot where I read that, I think it came from a WWII book I read on the rise of the Third Reich!

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it's been a while, but I seem to remember having to footnote all my facts and figures when I wrote an essay. i guess when you're a prof. that doesn't apply and you can spew off what ever you want without any supporting evidence.

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This article is the typical propaganda the BM likes to post.  The BM likes the words for what they have to say, not that they are accurate. 

"The bigger the lie the more people believe it."

I forgot where I read that,  I think it came from a WWII book I read on the rise of the Third Reich!

Are you (or others here) going to defend GM management? So, this writer is a big, fat liar - assuming that for a fact...does that make an 11 billion dollar loss on what is your core competency in a near record sales marketplace a good job?

I just don't get it. Instead of picking on this unknown writers' inaccuracies, how about pointing the finger at those who have brought GM to the literal brink?

BTW- somebody here posted the article...its not like we were going to see this one in Newsweek...Media Bias my ass...this guys work wouldn't have made it past his own doorstep if someone hadn't of posted it here!

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Are you (or others here) going to defend GM management? So, this writer is a big, fat liar - assuming that for a fact...does that make an 11 billion dollar loss on what is your core competency in a near record sales marketplace a good job?

I just don't get it. Instead of picking on this unknown writers' inaccuracies, how about pointing the finger at those who have brought GM to the literal brink?

BTW- somebody here posted the article...its not like we were going to see this one in Newsweek...Media Bias my ass...this guys work wouldn't have made it past his own doorstep if someone hadn't of posted it here!

the question of GM management ability is not really the point of this thread. we can argue all day long about $11B in losses and whether it was Rick's fault, Bob's fault etc.

The point IS that someone *cough cough-BM* posted an article to support his assertion that Rick Wagoner needs to go. Before we can argue whether Rick needs to go or not, we must first determine the accuracy of the article.

Some fairly credible people, IMO, have clearly demonstrated that the article is bunk.

does that forgive $11B in losses? No. but the fact is this specific article is bunk.

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the question of GM management ability is not really the point of this thread.  we can argue all day long about $11B in losses and whether it was Rick's fault, Bob's fault etc.

The point IS that someone *cough cough-BM* posted an article to support his assertion that Rick Wagoner needs to go.  Before we can argue whether Rick needs to go or not, we must first determine the accuracy of the article. 

Some fairly credible people, IMO, have clearly demonstrated that the article is bunk.

does that forgive $11B in losses? No.  but the fact is this specific article is bunk.

Good post,Regal. Maybe Rick needs to go, maybe not but factual information is essential in figuring that out. This article doesn't qualify.

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the question of GM management ability is not really the point of this thread.  we can argue all day long about $11B in losses and whether it was Rick's fault, Bob's fault etc.

The point IS that someone *cough cough-BM* posted an article to support his assertion that Rick Wagoner needs to go.  Before we can argue whether Rick needs to go or not, we must first determine the accuracy of the article. 

Some fairly credible people, IMO, have clearly demonstrated that the article is bunk.

does that forgive $11B in losses? No.  but the fact is this specific article is bunk.

This guy isn't media..he's (supposedly) an academic (if the byline is accurate).

BM is just that...BM. You want GM to get a fair shake? That's nice. But in the real world, people and organizations are judged on their performance...and GM's has been abysmal...

Wanna talk about that?

Investments....junk & losses.

Partnerships....awful wastes of time with Subaru & Fiat...with billions squandered. (Daewoo is the only success---and it will spell the end of small car engineering in the western world, but I digress)

Quality....mostly in the toilet until they were embarassed into action by JD Power &, to a lesser degree, CR.

Worker Relations....UAW is willing to ride this ship into the ground. 'nuff said.

PR....laughable since the time they were caught trying to lure Nader with hookers in response to Unsafe at Any Speed. There hasn't been an effective spin campaign or any media situation they've been less than heavy handed with (see LA TImes & Dan Neil fiasco) in years. or Where'd those 30, I mean 29, I mean 25 buttons gone ?

I just think the BM idea is BM. How do glowing reviews of the Solstice, GMT-900's and the 'Vette (along with high praise of the 'new' Cadillac) square with the Biased Media spin? Answer- It doesn't.

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Hey Enzl,

You raise some valid points, but I sense a misunderstanding here.

Are you looking at the abbreviation "BM" as "biased media"?

I believe others are reading "BM" to mean "Buickman".

Just thought I'd try to clear that up.

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Hey Enzl,

              You raise some valid points, but I sense a misunderstanding here.

Are you looking at the abbreviation "BM" as "biased media"?

I believe others are reading "BM" to mean "Buickman".

Just thought I'd try to clear that up.

Didn't realize that.... but it doesn't change the point of the post...this 'academic' is not just a nobody, he's a never-will-be...others jump on the 'facts' (as if an 11b loss is something to split hairs about) in the op-ed piece...it's not a news article, its an opinion! - and not a mainstream press publication, anyway!

I really just don't 'get' what it is that brings people back to pointing out every negative article that gets published...Yes, GM bashing is fashionable, but, for reasons I've BEGUN to outline above, its not entirely unfair, as recent history has only begun to undo years of negligence, waste & hypocracy of the highest order at the General.

It bums me out as someone who depends upon GM for part of my livelihood. It should kill those on this board who consider themselves enthusiasts. I look at the apologists on this site as analogous to beaten wives or helsinki syndrome hostages....they can't help but feel for their tormentor.

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Didn't realize that.... but it doesn't change the point of the post...this 'academic' is not just a nobody, he's a never-will-be...others jump on the 'facts' (as if an 11b loss is something to split hairs about) in the op-ed piece...it's not a news article, its an opinion! - and not a mainstream press publication, anyway!

I really just don't 'get' what it is that brings people back to pointing out every negative article that gets published...Yes, GM bashing is fashionable, but, for reasons I've BEGUN to outline above, its not entirely unfair, as recent history has only begun to undo years of negligence, waste & hypocracy of the highest order at the General.

It bums me out as someone who depends upon GM for part of my livelihood. It should kill those on this board who consider themselves enthusiasts. I look at the apologists on this site as analogous to beaten wives or helsinki syndrome hostages....they can't help but feel for their tormentor.

I think you'll find heavy agreement among the membership on many of your positions. If, they were presented in a different context than this thread. Even among some you refer to as apologists. Most here have a very critical view of past management practices at GM that allowed the current crisis environment to come about. However, the knee-jerk conditioning of much of the press to spew doom and gloom about GM no matter what, has most of us a bit ticked-off as well. This academiic, if he even exists, is hardly important by himself but any article with glaring inaccuracies is going to be ripped to shreds around here.

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Just because someone is a Ph.D. or an academic does not justify an op-ed based on false facts and lack of data.

What is his angle?

Almost every single opinion the Doc. states I can refute with hard data?

"Then there is the quality issue. Cadillac and Chevy are less reliable by miles than Lexus and Toyota. Even Hyundai has better five year reliability, and it offers a 100,000 mile warranty. If GM did that, the repair bills would likely break it."

What is the metric?

I know he does not have data available on his claims with regard to GM offering a 100,000 mile warranty since it is not public.

This article is not even worth reading because it is political spin for some agenda.

It is not based upon a document, hard look at the numbers and data.

Isn't that what a Doc. is supposed to do.

I know if his dissertation had as many holes as this long essay, I would have never approved it. He would still be helping out freshman in Intro To Econ.

I do plan to go through his other articles I see online.

He does appear to be a hack.

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I think you'll find heavy agreement among the membership on many of your positions. If, they were presented in a different context than this thread. Even among some you refer to as apologists. Most here have a very critical view of past management practices at GM that allowed the current crisis environment to come about. However, the knee-jerk conditioning of much of the press to spew doom and gloom about GM no matter what, has most of us a bit ticked-off as well. This academiic, if he even exists, is hardly important by himself but any article with glaring inaccuracies is going to be ripped to shreds around here.

I appreciate the thought. I have personally found that this site has been unfriendly to 'dissent.'

I personally believe that addressing these BS articles gives them the credence (and the PR) they don't deserve.

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Not only does the math not add up, but more than half of GMs losses for 2005 were due to employee buy outs, and Delphi. $1600 per car is $12.8 Billion. So without the employee buyouts and delphi, which GM wont have to pay every year, if GM could save $1600 per car, GM would be making about $8 Billion a year.

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Guest YellowJacket894

Quite simply, GM has higher costs than Toyota, and Toyota can fetch higher prices for its durable vehicles than Rick Wagoner can command for his more trouble ridden contraptions.

Then there is the quality issue. Cadillac and Chevy are less reliable by miles than Lexus and Toyota. Even Hyundai has better five year reliability, and it offers a 100,000 mile warranty. If GM did that, the repair bills would likely break it.

I wondered how much it cost for Toyota to get these two lines of deathless prose printed in this article, eh? (Probably a grand or two and the promise of a blow job to the writer, I would guess...)

As I have said in other threads here, I choose to give Wagoner another year before I jump on the "Give Wagoner the Boot!" bandwagon.

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LOL...

Now guys, I've been trying to post more from LOGIC lately than pure EMOTION which is very difficult for me to do.

So, in that light, I'll just say that this article is PURE :bs:. This guy is throwing opinions around like a frisbee on the beach and claiming them all as facts.

At least when I fling opinions, I ACTUALLY admit that they're opinions.

L-A-M-E.

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