Marie Antoinette’s Soul Mate

I’m back! I hadn’t meant to be away for five weeks, but life intervened. In my defense, I didn’t notice anyone actually breaking my door down asking about my whereabouts …

I am wondering if you heard the recent Robert Siegel interview of GM Vice Chairman Bob Lutz on NPR’s All Things Considered a few days ago. If not, it is definitely worth listening to (http://www.npr.org/templates/story/story.php?storyId=99253055), for it gives a unique insight into the travails of the US auto industry.

Mr. Lutz showed great restraint; he waxed eloquent about the stupidity of the average consumer, without actually using the word. GM produces great cars, he said, but only a handful of experts really know this. It will take time for the experts’ opinion to filter down to the great unwashed masses and GM had no choice but to wait this out. Asked about the effect of the government bailout on the workings of his company, he said, “I’ve never quite been in this situation before of getting a massive pay cut, no bonus, no longer allowed to stay in decent hotels, no corporate airplane. I have to stand in line at the Northwest counter. I’ve never quite experienced this before. I’ll let you know a year from now what it’s like.”

If anyone has any doubts about why GM is really flirting with bankruptcy, Mr. Lutz comments should have clarified the issue. The Vice Chairman of a company which went with a begging bowl to Congress acted as if he was Marie “Let them eat cake” Antoinette’s soul mate. CEO Rick Wagoner and GM’s Board should have repudiated his statements by publicly firing him, but in my heart of hearts, I knew that my life would long be over before any good sense emanated from those quarters. But hope is what keeps the world spinning, does it not?

So, did Mr. Lutz change my mind about the auto industry bailout? No! If anything, his words are proof that the bailout is needed to preserve the company until more drastic steps can be taken.

An argument – also made by a handful of others – is that without the bailout, the industry’s second and third tier companies will be irreparably weakened. This will harm the broader industry’s stronger companies, for they rely on many of these companies too. Ideologues don’t understand this is the unfortunate logic of networks: As I’ve written elsewhere, it is hard to succeed if your network is failing.

The more important, and thus far unmade, argument is: bankruptcies will not reform these companies. In the best case scenario, they would file for pre-packaged bankruptcies (in which creditors back the financial restructuring plan) without scaring customers (even though buying a consumer durable is a riskier bet than buying a ticket from a bankrupt airline). Who will manage GM through this process? People like Mr. Lutz will represent the companies. Across the table from them will be their creditors. What will the negotiations focus on? The executives will argue they can fix the problems – if everyone else makes large concessions. The creditors – rightfully – will be trying to get back their money as quickly as they can. No one will be focusing on changing the culture that allow people like Mr. Lutz to be top dogs. And without changing culture – encouraging collaboration, being open to others’ ideas, being willing to take considered risk, managing learning every day, etc. – these companies will stumble from one disaster to another. Changing culture takes great effort, committed leadership and time. All three will be in short supply during the negotiations and during the tightly choreographed marches towards tough milestones that will follow.

I hope the Obama administration’s Auto Czar, backed by the bills that Congress must pass (to provide additional funding) by March, will be able to force change. As I wrote in an earlier post, I would like to see appointees to the Boards, an orderly departure of people like Rick Wagoner and Bob Lutz, and a shifting of power to less jaded executives running smaller companies created by splitting up the behemoths. The ideologues will probably not let this happen, but extraordinary times call for extraordinary steps. Nevertheless, I’ll even take smaller steps along the lines I have proposed while hoping for more. Hope, as I said, is what keeps the world spinning, does it not?

Category: Business Environment, Company Performance, Corporate Culture, Financial crisis, Leadership, Organizational structure, Politics | Tags: , Comment »


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