“I will be forever grateful for the courage and commitment you have shown as we have confronted the unprecedented challenges of the past few years. GM is a great company with a storied history. Ignore the doubters because I know it is also a company with a great future.” –From the resignation speech of Rick Wagoner, chairman and CEO of General Motors
So Rick Wagoner is out and little-known Fritz Henderson is in, taking the helm at General Motors at a time when many believe the global carmaker is in its death throes – a notion much of the mainstream media seems all to happy reinforce.
President Obama’s administration gave GM, along with its ailing competitor Chrysler, failing remarks for its turnaround efforts. To get access to more government funding to survive, the White House asked Wagoner for his resignation – and he acquiesced pretty fast. Whatever you think of GM and Wagoner (pictured at right), give the man credit – he could’ve created a protracted media spectacle out of his government-forced ouster but didn’t.
That being said, however, the wreckage Wagoner leaves behind is daunting. A 32-year veteran of GM, Wagoner served as president and CEO since June 2000, moving up to chairman and CEO on May 1, 2003. By 2005, however, GM already was drowning in red ink -- racking up $11 billion in losses – and watched its market share crash from 45% in the mid 1980s to around 22% by the end of 2008.
Many of the reasons GM is in a major pickle right now are due squarely to the global carmaker’s own poor decision-making. Increasing global production capacity over the last decade to feed a projected annual worldwide market of 17 million units is probably going to be tagged as the big one, followed by the laughable decision back in the late 1990s to focus almost entirely on building big gas-guzzling SUVs and pickups, reducing car production to almost an afterthought, thinking that fuel prices would stay at $1 a gallon indefinitely. Talk about a bad bet!
Yet it goes deeper than all of that, because in the world of car and truck making, success really boils down – to my mind at least – into two very simple concepts: you must build good, reliable and durable products and you must support them through your dealers. Because automotive and truck buyers have long memories – and word of mouth between them trumps every single splashy advertising campaign in the known universe.
I know this because – like all of you out there – I’ve lived it. When I turned 16 a billion years ago, my parents bought a two-door four-cylinder Chevrolet Cavalier as a third car for me to shuttle my brother and sister (and myself) to school every day, to run errands to the grocery store, etc. I’ll sum my experience up with that car in two simple words: it sucked. (And it was WAY uglier than the model in this picture, to boot.)
From day one, it underperformed – just getting up to 55 mph to merge on the highway overtaxed the engine. Moderate braking would stall and then kill the engine – a problem two trips to the dealer failed to solve, despite costly maintenance work. And it came equipped only with an AM radio and weak, scratchy speakers. In some way, I think my parents jumped for joy over the crappiness of the Cavalier – I simply couldn’t get into any trouble with it.
Flash forward a few years: a design flaw in the motor caused the Cavalier’s engine cylinders to crack, forcing my family (thank the lord!) to unload this lemon. Its replacement was one of the ugliest cars I ever drove – a 1987 Honda Civic LX.
I called it a “trapezoid and wheels,” while my brother referred to it as the “Goofy-mobile.” But its four-cylinder motor cranked out the horsepower, it never gave me any trouble, and it shuttled me and my friends all over the eastern seaboard with reliable regularity. Oh, and it came standard with an AM/FM radio and cassette tape deck.
(End note: ye olde Civic bit the dust with my sister at the wheel in a serious crash, but did its duty, allowing her to walk away unscathed. Honda, we salute you.)
I didn’t abandon GM, though, and by the 1990s things were improving: my S-10 Tahoe pickup proved a rugged workhorse that lasted 16 years without major defects. Yet the company proved infuriating, to say the least. They nixed the S-10 and replaced it with the Sonoma – again, underpowered and not nearly as reliable in my estimation. My wife loved her Saturn four door sedan, which she drove for almost 10 years, but GM let that vaunted effort almost fade away to nothing by failing to invest in the brand. Though now revived, today Saturn is nothing more than a glorified “distribution channel” for rebadged GM products – its uniqueness is gone.
Of course, the old saw about GM’s costly union labor agreements comes into play, but again, it goes deeper than hourly wages, pensions, etc. For decades, many line workers simply didn’t believe in the products they were building. Longtime reader Steve Grantham starkly illustrated that with an example from his trucking days:
“In the early 80s I delivered loads to aplant in California and I had an opportunity to break with some of the line workers,” Steve wrote in. “They were complaining of the closing of the plant and wondering why. Stupid me – I popped up and said, ‘look at all those Toyotas, Hondas and Chevys in the parking lot. Do ya think if at least the employees would buy their own product it would help?’ I wasn’t too welcome there after that.”
Part of the problem, too, is that the folks at the very top of GM for far too long have been finance guys, not product guys. Bringing Bob Lutz into the mix at GM proved to be a super but long overdue move – though he’s successfully revamped GM’s cars and trucks, all that effort may now be too late. Lutz himself is out of the picture anyways, and with the focus at GM now completely on dollars and cents, the gains he’s made in product quality may suffer. Time will only tell.
No matter what happens next, though, the fundamentals in the car and trucking making business aren’t going to change. It’s all about products and support. Build good products, support them well in the market, and you’ll be a success. Build so-so products and treat customers like so much cattle, and you’ll find yourself in a world of hurt. Let’s hope GM internalizes this lesson now for good.