Was Firing Rick Wagoner Just for Show?
Fritz Henderson—the new CEO of General Motors—is the consumate company insider, whose career track closely mirrors that of ousted CEO Rick Wagoner. Can he really provide the transformational leadership the company desperately needs?
Was he scapegoat, a talented and dedicated corporate leader who fell victim to a heads-must-roll witch hunt, or a misguided manager, in way over his head? The only thing certain, right now, about Rick Wagoner is that he’s lost his last shot at staving off the potentially devastating bankruptcy of General Motors.
After eight years as CEO, Wagoner was unceremoniously ousted last weekend by the Obama administration, which then delayed a final decision on a desperately needed bailout for the once-invincible auto maker. Wagoner’s successor and protégé, Fritz Henderson, now gets 60 days to pull off a miracle: convincing the White House that GM can not only survive but thrive with the help of new federal loan guarantees.
Wagoner’s counterpart at Chrysler remains on the job, even though the smaller auto maker is clearly the worst off among Detroit’s Big Three.
Can Henderson—whose 25-year career closely parallels Wagoner’s—make a difference? Depends on who you ask, and that’s why many question the shakeup, which was touched off by the president’s automotive task force a day before Obama announced that GM and its even more damaged crosstown rival, Chrysler LLC, hadn’t made their case for further federal aid.
To Michigan Governor Jennifer Granholm, nominally Obama’s close ally, Wagoner was merely a “sacrificial lamb,” the head on the pike declaring to all that the White House wasn’t an easy touch. Timing didn’t help the 56-year-old former Duke basketball star: The March 31 deadline for Detroit’s troubled auto makers to turn in their business plans immediately followed the AIG bonus flap.
That’s raised concerns about bailouts, in general. Yet, the reality is that Detroit has undergone a far more grueling time making its case for aid, starting with last year’s high-profile congressional hearings, which the Big Three CEOs importunely arrived at in their individual corporate jets. While Wall Street ran up the truly mind-bending losses, the jet-setting Detroiters became poster children for corporate America’s disconnect.
The irony is that, even now, representatives of the finance industry face minimal scrutiny—and most continue flying their Learjets and Gulfstreams. To a large extent, the faces that stared out of the annual reports before the financial meltdown still man the executive suites today.
What’s equally telling is the fact that Wagoner’s counterpart at Chrysler remains on the job, even though the smaller maker is clearly the worst off among Detroit’s Big Three. Where GM has 60 days to fix its restructuring plan, Chrysler CEO Bob Nardelli gets just half that time to finalize a proposed alliance between the automotive arm of private-equity giant Cerberus Capital Management and the Italian automaker Fiat SpA.
Why wasn’t Nardelli also given the boot, considering there’s been little good news from Chrysler since he joined it in mid-2007—after his prior stunt overseeing Home Depot’s downturn? Perhaps the White House knows something that hasn’t quite come across in the headlines. Or maybe they feel more comfortable with an outsider.
For decades, Detroit was the ultimate insider’s club. Top management was, with numbing regularity, plucked from within; familiarity was as important as actual talent. And that clubbiness also made it difficult to take even the most obvious actions.
In the early 1990s, when GM also came perilously close to insolvency, then-Chairman Robert Stempel couldn’t bring himself to order the drastic plant closings and job cuts that he knew were required. The car maker squeaked through, following a boardroom coup, but Stempel’s successor could only make the most rudimentary changes. As the industry recovered, the unions and other stakeholders slammed on the brakes.
That’s not to say Jack Smith, who replaced Stempel, didn’t try. He made a number of difficult moves, and so did his hand-picked successor, Rick Wagoner, including the closure of the century-old Oldsmobile division. Yet after eight years as CEO, the automotive task force glumly concluded that Wagoner hadn’t finished the job—and wouldn’t, not after clocking $82 billion in losses in just the last three years.
Can Henderson do any better? He was a key player in preparing the viability plan that Obama rejected, after all. And by Henderson’s own words, Wagoner was, “a fantastic guy and mentor, somebody I have tremendous respect for. We have similar backgrounds,” the new CEO added, during a Tuesday news conference, “including speaking Portugese.”
Indeed, the two men followed uncannily similar career tracks, not only earning business degrees from Harvard, after which they both started out in the New York office of GM’s treasurer, but they even spent time as senior executives in Brazil and Europe.
Yet for those who fear Henderson is little more than a politically acceptable clone, insiders see a very different man than his predecessor, more candid in his assessment of GM’s current realities—and the rapidly narrowing path that might lead to salvation.
During his Tuesday newser, for example, Henderson took pains to accede that GM very well may have to go the bankruptcy route, a strategy Wagoner seemed unable to acknowledge, never mind accept. “If I was opposed to bankruptcy, I would have said no,” when asked to be CEO, said the 51-year-old executive.
In the end, there seems little doubt that politics played as much a role as anything else in determining Rick Wagoner’s corporate demise. Washington and the public both needed a blood-letting to cleanse everyone’s sins. But Rick Wagoner was no martyred saint.
Consider Toyota, which recently ousted its own chief executive after just one bad year in a half century—and at a time that blame could have been parceled onto the global automotive downturn. Wagoner had been given far more opportunities to achieve his grand vision than almost anyone else in the world of big business. The time for the GM board to have given the CEO the boot was probably several years ago. Now GM, its stockholders, dealers, workers, indeed, the entire nation, are paying the price of this timidity.
Paul A. Eisenstein is a veteran journalist who has won numerous awards for his work during 30 years covering the automotive industry. He is founder and editor of TheDetroitBureau.com, an online magazine serving as the voice of the auto industry.