In the New York Times, Micheline Maynard wrote a pretty balanced account of how Rick Wagoner became CEO of General Motors (GM) to start with and why many of the problems facing the company were already in place before he took control about a decade ago.
The article raises more questions than it actually answers.
For starters, Maynard writes:
Mr. Wagoner joined G.M.’s financial operations in 1977 out of Harvard Business School, and, like generations of executives before him, worked nowhere else during his career.
Is this a healthy practice? Goldman Sachs is run very much the same way, promote from within. But does GM start out with the same talent or raw material that a Goldman does? Maybe 30 years ago, certainly not now. Fresh ideas and energy come into a company, especially a bureaucratic nightmare like GM, from the hiring of fresh personnel and talent. Why does everyone know this except Detroit? Could you imagine if GM had a team of designers from Apple assisting with the planning and development of new vehicles?
Another question the article raises is why they promoted someone from the finance side of the business to the top slot in 2000?
Mr. Wagoner’s finance background might have been a poor fit: “The most successful auto companies are run by people who came out of the revenue-generating functions — manufacturing, design, marketing — making cars and selling cars.” Mr. Wagoner, the analyst said, “skipped the whole apprenticeship that most auto C.E.O.’s experience.”
Granted, Wagoner had paid his dues and worked his way up, but could the Board really have been so blind to the challenge coming from Toyota? Did they think that Asian automakers would be cool with just maintaining market share here in he US? Clearly, you put a numbers guy in charge when its business as usual, but when competitive strength and/or innovation is necessary, don’t you want a creator or a sales guy in the cockpit?
Its yet to be determined whether or not Obama’s administration will allow GM to avoid bankruptcy, but with Wagoner’s resignation Detroit may be finding out – too late, that business as usual is at an end.
While GM’s share price slid from 70 to 3 over the course of Wagoner’s tenure, one would have thought they’d have picked this up quicker.
Full Story: Wagoner Out at GM (NYT)
Full Disclosure: I currently have client accounts that are long GM and Apple shares and I have no positions in Toyota, or Goldman Sachs.