An Open Letter to the Board of GM, part one

Imagine my surprise when I learned Richard Wagoner, the head of GM, was to be a guest speaker at UT’s MBA Executive Speaker Series.

To quote Gordon Gekko, “What is this guy doing giving lectures? On what? On how to lose money? If this guy owned a funeral parlor, nobody would die!”

If you’re a regular reader of the Wall Street Journal or other business periodicals, you’re probably aware that Wagoner is about two months away from getting the axe. An action that is long overdue by the GM Board.

GM has $64 billion in unfunded retiree health burdens, it lost $10.6 billion last year, it’s bonds are rated junk, and it’s primary part supplier Delphi is about to go under. As of this writing, Mr. Wagoner has articulated no viable plan to avert disaster and the destruction of countless jobs; and yet he has time to hop into his private jet (complete with entourage no doubt) and fly to Austin Texas to deliver a talk to an MBA class.

As I mentioned in one of my previous blogs, I worked for a GM sub-contractor for approximately one year during the 9-11 economic downturn. My most indelible negative impression was this, at a time the company was losing large amounts of money; GM executives were flying around the country in private jets at a cost of approximately $7200 per-air-hour (air crew and gasoline) on junkets.

One particular GM executive visit stuck in my head. The head of GM North America visited the sub-contractor. He arrived by private jet, with entourage. Among his entourage was a flunky in an ill-fitting cheap suit whose sole purpose was to follow him around taking photos. You’d think Eisenhower had landed at Normandy. This executive was not Bill Gates, who flew coach for most of his tenure as CEO of Microsoft. This guy was not Jack Welch, who didn’t fly coach but who actually led General Electric to record profitability. This was an anonymous executive that nobody would have recognized on a regular flight. He would not be hounded for autographs. He would not have security concerns. He just wanted a sycophant entourage and a private jet, never mind that his company was losing millions of dollars on the day he made the visit.

It’s guys like this that give capitalism a bad name. They are clueless about leadership and oblivious to the message they’re sending to the world.

And from their perspective, it’s perfectly logical behavior. Why should they work for the good of the shareholders and employees? Why should they put themselves at risk with actual streamlining reform when they are part of the fat? That is to say, they benefit from a bloated salary without being accountable for actual results.

In that situation, you don’t get sanctimonious on the corporate culture that created and rewarded you. You don’t rock the boat.

And that reality permeates every aspect of GM. If you’re a middle manager at GM, you don’t wake up every morning with a passion to create a world-class-car, create a quality name brand, and make money. That would be a lot of work and you would more than likely put your own job at risk. It’s a lot easier, and more in your vested interest, to chase the jet.

I’m no fan of the UAW, but if as a worker, you saw company executives engaging in this behavior, how would you feel about making concessions? You know the answer, “No way in hell.” And there lies the answer. Leadership, or I should say the lack of leadership, is why GM is about fall.

Unfortunately, that fall will not just affect the responsible executives of GM. It will have serious economic impact on countless workers, retirees and small businesses which provide services to the once great company of GM.

JP