Editorial: General Motors Death Watch 242: The Straw Man Speaks

by Robert Farago

Published: April 6th, 2009

editorial general motors death watch 242 the straw man speaks

GM’s new CEO took to the airwaves on Sunday. If industry watchers had any doubts that Fritz Henderson is cut from the same cloth as his discredited, defenestrated predecessor, Henderson’s appearance on Meet The Press removed them. Like Rick Wagoner before him, Henderson’s facile, vague and evasive responses—re: the epic train wreck known as General Motors—revealed the full genius of the Talking Heads’ lyricists. “You’re talking a lot, but you’re not saying anything,” David Gregory forgot to interject. Alternatively, we could make this Churchillian: Never have so few said so little about so much. Even so, OMG.

There, on national TV, GM CEO Fritz Henderson showed the world (and GM customers) that he’s a craven corporate spinmeister. While trying to reassure everyone about everything, he singularly failed to reassure anyone about anything. In both tone and content, Henderson showed the wisdom of rule number one in How to Succeed in Business Without Really Trying: “get a job in a big firm.”

What GM needs is a CEO who can create root and branch reform. What they got is a man who went out of his way to tell denizens of GM’s poisonous corporate culture that not a single ass is in any danger of being kicked.

No surprise there. Red Ink Rick Wagoner’s hand-picked successor is a caretaker CEO, elevated to his promised position through primogeniture, rather than any talent for crisis management. As planned.

The Presidential Task Force on Automobiles (PTFOA) knew they were going to fire Rick Wagoner before the Treasury Department assigned them email accounts. Steve Rattner and friends had plenty of time to find a Mulally-like outsider ready, willing and able to triage GM ahead of, in the midst of, and after bankruptcy. Clearly, that’s not what the PTFOA wanted. What they wanted was what they got: a patsy.

Henderson is nothing more or less than a powerless placeholder. As the representative of “old” broken ass General Motors, the company’s new CEO is free to tell his company’s new masters how to run the terminally ill automaker. Henderson can advise the PTFOA which national and international brands should survive the forthcoming cull. He can nominate the new product mix. Anything. But the moment Henderson’s recommendations clash with the will of the people, the PTFOA can (and will) turn to him and say “What the fuck do YOU know about it?”

Which is both true and deeply worrying.

Suffice it to say, we could ask the PTFOA the same question with even LESS chance of a satisfactory answer. Although the majority of their members drive foreign cars, the task force has no more idea about successful automotive design, branding, marketing and sales than GM’s current management. If TTAC’s Best and Brightest are still arguing how to “save” GM, what chance do a bunch of politically appointed ex-journalists, lawyers and professional bureaucrats have?

Never mind. Despite their ignorance over industry matters, Barack’s automotive army is large and in charge. And they aim to keep it that way. Surrender power over GM’s fate to a new, independent, charismatic CEO? No way. Not yet, anyway. Not until the Treasury men have done whatever it is they need to do (they’ll figure that out as they go) to “protect the taxpayer.” Oh, and save the planet.

Yes, there is that. Pundits who read the PTFOA’s excoriation of GM’s vaporware Volt mistake the quango’s criticism of a tree-hugging Hail Mary as recognition that GM has to, you know, sell something that people want to buy—even if it’s not an electric car.

Wrong. President Obama’s base demands federal intervention within the evil, electric car killing industry. The feds must reduce global warming, eliminate SUVs and generally get American consumers to do the right thing, whether they want to or not. Believing that PTFOA have subsumed the president’s political agenda to the gods of ROI is, at best, naïve.

As Henderson’s appointment reveals, as the increasing chatter about a “quick” (i.e., non-judicial) bankruptcy indicates, the PTFOA are ensuring that THEY will decide which bits constitute the new, healthy “good” GM, and which bits are shunted into the old, “bad” GM. “Good” as in environmentally and union-friendly, built wherever supportive votes may live (think defense industry). “Bad” as in anything that isn’t environmentally and union-friendly, built outside fertile Democratic voting territory.

It won’t work. At this point, I can’t see GM emerging from bankruptcy as a lean, mean organization, building [at least] two brands’ worth of world class, competitive products.

Perhaps I’m wrong. Maybe the PTFOA will eventually step aside for the next presidential proxy. Maybe he’ll be the savvy kick ass CEO GM needs to survive. Until then, Henderson. As New York Times columnist Frank Rich said, change is traumatic. We ain’t seen nothing yet. Then again, maybe we have.

Robert Farago

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2 of 51 comments

Pch101 on Apr 09, 2009
No German brands have been sold in recent years. (VW was sold, but to another German company. The context didn’t change.) So your German example is void. Not on point. The issue here is that high wages don't prevent car companies from making cars that command high margins and generate profits. A Daimler worker gets high wages, and his employer pays them by selling Mercedes vehicles at high prices. Detroit sells vehicles at low prices with steep discounts. That's a losing strategy. A company with high costs has to make up for them by finding a way to pass them through. Go drive a Sebring, and you can see why that they aren't able to do that. Cerberus got it for free, indicating that the union was a negative value. That's an odd and inaccurate way to interpret the deal. Chrysler is losing money, because it builds stuff that people don't want and sells it at low prices. Top-line revenue compares poorly to the profitable competition. Drive the cars, and it is easy to see why that is. If UAW wasn’t the blocker, why don’t Obama & Co. just auction off GM with no strings attached? You should look at their balance sheets. They have plenty of strings attached in the form of secured debt and bondholders, along with abundant exposure to the credit default swap market. One doesn't simply snap one's fingers and sell an entity with few revenue generators and plenty of creditors. Your analysis remains poor and tunnelvisioned in its lack of scope. As noted above, a buyer would require tens of billions in working capital to buy these companies. As bad as they are, their main hurdle is not the existing liabilities but the ability to fund future operations and achieve profit. That's particularly true in an economic environment in which revenues will be poor for some time, and commercial credit difficult to obtain. Even if you could buy it for $1 without any liabilities, you'd still have to have $50-100 billion at your disposal to buy a company such as GM and make it go the distance. Getting rid of the union would solve little or nothing; you still need to develop, build and sell cars.

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U mad scientist on Apr 11, 2009
As bad as they are, their main hurdle is not the existing liabilities but the ability to fund future operations and achieve profit. That's not necessarily true, since they're part of the same equation. Liabilities mean less with growth, but given that the auto industry is quite mature, any buyer should care. These things often get pushed under the carpet because financial "analysis's" of such deals tend to be overly optimistic in projecting the future. After all, there's less money in doom and gloom. - The real blocker is UAW, which equates Obama’s re-election. I'm glad you set everyone straight on his strategic swing bloc. I guess they could always vote for the other party. I mean, why give a shit about employment when you can bash on gays and brown people or other things of that nature.

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