Rick Wagoner: "Sacrificial Lamb" or Corporate Ostrich?

On another network this morning, Michigan Gov. Jennifer Granholm described former General Motors chairman and CEO Rick Wagoner as a "sacrificial lamb" in the Obama administration's attempts to force US automakers to, in their view, aggressively restructure.

A "sacrificial lamb"?

Under Wagoner's tenure, GM's market share declined from 29% in 2000, when Wagoner took the reins, to its 2008 rate of 20%.

When he took control of the company, the stock was peaking around $90 a share. It's currently below $3 a share. That's about $50 billion in shareholder wealth that has vanished.

GM in the last two years has lost $70 billion.

And then there's the restructuring plan Wagoner submitted to the Treasury Department last month, one the Obama administration considers weak, with unrealistic sales assessments and insufficient urgency.

"The GM plan, in its current form, is not viable and will need to be restructured substantially," a senior administration official says.

How so?

  • Some of the restructuring initiatives aren't set to be finished until 2014;
  • The assumptions in GM’s business plan are too optimistic -- the company has been losing 0.7% of the market share every year for the last 30 years and yet GM's projections assume a decline of only 0.3%;
  • President Obama's auto task force believes GM's plan retains too many dud nameplates (Hummer, Saturn, Saab, Pontiac) that tarnish the GM brand, "distract the focus of its management team, demand increasingly scarce marketing dollars and are a lingering drag on consumer perception, market share and margin";
  • GM's plan doesn't close enough unprofitable/underperforming car dealers quickly enough, in the Obama administration's view;
  • GM's plan relies too much on the high-margin trucks and SUVs that are "vulnerable to energy cost-driven shifts in consumer demand";
  • GM lags significantly on green R&D;
  • even with all its optimistic assessments, the plan assumes too much debt.

Obviously, not all of this can be blamed on Wagoner, and GM has made a number of advances.

But as the chairman and CEO, shall we say, the Buick stops with him. - jpt

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