In a piece for Fortune magazine, former head of President Obama's Auto Task Force Steven Rattner, outlines the reasons he fired of former GM CEO Rick Wagoner -- and took the opportunity to take a few last pokes at General Motors' culture.
"I was shocked by the stunningly poor management that we found, particularly at GM, where we encountered, among other things, perhaps the weakest finance operation any of us had ever seen in a major company," writes Rattner.
Ouch.
Read more of Rattner's indictment of GM after the jump.
But what about GM's culture?
"At GM's Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor has elevator cards that allowed them to decend to their private garage without stopping at any of the intervening floors (no mixing with the drones)."
Well, Wagoner took responsibility for the company's failings, right?
"Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW."
Okay, but what about the board of directors?
"Meanwhile, if ever a board of directors needed shuffling, it was GM's, which had been utterly docile in the face of mounting evidence of looming disaster."
More importantly, Mr. Rattner, how were GM staffers' use of PowerPoint?
"...under the previous administration's loan agreements, Treasury was to approve every GM transaction of more than $100 million that was outside of the normal course. From my first day at Treasury, PowerPoint decks would arrive from GM (we quickly concluded that no decision seemed to be made at GM without one) requesting approvals. We were appalled by the absence of sound analysis provided to justify these expenditures."
zoomzoomn says:
08:09 AM, 10/21/09
No, really!?! GM has known since the 70's that they had brand management and union issues that would cause huge problems for them down the road. Add to that their own recognition earlier this decade that, indeed, things had come to a head for them. And still they reacted relatively little. How bad is that? Now, take Ford in comparison. They recognized just shortly after the turn of the century that bad things loomed over the horizon if they did not change how they went about their business. While many things they did were deemed unpopular and often resulted in the elimination of jobs, it saved them from the brink of disaster. I respect Ford for being proactive enough to not having to accept any government funding (and in turn not being in position for a government official to fire someone in a private sector company).
redliner says:
08:10 AM, 10/21/09
You'll be hearing from 1487's lawyers for slander and defamation of GM.
1487 says:
08:43 AM, 10/21/09
I just feel that if GM had been run like a Wall Street firm it would've been able to avoid a bailout. Oh wait, that doesn't make any sense......
I see Redliner is on the Rattner bandwagon which means he agrees that the best place to go for advice on effective managemnet is Wall Street. Pot meet kettle. If they believed if removing ineffective CEOs and board members why didn't they do that when all the bad decisions of the last decade were being made before the collapse in fall 2008?
mrryte says:
10:06 AM, 10/21/09
1487 says:
"If they believed if removing ineffective CEOs and board members why didn't they do that when all the bad decisions of the last decade were being made before the collapse in fall 2008?"
"They" as in the people on Wall Street or "They" as in the government? GM wasn't going to change on its own and Wall Street wasn't going to get too involved either. Sad to say, it took a total implosion to force the changes that should have been made long before. Like ZOOMZOOM said, FOMOCO had the foresight to change on their own and they'll be better off for it. As for Chrysler.....
altimadude00 says:
10:06 AM, 10/21/09
Because they were shoveling in money from the SUV buffet before it all collapsed. The CEOs were more concerned with their salaries and nest eggs than with developing a good product.
stoppre75 says:
12:23 PM, 10/21/09
1487:
Because those decisions were GREAT when taken in context. They produced some of the largest revenue numbers ever for an extended period of time in the finance industry. You can't blame a couple hundred bankers for making $6Trillion disappear. You can blame the government and Alan Greenspan for making money almost free to borrow for way too long. You can blame "Joe-the-Plumber" for buying a house he had no business owning because he had no realistic way to pay for it. You can blame the fraud that went on in the mortgage industry where outright lies were used to secure financing. You can blame a run-away real estate market that had people speculating on assets that were "never to depreciate". That right there would be a big red flag to anyone with their eyes open. But everyone was guilty for the recession, not a couple guys in downtown Manhattan making shady swaps and options trades.
These CEO's from Citi, Bear Sterns (the ones not on trial), Goldman Sachs etc. all did what they needed to do to gain a competitive edge. And most got caught with their hand in the cookie jar when all of a sudden everyone realized "oh sh*t, i can't pay the mortgage now that the payment just doubled" Their bailouts are from bad short term judgment calls and illiquid assets.
General Motors is NOTHING like that. They had decades to solve their problems and chose to do nothing. They watched the industry change and revolutionize before their eyes and just built bigger SUV's using more union labor. Sure those things made money in the early 2000s, but don't tell me no one at GM thought oil might become an issue sooner or later. You know that they must have realized that they're gonna lose any competitive advantage they had when Toyota can build a car in this country for half the labor cost as themselves. You can't believe that a company that lost over $100 Million a DAY for over a year didn't have management issues. For whatever reasons they had, the execs at GM thought that if they build a car we will buy it because who knows better. Being top dog for so long can make it hard to accept change. That's obviously what happened at GM and the quickest way to fix it was to change the people making decisions.
I'm not hating on GM, I'd like to see them succeed. They have all the pieces in place to do it now too, but its going to come down to execution again. They need to get off this EPA MPG advertising campaign for one, bring in or start building cars that Americans WANT to own and just do it, nike style. Build the best car and people will buy it, plain and simple.
inlinesix says:
02:15 PM, 10/21/09
"You'll be hearing from 1487's lawyers for slander and defamation of GM."
+1
Great article by the way.
The direction Buick is headed is a good start but spending time/money on competitions that show the CTS-V is fast is not great. Because, people already know the CTS-V is fast, and they aren't going to buy them due to a 1/2 second advantage around a track.
hondacura4 says:
03:47 PM, 10/21/09
The truth hurts.
cwc1 says:
06:44 PM, 10/21/09
Whether this guy's assessment of the cause of GM's problems is the whole truth or not (it's not), he had no legitimate authority to fire GM's CEO, whether or not others think he deserved it. It is *not* the role of a federal government to run private industry. This is an illustration of how our federal government has morphed into a national one, where central planning and fascism is their standard method of operation. GM should never have asked for federal loans, as that just gave the big government advocates a bigger opening into its business. GM should have been allowed to file the quick-wash bankruptcy on its own, before it ever accepted dollars from Washington (which really come from us).
Also, building vehicles with union labor is the only choice GM (and Ford & Chrysler) have for the vehicles they build in North America. They can't ditch the UAW. They're not allowed to due to federal and state laws, although I would sure love to see it. The UAW's political hold on Detroit is one of the nooses which have been strangling them for years (but not the only one).
Ford's situation is just good timing. Sometime in late 2007 - early 2008, they mortgaged everything of value that they could in order to get the credit lines they have now, before the credit markets tanked. Their product line then was pretty dismal, and not as deep as even GM's. Ford has been moving fast to correct that, and we are starting to see some results. Don't get me wrong though - I want Ford to be successful, particularly because they may be the last American auto company untainted by government bureaucrats and politicians.
cwc1 says:
06:51 PM, 10/21/09
And one more thing -- Mr. Rattner conveniently neglected to mention the entity with the truly weakest financial operation of them all. That would be the very government that employed him during that time.
firstwagon says:
07:26 PM, 10/21/09
The government is the representative of the people of the country. When the people of the country (aka the taxpayer) paid to bail out the company, they got the authority to fire whomever they choose.
No matter what political theory classes taught you.
allthingshonda says:
08:18 PM, 10/21/09
I also applaud Ford for going it alone and without government help and I hope they are successful. But I don't think GM should be frowned on just because the government owns some of it. Most people here think Volkswagen makes great cars including IL since they can't get enough of Audi. Volkswagen is partially owned by the German government and no one seems to have a problem with it.
blueguydotcom says:
09:48 PM, 10/21/09
@firstwagon - agreed. GM took the cash and at that point they surrendered the argument that the government couldn't run them.
cwc1 says:
06:12 PM, 10/22/09
This is exactly why it was wrong for GM to ask the federal government for money and why it was wrong for the government to authorize it. I bet a lot of these CEOs and board members are now wondering what in the world they were thinking. The cure for avoiding bankruptcy is worse than the disease.
@firstwagon, events like this set precedents for governments to take even more control and seize even more power - power that they never give back to the people. Already, certain congressmen and senators are discussing controlling other private sector companies who didn't receive any federal dollars at all, under the guise that they want to prevent events like these from occurring again. The truth is they just want more power over the citizenry whom some of them regard as subjects instead of their bosses. Whatever liberty a society cedes to the state, they never get back. These are significant steps along the road to serfdom.
And here's something to contemplate, that we'll never see analyzed in the mass news media.
The money to bail out GM didn't come from our tax dollars, or even the taxes of our children and grandchildren. Our tax dollars have long since been spent on plenty of other crap, such as paying the interest for the years of huge budget deficits in the past and in the years to come. (The Obama administration's projected annual budgets for the next few years are over 1 trillion dollars - more than was consumed by the federal government in America's first 200 years.) The money for GM, Chrysler, TARP, Fannie Mae, Freddie Mac, etc. was created out of nothing; just by a few accounting entries at the Federal Reserve, and speeding up the printing press at the Treasury as necessary.
So, it's essentially counterfeit money that doesn't represent real productivity. Thus, it's coming straight out of our pockets and bank accounts through currency devaluation by artificially inflating the supply of our fiat currency which is backed by nothing tangible. Our dollars will buy significantly less in the near future.