Obama, GM’s new Chairman (Guest Voice)

When you are talking executive qualifications at that level it basically boils down to 2 things. The ability to recognize a good thing and then the ability to make your operation money off it. He has demonstrated this ability. It doesn't have to be car specific, a good exec is a good exec. One who takes the long term view and not the short term. All these mega corporations that have been tanking are doing so because they were short term view folks. GM especially. Gas was $4/gallon and yet the leadership of that company still thought it was a good idea to push Hummers and SUV's with TV ads during the NBA finals. They had a good start on the electric car market back in '98 and decided to trash the entire program, only now are they playing catch up.

You may say that AT&T is only doing well because of iPhone sales. Well why is that? You think iPhone just magically became tied to AT&T services? Or do you think that they recognized that as a good potential platform for their services and went after the market share and beat out the other carriers? Your saying that Whitacre lacks the tactical vision when he isn't being hired for tactical vision but strategic vision. GM sales aren't in the crapper because the customer experience at point of sale is bad. Its because they have been making the wrong vehicles for the last few years and they are making them at a lower quality than their competitors.

Well, I respectfully disagree. Board of Directors are in place to create POLICY. The executives of the organization that report to the Board develop the STRATEGY necessary to implement the policy. The choices of the Chairman become the direction of the organization. If you disagree, name a single company successful over the long haul where the Chairman and CEO are on different pages.

If you don't think that the customer experience at the point of sale -- the GM dealers -- is woefully inadequate, you are the first I've encountered after literally thousands of presentations regarding the customer experience in fifteen countries. Only a miniscule percentage of us really get excited about the process of purchasing an automobile. You can make the right product, and if you can't create a compelling customer experience, you're still "in the crapper," as you say.

And, I would submit that the way any executive accomplishes the two points you state at the beginning of your comments is to connect with employees and customers. I wholeheartedly agree that a good exec is a good exec -- the CEO of Ford that came from Boeing is a perfect example. However, note that he didn't begin his tenure by saying he didn't know anything about the industry. He said his task -- no matter the product -- was to become more connected to the people selling and buying the product.

If you can't create compelling experiences for the customer and connect with what they REALLY want -- and if that isn't the primary focus of the organization from the Chairman on down -- the organization is destined for poor performance over the long haul.

Man, talk about slamming a guy right out of the gate. I suppose the Obama team should have chosen another auto exec to run the firm. After all, they've done such a stellar job so far (rolling eyes). Most of the good execs I know have switched industries, most knew nothing about the new industry, most did well. I'll wait and see.

To his credit, Whitaker saw and invested in wireless early. Had Detroit seen and invested in fuel efficient cars, hybrids and electrics early, they'd be much better positioned now.

"He is coming into an industry that is accustomed to heavy regulations. He knows how to grow a company. He gives a lot of credibility to GM's restructuring," said Stephen Spivey, an auto analyst with Frost & Sullivan.

He was picked by the chair of the board, "with input from the White House," which is just a tad different than your "hand picked" by Obama line. "Kresa [interim chair of the board] told reporters on a conference call Tuesday that he picked Whitacre with input from Steven Rattner, chairman of the Treasury Department's auto task force."

I don't know much about Whitacre, don't care to research him that much, and don't know how he'll do. Time will tell.

Ford is doing much better than GM or Chrysler. (It not only has good products, and has other goodies in the works, but among other things, produces American-designed vehicles these days that actually have good style; for decades Detroit made only ugly rental-fleet vehicles nobody with taste on the West or East Coast would go near, and often even be seen in! Ford makes American cars worth considering by the discriminating public.) Much credit for this goes to Mulally, who came from Boeing -- i.e., he was an outsider, not part of the "inbred idiocy" (most notably at GM) of an "island of Detroit" cloistered culture out of touch for thirty years with the public, no longer a captive market.

One of the problems at GM was that the board of directors was no good -- it was part of the problem (it acted as if there was nothing wrong with constant loss of market share from poor products for thirty years). I believe Ross Perot called them a "bag of works" insofar as their value to the company went.

Detroit has been so bad there even are Web sites that routinely hammer and trash the Detroit companies (which for thirty years, after all, has been the real American way by the public), such as this:

http://www.thetruthaboutcars.com/

Having an outsider is a _good_ thing, not a bad thing, and it is particularly good that this guy is apparently known for being very hard-headed, blunt, and harsh. That is what is needed at GM.

(I wish I were a marauding renegade tycoon. I'd steal Chevy and also Cadillac, the new luxury Chevy a la Lexus, and take over the GM Tech Center at Warren and go mano-a-mano with Ford in this other world.)

Whitacre is not a problem. He's an improvement, not a detriment (as opposed to someone chosen for political or silly-trendy purposes. Rapid consolidation _is_ one thing decades overdue for GM. It does not have a 1950s-1960s captive market who will buy whatever junk is offered or accept poor styling. The dealer network as well as the company needs to be greatly consolidated and shrunken; the standard of comparison is the champ, Toyota, who has defined modern vehicles and earned market share as a result for decades.

The real problems at GM are that it has been federalized, that bondholders were given the Hugo Chavez treatment (with Chrysler, there was even the lower-public-quintiles-appeal describing them as "speculators" to demonize them dishonestly), the enormous payoff to the undeserving UAW (which in practice constitutes an additional Democratic Washington share of the company), control over operations and business decisions (fascism openly practiced), and (along with excessive, unrealistic fuel efficiency goals) a fear being introduced that they will meddle more with GM and make it produce overly-technological-and-expensive, under-performing and under-sized vehicles the public won't want to buy (even Detroit die-hards who supported a bailout have expressed that fear, here in Detroit metro).

Compounding this is the inevitable entry into the political mess by Congress, who has forced GM to reverse at least one of its overdue plant shutdowns, and is about to be struck by members of Congress by legislation preventing or inhibiting long-overdue dealer closures. This political intervention is what is most distressing and abhorred by people. Members of Congress have also been insisting on arbitrary, more-unrealistic fuel efficiency goals and other goals. Worse still is the prospect of social-engineering tax and other legislation in the future meant to induce or compel people to buy smaller or more expensive vehicles than they want to buy, and of course a federalized GM is in no way a fair competitor to the other companies. (That GM will no doubt be favored for federal fleet replacements is an easy stunt to imagine.)

This was _never_ only about saving jobs and industries from collapse when the economic slump had so many people panicked. This was and is something much more broadly political and much more sinister.

Already we've seen the UAW put forth a board member with amenable-to-UAW views to "counter-balance" Whitacre (and to oppose needed reforms). Already we've had revealed how much the Obama team has made decisions about GM and Chrysler even _before_ bankruptcy -- that they forced the companies into bankruptcy, told Chrysler, at least, how much cash to have on hand at the time of filing, and so on. Already we've seen Barney Frank demand GM reverse a plant closure, with compliance by GM. This is true federalization, and federal control of a large auto manufacturer in addition to worse intervention in the industry and related laws (fuel efficiency goals being the most notorious example). _This_ is the problem.

This political infusion and infection of the company (more than merely propping up a failed dinosaur model that has been a failure for thirty years or more, to pay off the UAW and infiltrate the industry itself, not merely to "create or preserve" jobs) is what we _really_ need to worry about, not a long-overdue qualified, appropriate-for-the-situation non-insider on the board of directors.

"If you don't think that the customer experience at the point of sale -- the GM dealers -- is woefully inadequate"

He may not care, but most of the public does, particularly the discriminating drivers on the West Coast (California, not Detroit, has been the center of auto culture in the USA for _multiple_generations_) and East Coast, where people make it clear they have not only disliked the inferior Detroit products, but also being treated as if the dealers were doing them a favor offering them any time and any such products.

Note that Penske is going to a new model, which is centered specifically on the _dealers_ (he is buying the Saturn brand and the Saturn _dealerships_ and planning to contract production to others, eventually import vehicles as well as locate some production eventually in the USA ideally). The dealerships really do matter and I suspect Penske is going to make sure that people are treated right when they visit now.

"Gas was $4/gallon and yet the leadership of that company still thought it was a good idea to push Hummers and SUV's with TV ads during the NBA finals. They had a good start on the electric car market back in '98 and decided to trash the entire program, only now are they playing catch up. "

Be careful.

It makes sense _not_ to rush into smaller cars. Some of us "small footprint, small expense" guys have always owned and driven small cars, but it's not true for everyone, nor is there any reason it "should" be that way. It makes no sense to assume the small-car market is guaranteed in the future (even with the eventual reduction of cheap oil supplies plus aging of an empty-nester population). Certainly nobody in government has any business saying we "should" move to smaller cars and attempt social engineering measures to try to force us to do it when we don't want to.

Iacocca has noted that it takes time to retool and redesign for smaller vehicles, and that there never has been a long-term trend toward smaller vehicles, and anyone committing too much to them will get burned when fuel prices change from high back down to low. There is no guarantee that prices will become and remain high in the near-term or even medium-term future (and government has no business trying to achieve this through high taxes on fuels, notably as a means to compel a reductionist change in public behavior -- that is the behavior of contemptible Little Green Fascists).

Ford is doing things right -- it is letting some people currently participate in a trial program (test driver program) similar to what GM did with EV-1. This is the way to go. Ford will also continue to offer a full line of vehicles, not just new small cars. It wisely proceeded to develop a new F-150 because real truckers will always need and want trucks. Its Eco-Star engine looks to be great and a fine engine upgrade from the base model for a future small pickup truck. (Getting a bigger engine is not a crime!)

Electric vehicles have poor performance and are far too expensive. Volt only goes 40 miles, for a $40,000 vehicle. EVs have years, decades to go before they are serious. Don't forget generation and charging infrastructure yet to be developed.

Good comments, DLS. I disagree with your distaste for "social engineering" with respect to fuel economy. Had we kept on the CAFE standards plan Carter put in place (which Reagan dismantled), we would not need any Middle East oil today. Zero. No national interest in Iraq, Saudi Arabia or Iran, no US funding for Al Qaeda, lower emissions, lower pollution. It IS in our national interest now to reduce fuel consumption and especially fuel importing, for exactly the same reasons, plus the obvious economic one. Fuel costs will rise again, as they currently are, and our savings rate, critical to our recovery, is negatively impacted. All consumables will cost more, including food, when fuel prices inevitably rise. The less we demand, the less supply is needed, and the lower the cost. For the forseeable future, we will need petroleum for trucks and trains. The less demand we need for passenger transportation, the lighter will be our financial burden in getting products to market.

As for electrics, that's the way to go for common urban transportation. Charging would never be a problem for me as I never put >40 miles on a car in a day except for special occasions like vacation. Our town had no trouble at all installing "infrastructure" to accomodate and incentivize the use of electrics and plug in hybrids. Parking is right next to disabled parking, for example at city offices and recreation centers (with an outlet, just like at the KOA. No big deal). As more electrics hit the road, businesses, like shopping centers will install plugs to draw customers. It really isn't that big a problem. As for cost and range, that's improving already, and plug-in hybrids eliminate all the problems cited for pure electrics. Pure electrics with small gas generators (not really a hybrid as the gasoline engine never directly powers the vehicle) are on the market in China and will be knocking on our door faster than Detroit can get one to market. There IS a market for these innovations and if you don't think so, you ARE an optimist, believing against all evidence that the days of cheap oil will return.

WE kind of went through this a couple of decades ago when it was the fad to declare a good manager can manage anything no matter what the company actually produced. Sometimes this worked out but often it didn't. The key for Whitacre will be admitting what he doesn't know, having good people around him and listening to them. That is harder than it sounds. Add to that the question whether Whitacre will be a government toady and is taking over a company that deserved to fail, and I'm not optimistic.

DLS I agree with you 100% on Obama throwing bondholders under the bus and giving Chrysler to his union cronies, circumventing bankruptcy courts to reward his own special interests. This was a huge government overreach. Ford will be getting my business in the future.

DLS - great point about Penske. I really wasn't slamming Whitacre...in fact, I noted his accomplishments in moving AT&T into another arena. I just believe it speaks volumes about the direction of GM. If you want someone to lead the company into a customer-centric era of terrific products and compelling experiences, you don't select the guy from the phone company. If you want to navigate your way through governmental regulation and control, you do. Whitacre is not the problem. His selection is a reflection of the problem.

I hope the new Chairman is a wild success. As a taxpayer, I want my investment to pay off! But, GM needs to be revolutionary in their approach to customers and development of products. While Whitacre certainly provided leadership to AT&T, my belief is that GM needed a different type and style of direction.

Green Dreams --

In addition to excessive optimism and expecting too much, like much higher fuel prices that will move Americans to buy smaller and more expensive vehicles than they really would prefer, the new fuel regs have a defect shared with the earlier regs. That is, the "fleet" average. How many people predicted the current economic downturn? How can people expect to be able to predict the future composition, in any affected year, of the vehicles purchased in that or any other given year. To a lesser extent this is true as well for car versus truck requirements. A minimum for each kind of vehicle based on weight or engine displacement (strike that -- people have a right to replace an old engine with a bigger one if they want) is more precise. And the requirements should be reasonably attainable, not over-ambitious or unrealistic.

I've liked the idea of electric vehicles for years. When I was in Atlanta, I even enjoyed operating several of them at an EVAA-sponsored electric vehicle show. (When I was in Phoenix, I got to meet with someone on the demonstrator test-driver program.) These are great in theory, not only for performance (once range is solved as a problem) and for quietness, but because they'd wipe out _so_ much pollution in so many metro areas. The problem is that they aren't ready yet to replace conventional vehicles. Range is still pathetic and recharging takes far too long. There are more problems: the generation capacity isn't in place (people cannot be expected and should not be required to recharge only at certain times), and the infrastructure for recharging (necessary at all times in all kinds of weather) has not been developed, much less fielded yet. (Recharging infrastructure and standardization is an example of something good for new federal research and development.) The range needs to be boosted greatly and recharging time reduced. Finally, with all this needs to come comparable costs, if not on the low side from the start to support a large-scale switch or new-vehicle movement by people driving conventional vehicles.

Good luck with batteries. More research could be done by the feds (freely available results, not patentable). I worked in a battery factory 25+ years ago and can tell you, there was interest even then in batteries for electric vehicles, but as with wind and solar, there are no likely miracles, just stepwise refinement as the likely course of improvements.

I actually give Chrysler some hope. Fiat used to be laughed at, but ... the short ending, Chrysler is now being run by a guy, trying for a turnaround, that apparently did a fine turnaround already at Fiat. Keep the Fiat name on 500s brought here for SF and NY, though!

"I disagree with your distaste for 'social engineering' with respect to fuel economy."

People should not be compelled by a select few (who often don't subject themselves to these same compulsions, naturally) to live differently than they want to live, when they aren't doing anything truly wrong. That is the case with people driving vehicles of the size they want, of the engine size and power they want, and the fuel consumption they want.

I've driven like a classic grandmother and cut my speed on the highway to save fuel (and reduce the amount I travel), but even though I behave better than many on the road, and that in many cases the big-vehicle and aggressively-driving people are wasteful and gluttonous, they really aren't doing anything that should be considered criminal, or subject to restrictions or prohibitions, and again, they should not be made to change such behavior against their will any more than people should be limited to the size of house or land parcel, etc., they buy. And of course, the motives and psychology of those who want to introduce limitations on everyone should be questioned, as to why people should in fact be intentionally deprived and mistreated.

Most people would economize if fuel prices got high enough*, and a fuel tax would be, as has been said by others, the best way to learn at what point there would be such economy, but even with the fuel tax, government currently is reluctant to raise taxes because even Dems recognize it would hurt economically (and be an inflation driver if it were too high), and cost them at the polls.

I am annoyed and frustrated at the excess of, but not surprised by, the clamoring still by some in Congress for, to name one example, higher fuel efficiency requirements for new vehicles in the "Cash for Clunkers" program currently under consideration and legislation. These people, Feinstein, Boxer, etc., make me ashamed as a Califrornia native, one, and consequently more concerned about future idiocy with energy policy and its deleterious effect on our lives and the economy, two. (An example other than motor vehicles of idiocy is arbitrary, childish, wave-a-wand "alternative energy" mandatory fractions of electricity generation at some given [arbitrary] time in the future. It's wishful thinking and harmful action.)

* Many people will do this in the absence of any compulsory measures, and there even is a subculture here in the USA devoted to smaller vehicles and specifically to minimizing fuel consumption. They are doing this out of their own free will, which is better than having them forced to do this, resentful about it, and trying to evade the limitations, and if you want people to be deliberately constrained, again ask yourself truly why.

* * *

"Fuel costs will rise again"

In the long run, experience says yes, of course, but we can't predict by how much and how soon, as with global warming (more likely from what has been observed than global cooling; we haven't hit the peak yet, in other words, as well as contributing toward rising rather than falling temperatures).

The problem we face is that there is no real, serious alternative yet. My driving experience is probably at the very high end when it comes to recreation (dozens of day trips 800-1000+ miles, so many routine trips under those distances I've never bothered to count -- numbering in the hundreds or thousands) but I look at the general public and unless you can offer something _cheap_ and convenient, the electric car is still not the solution even in most urban situations. Metro area commuters in many places can exceed 40 miles _each_way_ just for commuting, to say nothing of running errands or driving for other reasons in addition to commuting during the day and evening. They'll also likely want to use the vehicle for inter-city travel. (Again, a dedicated daily-driver-commuter vehicle needs to be _cheap_ to be considered a serious auxiliary vehicle, which it would be for most people.) And note we still need more generating capacity and much faster recharging in addition to much increased range, as well as the development of safe, reliable, long-lasting charging apparatus. (A California government report even notes the liability problems if the charging apparatus, sockets, charging stations, plugs, isn't safe.)

* * *

"... you don't select the guy from the phone company"

At least in Ford's case with Mulally, he has experience at state-of-the-art manufacturing and labor unions.

One thing I'll note before leaving this to others (if they still visit it, as it's an older thread) -- China and India are key players, of course, waiting in the wings to break into the US market. GM wants to import cheap Chinese cars, but is being fought by the UAW. Now, not only in the auto sector but overall, China is the big growing company, and India remains largely a growing country with industry to come in the future ... continuing to be postponed for cultural or governmental reasons.

But one thing that I noticed in the news that was just barely & briefly mentioned was that some Indian concern has been talking with some of the dealers who are no longer going to be with Chrysler and GM, so there may be a way eventually for Indian vehicles to be marketed here. We'll see if anything happens.