Can I be GM’s new CEO?

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

In 2009, a very bad thing happened. GM went from being General Motors, a privately held and operated corporation, to General Motors, a majority-share government-owned corporation. After a Chapter 11 filing, in order to save a company deemed too big to fail, the government bought out 864 million shares of the available 1.4 billion. While it was not a hostile state takeover that would make Fidel Castro proud, let’s look at some of the highlights here.General Motors

  • In 2008, GM began losing money, partly due to a crippled economy. However, this could have been managed if not for unreasonable and unwavering demands from the UAW. GM executives at the time, headed by then CEO Rick Wagoner, had decided that bankruptcy would likely be the solution. This would allow GM to terminate and renegotiate new, more manageable union contracts, enabling GM to survive into 2009 and beyond.
  • December 19th 2008: Then President George W. Bush approved TARP which in total, gave $17.4 billion to General Motors and Chrysler in an effort to prevent such a bankruptcy.
  • February of 2009: GM makes it known that the bailouts had not solved their solvency issues and bankruptcy still seems to be the most likely option.
  • March 29, 2009: In a deal we will likely never know the details of, current president Barack Obama ousters CEO Rick Wagoner in hopes of preventing a bankruptcy that would ultimately harm the UAW. It was stated that Wagoner “agreed to step down,” which we all know is code for “He was offered something to step down and shut up so that we didn’t have to fire him publicly and have him tell people what actually happened.” There can be no doubt Wagoner did not want to step down, he was turning GM around. Obama then replaces him with Fritz Henderson.
  • July 2009: Federal government buys a controlling interest in the new General Motors after bankruptcy.
  • November 2010, Government sells approximately 358 million of its 864 million shares back to private investors, thus relinquishing a controlling interest, but losing $11 billion dollars of taxpayer money doing so.

    Rick Wagoner
    Rick Wagoner

I understand that Bush and Obama felt GM was too big to fail, and certainly had GM closed its doors, it could have seriously hurt the American economy. But no one was proposing that, nor even reasonably insinuating it would happen. The intent was to reorganize and draft more manageable UAW contracts, not close the doors.

As this debate raged on, I watched a labor union rep say in an interview that GM’s issues had nothing to do with labor unions; that it was purely about the economy. Interesting argument since the facts were that non-union automakers, with significantly lower labor costs, while hurting from the economy, were still quite solvent. Such lies and/or delusions are quite common among the UAW ranks.

In a properly free market, as GM sales were down, GM should have had the flexibility to cut staff, lessen benefit expenditures, reduce hours, or whatever it took in order to insure the solvency of their organization; something labor unions simply won’t allow. The idea that the UAW weren’t contributing to the problem is absurd.

However, the UAW isn’t the only villain. Since Obama is a friend to the unions, he felt it was his duty to intervene and protect them as best he could from the bankruptcy Wagoner would have negotiated. So Rick Wagoner was forcibly removed from office so that Obama could bring in new CEO Fritz Henderson; one who would manage such a bankruptcy if it occurred, in such a way as to benefit the UAW the greatest.

Fritz Henderson
Fritz Henderson

The problem? Any contract GM signs should be done with the best interests of GM in mind, period. The UAW conversely should negotiate the best deal for themselves. But when both sides are working for the betterment of one side over the other, that’s not a negotiation, that’s corruption.

And so it was, the UAW got a fully loaded Cadillac, and the taxpayers and General Motors got a driveshaft in the rear entrance. You can read about this UAW inspired, Obama approved corruption here.

So the money Bush approved in order to prevent bankruptcy was a waste. It obviously didn’t work; GM filed for bankruptcy anyway. The sale of GM stock later by the government, another big loss. Whether we lose on what we still own—only time will tell.

In my opinion, the problems don’t end there though.

President Obama knows that the people frown on government directing a private company, but he’s not exactly known for his humility. He has demonstrated he will do what he desires to do, then figure out a way to present it to the American people in such a way that they’ll accept something they would otherwise not support.

So a man who has zero private sector experience, zero automotive experience, zero management experience, and zero business administration experience decided that in an ultimate show of hubris, he somehow knew what was better for America’s largest corporation than its current CEO who had a significant amount of experience in all the aforementioned areas.

Barack Obama
Barack Obama

Imagine if Obama decided he could perform surgery better than a practicing physician who may have just lost a patient. Then he gives medical advice to this doctor’s patients contrary to what the doctor prescribed. Whether the doctor is sub-par or not, Obama would have absolutely no business doing this—it would be a serious breech of ethics.

As a person who spent over 20 years of my professional life involved in both the sales and service management of new and used automobiles, I literally have infinitely more experience in this arena than Obama. Anything times zero is infinity before you accuse me of hyperbole. The only difference? I’m smart and humble enough to know that I’m not qualified to run General Motors.

When Dr Rand Paul weighs in on medical issues, he knows what he’s talking about. When Obama weighs in on legal issues, he knows what he’s talking about, even if he’s not a practicing lawyer. But nothing qualified him to make a single decision regarding the management of General Motors.

We expect our presidents to be strong, confident, even a little arrogant on occasion. Maybe it’s the same phenomenon of implied danger that drives good people to date bad people. But if America is to have an effective leader, that person should have the humility to understand their duties are to protect our rights, not drive a market which has a nearly infinite greater wealth of experience than any one person could have.

This boondoggle cost us taxpayers billions, and we are no better for it. Much like the false belief that Roosevelt saved the American economy after the great depression, Obama didn’t save the auto industry either.

The president represents the state, and state-run markets are never good—there’s more than enough history in this world to know free-markets are always better. If GM manages to achieve success again, it will be despite Obama and the UAW, not because of it.

Sources:

http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorganization

http://www.treasury.gov/press-center/press-releases/Pages/tg959.aspx

http://autos.yahoo.com/blogs/motoramic/march-29-president-obama-fires-ceo-general-motors-132056452.html

http://online.wsj.com/article/SB123836090755767077.html

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