Helpless in Detroit

Getting rid of General Motors (GM) CEO Rick Wagoner was necessary, but changing bosses won’t solve the problem: GM doesn’t have a meaningful survival plan.

There are many good reasons for firing Rick Wagoner, the unfortunate head of GM, world’s largest automobile maker. Like no one else, the 56-year-old represents the failures of a gigantic corporation that didn’t recognize the handwriting on the wall. As head of GM for the last nine years, he bears the responsibility of explaining why GM didn’t react to changing markets, while competitors like Toyota, BMW and Audi gained ever-increasing market shares in the United States.

At every Detroit motor show, his people blithely trotted out the newest monstrous truck-like vehicle aimed at the small family, the newest totally absurd gas-guzzler – the “I-have-two-fuel-tanks” Hummer also belongs to Wagoner’s morbidly obese armada of products. Instead of engineering innovation, Wagoner’s troops unleashed a ruinous rebate war on the U.S. market. The mission was to overwhelm the smaller competitors and drive them out of the market through sheer economic force. The undertaking was an abject failure. General Motors had already become a teetering giant with no vision far before the advent of the financial crisis. Ratings agencies were lowering GM’s credit ratings almost by the week.

Wagoner didn’t awaken from his “full-speed-ahead” daydream, even after he was forced to go to Washington, hat in hand, to beg for billions in bailouts to save his chronically afflicted empire. His trip to the Capital aboard a private corporate jet earned him a slap in the face from Congress, and his next appearance was via an eco-friendly limousine. But the basics never changed: he had no concept whatsoever of how to rehabilitate his clapped-out company.

But the most dramatic thing of all is that Wagoner and his staff, including his successor, Fritz Henderson, still haven’t got the first clue as to how to go about saving the company. Henderson, 50, is a close confidant of Wagoner’s and, much like his chastened boss, is also no visionary, no brilliant engineer, but merely a number-cruncher. All previous plans to save the company had been rejected, because the numbers didn’t add up to the desired sum.

President Obama’s task force has flatly rejected the restructuring plan submitted by GM. If this were a school, GM would be given an “F” and told to sit back down. The task force’s audit report, already made public, calls the planned concepts “not viable” over and over again. Every assumption made by GM, from market development to the effects of planned austerity measures, have been called “exaggeratedly optimistic” by the government’s auto experts. They’re beginning to see just how completely unrealistic plans made in Detroit really are.