Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

31 March 2009

Rick Wagoner and Our Culture of Incompetence


Michigan Governor Jennifer Granholm has called fired GM CEO Rick Wagoner a “sacrificial lamb.” The wonder is how many think she’s right.

Read the posted comments to any news story about Wagoner’s firing, and you’ll find more than a smattering of two views. One sees the firing—in exchange for decagigabucks of government money—as a harbinger of Stalin and the Bolshevik hordes. Lock and load your rifle and prepare to repel the hammer and sickle! The other apparently comes from workers in the auto industry. Somehow, they believe that dismissing Wagoner is dissing their industry and their work.

But sometimes it helps to have a few facts before rendering opinions. Here, in tabular form, is what happened to GM under Wagoner’s “leadership:”

The Decline of GM under Rick Wagoner
BenchmarkBefore WagonerAfter Wagoner (today)
U.S. Market Share33.2% (1994)18.8%
Stock Price$70 (2000)$2 (3/31/09)
Cumulative lossNone (profit
for 1993-2005)
$ 182 billion

Here, reproduced from an earlier post, is a table comparing the percentage of tested GM cars recommended by Consumer Reports with similar percentages for Chrysler and leading Japanese brands.

Consumer Reports’ Share of Tested Vehicles Recommended
SubaruHondaToyotaGMChrysler
100%95% 89%17%
  0%

If you ran a business, would you hire or fire someone with this record? How bad does it have to get before you let a “leader” go?

When I was young, “The Age of Aquarius” was a popular song. Its message was that we were entering an era where everyone would get along. No one would shout or declaim, or, apparently, strive or fire losers. We arrived at that destination long ago. Today most of us live in Lake Woebegone, Garrison Keillor’s fictional town where “all the children are above average.”

Keillor’s mantra makes us laugh because we recognize its underlying truth. We routinely tolerate subpar performance and stupidity because we want to get along. We value self-esteem and personal harmony more than brains, competence and achievement. We have adopted a culture of mediocrity for the sake of feeling good. How else can you explain the public response to such a loser’s firing? How else can you explain the consistently poor quality of GM’s cars?

There’s also another lesson in Wagoner’s story. He spent most of his career at GM, but is he really a car guy?

To answer that question, read his biography. No doubt he’s a smart guy. But he has an undergraduate degree in economics and an MBA. He started his working life as a financial analyst. He proved good with numbers, so he rose to the top. As far as you can tell from his biography, he knows as much about engineering as does Carly Fiorina, who majored in medieval history and philosophy and, before she was fired, nearly did for HP what Wagoner did for GM.

If you think these are isolated instances, think again. Who ruined our economy? Financial gurus and their promoters. Then read Kevin Phillips’ brilliant book about the financialization of our economy. When you put financiers and marketers in charge of designing and building machines, you get cars like GM’s.

Some years ago, I met an up-and-coming young Chinese at an international conference. He was tall, smart and handsome, spoke good English, and stood ramrod straight. Obviously he had had military training. He was in charge of an important industrial office in government and on the rise.

In our country, an equivalent bureaucrat would almost certainly have been a lawyer. So I got curious and asked him his background. He trained as an engineer and had spent over a decade managing a big steel plant. Now he heads a national commission in charge of transitioning big state enterprises to private ownership and global competition.

In China, it seems, engineers run heavy industry. In our country, it’s lawyers, financiers and marketers. If you want to know why we’re losing the battle to keep our heavy industry competitive and on shore, you need look no further than that.

A guy like Wagoner will never know when his company is producing Rube Goldberg machines. He doesn’t have the background or the training. He probably doesn’t even know what he’s looking at when he pops open the hood.

How, pray tell, can such a man run a car company? His record is a testament to our financialized culture of incompetence. His retention, despite his long and sorry record of failure, reflects our Age of Aquarius.

Maybe our new President—our first post-Boomer commander in chief—can break the Aquarian spell. It doesn’t matter whether a politician or business leader breaks it, as long as someone does. If that spell stays in effect, our industrial and economic leadership will be history in about a decade.

P.S. (Update 4/2/09) If you want to see what happens in a country where engineers run the auto industry, not lawyers, financiers or marketers, read this.


Footnote 1: Wagoner took charge of GM’s North American operations in 1994, became COO in 1998 and CEO in 2000.

Footnote 2: Published at the height of the religious right’s power, American Theocracy has a misleading title. As the book’s much longer subtitle reveals, two-thirds of it focus on oil and political power and the transformation from a manufacturing economy to one based on pushing paper. In the last third, Phillips convincingly compares the declines of past empires to our own decline as we undergo that transformation. Whether we can arrest it remains to be seen.


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