Bailout shock: "stunningly poor management"
The arrogant duo?Over the years, I've been a pretty big GM critic. Sure, the Chevy Volt gave me some hope - and it still does - but GM's overall efforts towards fuel efficient products has been disappointing. Even after 9/11, GM didn't embrace hybrid cars or small, more fuel efficient vehicles. Instead, they launched a new line of their biggest, foreign-oil dependent guzzlers.
While I've always blamed poor management for GM's lack of visionary leadership, others have blamed the lack of national health care, yen-dollar exchange costs, sky high oil prices, etc.
Today, Steven Rattner, one time Obama Auto Task force leader, told Fortune he was alarmed by the "stunningly poor management" at the Detroit companies and said GM had "perhaps the weakest finance operation any of us had ever seen in a major company."
"We were shocked, even beyond our low expectations, by the poor state of both GM and Chrysler. Looking just at the condition of GM's finances and Chrysler's new-car pipeline, the case for a bailout was weak," claims Rattner.
Sure, America might have had no choice but to bail out most of the US auto industry, but it's time to close the book on the idea that management at GM couldn't have prevented this crisis.
Labels: bailout, fuel economy, GM, Hybrid Vehicles
posted by Dahcredyns at
7:53 AM
24 Comments:
gotta watch whose making these judgments sometimes.
I'm not sure who would be a rock-solid credentialed critic but I would hope they had substantial experience successfully running a company - at least allied with the automobile industry or that they have solid background in the finances of similarly large enterprises.
The Wiki account of this fella - is not impressive.
he may be a lot better than he looks on paper ... I dunno...
Remember GM is a worldwide company :
"GM manufactures cars and trucks in 34 countries, recently employed 244,500 people around the world, and sells and services vehicles in some 140 countries."
that's out of about 200 countries total.
you don't get to be that large without doing some things right..
the thing about companies though - is that they are not unchanging monoliths... management changes and sometimes idiots take over an ruin what used to be a good company - and most of us are none the wiser as to who the players are now - or ever were - much less which ones were excellent and which ones were nincompoops.
so, are you suggesting that Obama's task force was/is incompetent?
to me it all adds up.
and sure GM is huge. it's so huge it's too big too fail. it's so huge that, up until recently, it had tremendous influence over congress and american politics.
just a few years ago, when dems controlled congress during the bush admin, dems had a chance to increase cafe.
they didn't and John Dingell led the charge on the back of the union.
likewise, it was so huge that it could simply buy out many smaller foreign automakers, or at least a controlling share of those companies.
there was a time when GM was a heck of a company, but for many decades it was a crappy company that used it size and influence to protect its complacent incompetence at the expense of US energy policy and even GM consumers.
they've turned some corners but their "friendly arrogance" is still offensive and unwarranted.
likewise, ron goettlefinger expressed similar thoughts at his testimony before congress leading up to the bailout.
add that to supplier surveys that claim even Chrysler is more innovative than GM and i'm pretty comfortable with the "stunningly poor management" assessment.
"incompetent"? You mean like "Good Job Brownie"?
heh heh
this guy's qualifications look a little sketchy - started out not as an MBA but a news reporter.
All Presidential administrations appoint their share of stinkers...
anyhow... when we're talking about these huge corporations - I want the critic to have some equivalent experience...
Just about anyone can repeat the conventional wisdom of just how bad GM is... especially since they had to be bailed out - just jump on the bandwagon...
but I do give them a chance - I read the specifics of what they are saying...but it needs to be specific not just saying they did this or they did that "bad".
I want to know what it was they were doing not so good and how that was different from a better run company.
and it has to be germane - a material difference.
In other words, if a certain failing is found throughout an industry in both good and bad companies.. it's not relevant IMHO to ascribe that behavior to a company that fails if other companies that have't failed also do it.
it needs to be material and specific - at the core of what the company failed - and that's a higher standard.. it requires them to know their stuff and not just another guy piling on...
Larry G:
Just because you are large and grow doesn't mean you are doing it right.
Cancer also grows uncontrollably...does that make good and right?
Under the right circumstances, even crap can grow. Unfortunately for GM, the reality of selling crap is catching up them.
No one seems to want to listen but honestly, the sooner this company completey goes under and disappears, the better for the LONG TERM of our future, environmentally, globally, economically.
We need to hit the restart button for a change.
larry,
the report doesn't just hammer rick wagoner, but the board as well.
the company was permeated by "friendly arrogance".
many americans can survive paycheck to paycheck, but that doesn't mean their long term financial situation is very good.
gm, chrysler, and ford - before mulally - were largely living paycheck to paycheck. the long term plan and vision was unclear.
just look at the futuristic concepts that have been coming out of japan for many years. japanese automakers are very focused on the future.
the tokyo auto show, for instance, is full of robots, odd and unique ideas on personal transportation devices, strange micro-cars, etc.
you don't see anything like that on the US auto show circuit.
the big 3 have largely only been focused on right now.
fortunately, that's changing, at least a little. only time will tell.
still, even today, if you ask bob lutz about the decline of GM, he'd come up with many reasons, none i bet, however, would be management or product related.
whoa - I'm not defending GM. I'm just saying that only someone with the right background and experience can give a more informed view of what they did wrong.
GM makes cars worldwide guys.
The make small, fuel efficient cars worldwide - and they produce what the particular market wants in those countries or else they would not have grown to the multi-national that they are.
They did not get that big by doing stupid stuff...
For instance, OnStar was/is a major telematics innovation - it pioneered the field.
they're big in Brazil...
they obviously have done stupid stuff after they got big - but again.. unless someone really knows what happened.. it's just another guy piling on...
Again.. I'm not defending them.. I'm just saying that there are lots of opinions about what they did to go wrong - and not all of them are spot on.
just one aside here...
when the credit markets dried up - a bunch of companies that depended on the credit markets - got into trouble and some of them escaped default and bankruptcy by the skin of their teeth...
It is likely that GM would have survived if the meltdown had not occurred.
they just had no insufficient reserves to carry them once the credit markets dried up.
ya'll ought to swing by Wiki to gain a broader appreciation:
http://en.wikipedia.org/wiki/General_Motors
GM has quite a few profitable divisions overseas.
their failure has been primarily in the US
i've been following the GM story closely for at least 5 years.
why is wikipedia more of an expert than the Obama Task Force?
likewise, i don't disagree that GM would have survived if not for the economic collapse.
so what?
they might have survived the economic collapse if they had a more well-rounded and stocked product portfolio during the gas spike leading up to the recession as well.
still, to me, you keep your financial house in order by having a long term plan. i really doubt, based on their products and concepts, that gm had a seriously thought and well-invested long term product plan.
gm overplayed the gas-guzzler and it cost them big.
long term planning requires vision. toyota's vision has been blatantly obvious for more than a decade.
that's leadership. when you have that kind of vision its much easier to forecast your financing.
if not you're just flying by the seat of your pants making quick decisions.
alan mulally understand this, and that's why i have faith in ford. still, ford has decades of bad management to overcome.
it wasn't but just a few years ago that ford was all but left for dead.
new, smart management made an obvious difference between Ford and Gm.
One specific difference between Ford and GM that I vaguely recall, is that when Mulally joined Ford he secured a new, very large line of credit to finance his restructuring. I believe Mulally even claimed that if the timing for his arrival had been too late, Ford would have been in a similar boat of not being able to secure credit for a restructuring.
This is just a little nugget of back ground data. Unsourced even!
Disclaimer: I am also not defending GM! I don't have an informed OPINION to share or DEFEND.:)
I just didn't see Wiki as a "pro-GM" account... but rather a fairly comprehensive view of the actual width and breadth of the company - a better true measure of who and what they are.
Again. I'm no defender of them. A long time ago, I stopped buying their cars because they were so bad in terms of reliability.
you're absolutely right, alcatholic.
it was basically his first order of business. yet, even after doing this ford was still not taken seriously by anyone.
it wasn't seen as some major move in the industry until it saved Ford from bankruptcy. but for an outsider coming in and looking at the future, it was the most important step to be taken.
yes.. FORD was either lucky or smart - but the really relevant point ere is that BOTH GM and FORD needed credit.
Ford got it and GM could not.
timing is everything sometimes
larry-
i was just wondering why you seemed so skeptical of the Task Force assessment. steve rattner, for instance, is an incredibly well known financier.
certainly that doesn't mean he fully understands the auto business, but, from a financing perspective, he's got pretty good cred.
i'd love to be a huge advocate of GM. when they first debuted the Volt, i almost became a fan. but the Volt wasn't enough to make me look past the rest of the business and the gaps in their product plans.
now we've bailed them out.
still, if gas prices go up significantly in the next 5 years, i don't see that GM's game plan his really changed that much.
the cruze is a nice move, but that should have been done years ago. it wasn't until CAFE forced GM to act did they finally act.
yet, at best they are playing catch up. i still don't see a real vision, and that's worrisome.
if management was as bad as rattner claims, has enough change occurred?
larry-
on that point, i don't think it was luck at all. mulally saw it as essential to survival.
nothing personal in my view - I don't know him. I don't know his work and his career does not appear to be a MBA through CEO ( or similar management levels).
but also.. isn't this also his assessment (from the article):
" Former task force head bullish on GM, Chrysler"
" The former head of the Obama administration's auto task force expressed optimism Wednesday that General Motors and Chrysler could rebound and help taxpayers recoup some of their multibillion-dollar investment in the Detroit auto companies.
Steven Rattner, in a speech sponsored by the Brookings Institution, said his auto team was stunned by the dire straits of GM and Chrysler when they delved into the companies' financial books but remained confident that the overhaul of the automakers could eventually restore them to profitability."
you know me... I'm from Missouri.. trust but verify and all that rot..
re: "growing" , crap, cancer, et al
yes.. I agree.. but NORMALLY the way we judge success with companies is that if they are doing good - they sell more stuff and then they have to open new factories... expand into new markets, etc...
the problem is when you get big - that it can and does in many cases engender an institutional culture that starts to tend toward a status-quo arrogance.
Even Toyota is not totally immune from this - nor Ford.
In this day and time, it takes a really good management team to steer a big company ... and even then you can get in trouble - ask Kodak and Polaroid.
People can say - why didn't Kodak and Polaroid adapt and change with the market - and that's a real good question. GM is not alone but I think they have disappointed a lot of people who wanted the US to stay in the game.. and they didn't do such a hot job of that.
I'm not convinced they are done.
The poor management went on for 30 years if you ask me.
This is not the first oil crisis we have seen. When the last oil crisis hit 30 years ago, GM, Ford and Chrysler were caught with their pants down, having no vehicles that were fuel efficient in production or even in development.
30 years later, GM, Ford and Chrysler slipped right back into the same pattern and let history repeat itself. This time the price for failure was much higher for GM.
The question is, will history repeat itself a 3rd time, or will the big 3 finally learn their lesson?
larry-
"the problem is when you get big - that it can and does in many cases engender an institutional culture that starts to tend toward a status-quo arrogance."
i think you sum it up quite well in that statement.
and GM can survive and do well, but they'll probably never pay back all that was invested into them.
moreover, my issue with GM still comes down to their future plans.
to smurf's point about a third oil crisis, i think it would crush GM, and I don't see enough in the product pipeline to address this issue.
perhaps ethanol or natural gas or something will stabilize energy prices and make GM's profitable products sustainable for a longer period of time.
if not....
Obama put a different head on the snake, but the body and instinct of the snake remained the same. The same is likely of the Big 3. Both Washington and the Big 3 needed to change their mindset years ago. Our past 8+ years of denial have driven them too fast for their breaks to stop them in time or their handling to avert a wreck.
The bail-outs were merely to buy time for public opinion. Too little has been done since then to justify that investment. It might have been more efficient to just dump the money as loose bills from a helicopter at 5000 feet over Detroit. At least then it might have been useful to someone who needs it.
well, i think we've been subsidizing the Big 3 for longer than just the last 8 years, but i largely agree with your sentiment, kp.
the government wants to invest $80 billion in GM and Chrysler, but with a hands off approach.
why? why not use this as an opportunity for real change?
that's what bugs me.
they could not allow GM to go under in the middle of a near depression.
it would have destroyed any consumer confidence in the economy and probably started a panic.
the bail out is a temporary reprive... and it won't be repeated if GM does not produce.
Once the rest of the economy starts to recover, if GM is still fiddling around .. I'm convinced that this administration is going to kiss them goodbye....
the only thing that saved their bacon was this administration didn't want them going down at the same time that the banking industry was going down...
and while i agree with KP's sentiment, i didn't mean to suggest - if i did - that i thought gm should go under. rather, if the gov. has to get so financially involved, why not use it as an impetus for greater change within the us auto industry?
As bad as some may feel GM management is.. believe me, we do not want a government employee telling them what to do.
you need to have people whose salary is tied to the results involved in the decisions and when you have a career govt employee deciding what is appropriate business decisions.. you've got yourself a worse problem than private sector bad management.
no doubt a good point.
i certainly don't mean running GM. i mean creating a bigger national goal around the auto industry, such as ending US dependence upon foreign oil.
if gm, for instance, is too big to fail, how can the government ensure a return on our investment - a return not solely based on GM's decision making?
aside from the $80+ billion directly invested into GM, the government is also handing out billions in grants and another $50 billion in loans.
for what?
new cafe regs that put us where europe and japan are today?
that's where i'm getting at.
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