Monday, March 30, 2009
G. Richard Wagoner Jr. just stepped down as CEO of General Motors at the request of the Obama administration. Should he have been dismissed? The Post asked experts to weigh in. Below are contributions from Mark Zandi, Malcolm Salter, Matthew Debord, Kimberly Rodriguez, Daniel J. Ikenson and Dennis Virag.
Chief economist at Moody's Economy.com
The Obama administration's hard line with GM and Chrysler, including dismissing GM CEO Rick Wagoner, is appropriate and will produce substantial benefits. The government became the automakers' most important creditor at the end of last year, and it is ensuring that the taxpayers' investment is protected. This includes installing senior management that the government is confident will make the changes needed to put GM on the path to long-term sustainability, and telling Chrysler that its survival depends on quickly finding a business partner.
The most immediate benefit of the administration's stance is that it raises the likelihood that the automakers and their stakeholders will quickly make the tough decisions needed to become viable. It also sends a clear message to the managers of other troubled companies looking to the government for help: aid will come with a very high price tag, including perhaps even the loss of top executives' jobs. The government can't bailout everyone, and the administration's actions with GM and Chrysler are clear signals that it won't try.
Former adviser to GM and Ford; James J. Hill Professor Emeritus at Harvard Business School
Rather than strengthening Rick Wagoner's hand in his extremely complicated multi-year, multi-party negotiation among GM's shareholders, bondholders, bankers, dealers, customers, suppliers, union leaders, and many power centers within the company itself, President Obama has arguably set back a permanent resolution of this larger-than-life industrial conflict. What's needed most in times like these is a corporate leader, like Wagoner, who is highly regarded and trusted by his or her negotiating partners. While Wagoner's replacement, Fritz Henderson, is also a man of exceptional talent and character, negotiating GM's future will not get any easier. It's hard to believe that the president's automotive task force can quickly replenish the trust that Wagoner built up over years and is now required for GM to set itself back on a sustainably profitable course.
Writer on the auto industry for Slate's The Big Money and The Huffington Post
Rick Wagoner is decent man who took the lead in admitting to Congress that Detroit needed help -- and he was equally willing to put his head on the block as a result. But he never should have run GM. For all his prescience about the future of the company's international business, he failed to manage the company well at home and damningly went with a strategy focusing on SUVs and trucks when he could have simultaneously been more aggressive with the EV1 electric car and other such projects -- or, at the very least, a hybrid strategy to match Toyota's. He's the culmination and ignoble demise of the finance-over-engineering trend that has brought GM to this bad place. His tenure has always been a problem, and if the solution to that problem is that the taxpayer and the government need to run things for a while, that's okay, because the people have the billions -- and, more importantly, a stronger sense of the kinds of cars they want to buy.
Global automotive practice co-leader at Grant Thornton LLP
If General Motors had declared bankruptcy in November, Rick Wagoner might still have a job. Instead, he now has plenty of time to ponder the dangers of accepting public financing.
In a bankruptcy most lenders focus on one goal: getting repaid. They tend to leave governance issues such as firing CEOs where they belong: with the board of directors. The assumption is that management stability will make the bankruptcy process smoother. However, in the case of GM's quasi-bankruptcy, the government also must address bailout fatigue among the public and hold someone accountable for the failure of bondholders and union leaders to swap massive amounts of debt for high-risk equity. Put aside the fact that the amount of restructuring required at GM is massive and that the government's timetable was incredibly short.
But his replacement will fail, too, unless we see a rebound in sales. If the president can coax auto sales back to 13 or 14 million units a year, the new, smaller GM will be healthier, its need for ongoing government support will be much reduced, and its new CEO will look like a winner.
DANIEL J. IKENSON
Associate director of the Center for Trade Policy Studies at the Cato Institute
President Obama's newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn't demanded Rick Wagoner's resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous "Pottery Barn" rule: you break it, you buy it. If things go further south, the government is now complicit.
It also means that Wagoner was perceived as an obstacle to whatever plans the administration has for GM. And that's the real source of concern. If getting these companies back on their feet is the objective, a bankruptcy judge can make a determination pretty quickly about the viability of the firms and the steps necessary to get there. But if the objective is something more grandiose, such as transforming the industry into a model of green production, government oversight and close scrutiny of operations will be necessary. CEOs must be compliant and pliant. It is worth noting that a return to profitability and the metamorphosis of the industry according to a government script work at cross purposes.
President of the Automotive Consulting Group, Inc.
Rick Wagoner was a sacrificial lamb to an outraged voting public, and his firing is a caution to all executives: If you take government money, you're fair game.
Unfortunately, Wagoner's departure will not help GM, nor will it help the economy. Rather, it will erode confidence in GM, accelerating its decline and stalling an automotive sales recovery. Consumers are reluctant to purchase high-ticket items in times of economic uncertainty, anyway; government's attempt to micro-manage public corporations will only add to concerns about GM's future viability. While Wagoner has made many missteps over the years, it is not the government's role to dictate who leads the organization. That is the right of shareholders, who get to elect the management team.
Want to join the conversation? Submit your own Topic A contribution here.