Rick Wagoner – A Different Kind of Fall Guy

Was Rick Wagoner the fall guy for the trouble automobile industry? Maybe he was, but I do not really care about that type of fall guy. Rick Wagoner was the fall guy for GM. A quick look at the General Motors page on Wikipedia (http://en.wikipedia.org/wiki/General_Motors_Corporation) shows why. From 2001 to 2008 the approximate level of domestic sales decreased by 40%. Even if you take out 2008, which is a bad year for everyone, you see a decrease in sales of approximately 20%. As President and CEO of GM at that time, Rick Wagoner is the fall guy.

What disturbs me is that in 2007, the year after Wagoner lead GM to a huge 8.7% decrease in sales and a year where they lost an additional 6.3% of domestic sales, Rick Wagoner made $14,415,000 in compensation. That translates into $3.73 for every domestic unit sold.

I once attended a management seminar in New York City. The keynote speak spoke about decision making. One of the main points was that businesses need to continually make good decisions. Making a good decision only allows you to stay in the game so you can make the next decision. Making one bad decision could lead to ruin. If a bad decision was made, quick action is needed to minimize the impact.

The decision to focus on high margin SUVs while giving up market share in other vehicle categories is one of those bad decisions. Most analysts were critical of GM for their short sightedness, but it fell on deaf ears.

The problem with GM is not that we can not manufacture automobiles domestically. The problem is that, like all companies, we need run our businesses better. What is better? I am not sure, but it starts with having people who see the bigger, long term picture.

I do not blame Rick Wagoner for being a subpar business leader. Maybe he knew exactly what he was doing. Mr. Wagoner, as CEO of GM, had eight years where he made more money then 95% of Americans will make in their lifetime. Mr. Wagoner was incented to think short term.

Do I support the government strong arming Rick Wagoner to resign? I will give an ambiguous answer of No and Yes. The No is because I do not think that government should be involved in business at that level. In fact, I am not the biggest fan of the bailout of the auto industry. The Yes is because the bailout had to be done. We need to keep as many manufacturing jobs here as possible and the bailout will help. To do that we need to make sure GM is run better then it has been. Once the bailout was decided on, the Obama administration had to decide whether or not Rick Wagoner was the right person to lead GM back to profitability. The administration came to the conclusion that Wagoner was not the right person to do it.