Wednesday, August 1, 2012

Some Random $GM Thoughts

I want to touch on the General Motors - $GM - something as I haven't done in quite a while. We all know this is the new and improved, born again, General Motors. 

A quick glance at that chart suggests that lower band around 19 sure better hold.
Today we received the news that GM July auto sales were down 6%, Ford's were down 4% by comparison. We do know from previous reports that GM is ramping up subprime auto loans to drive sales. You can debate the merits of this marketing strategy till the cows come home but put simply this is business decision risk which, on a planet known as Earth and a system formerly known as free market capitalism, would normally be born by management and the company's shareholders. Not so anymore.

Some while back ultimate insider Fritz Henderson was shown the door by the board. That move by the omnipotent Ed Whitacre got me to REALLY thinking a lot about all of GM. Fritz had been a lifelong GM'er. So to those who thought he was something different than Rick Wagoner you can continue to keep dreamin' on. I will admit that it must be nice to get fired and then hired back for a $3,000/hr consulting gig but what would I know.

On to more important things. Below is a long term chart of GM's market shares vs imports. Suffice to say GM's dominance peaked in the 60's near 50%. 

Now lets compare this market share chart with the chronological list of GM's former chief executives and their background;
  • Alfred Sloan 1923-1946 (engineer)
  • Charles Wilson 1946-1953 former CEO of GE (mftg concern at the time and not a closet hedge fund like today)
  • Harlow Curtice 1953-1958 (wholesale produce family biz exec)
  • James Roche 1967-1971 (statistician)
  • Richard Gerstenberg 1972-1974 (comptroller, treasurer)
  • Thomas Murphy 1974-1980 (accountant)
  • Roger Smith 1981-1990 (MBA)
  • Robert Stempel 1990-1992 (engineer)
  • Jack Smith 1992-2000 (MBA)
  • Richard Wagoner 2000-2009 (MBA and Hygiene salesman from P&G Ron Zarella)
  • Frederick Henderson 2009-2009 (MBA)
  • Ed Whitacre 2009- present (engineer)

It sure looks to this simpleton like the fall started with James Roche as the paper pushers and money changers took over. Sure Stempel (who I was a big fan of) got a shot but for the most part MBA's finance and number experts took over. 

According to GMWiki, the transition from Roche to Gerstenberg;

 "When James Roche retired the chairmanship in 1971, Gerstenberg was elected to that post. His main rival for the position was GM President Ed Cole. Cole was a "car guy" with a background in engineering and production and was seen as the logical heir from the traditionalist view point. However, Gerstenberg was chosen by the board because his strengths as a money manager and an articulate defender of the increasingly criticized auto industry were viewed as necessary to handle the problems GM looked to face in the coming years. "

Strengths as a money manager and an articulate defender of the auto industry huh. Lovely. I have a good friend whose father is a very successful 'old school' attorney who was visiting and had the opportunity to meet and have a long discussion with on many subjects. His age, his experience coupled with his insight made for a very interesting and educational evening. He did make one comment in particular that night that has stuck with me in which he said;

"Whatever you do never, ever under any circumstances invest in a company where the fella in charge is an attorney or an accountant unless that company is in the law or bookkeeping business."

Based on the above market share chart and CEO time line that advice sure would have saved some GM shareholders some money.

I cannot help but look at that CEO list and not notice a couple of things in particular. First good ol' Roger Smith and his baby Saturn. Smith's baby Saturn which was started back in 1985, had never, ever, ever made a profit but that sure didn't keep the brain trust of GM from pumping billions into keeping afloat this modern day marvel of ego. Sure the dealers made a few bucks sellin' em but at the manufacturing level this "New Kind of Car Company"  had never earned a dime. This would, one might think, beg the question as to at what point any of the management or board of directors- assuming they were anything more than a Neiman Marcus dressed version of the Keystone cops-  might ask the question why are we keeping this thing going? Maybe they were too busy flying first class cashing their cheques and shutting down money maker Oldsmobile but I digress. Secondly is Bob Stempel who in my opinion over the past decades of rotting decay yes men and governmentication at GM was the only 1 guy worth a red cent over there. Lastly Rick Wagoner. What more needs to be said about this empty suit surrounded by grovelling yes men that hasn't already been 'cept we can always he was responsible for landing that gem Ron Zarella.

Here is my 2 cents. GM needs someone with engineering or industrial back ground period. In a perfect world GM would find another Alfred Sloan. Think about this Alfred Sloan quote I dug up;

"If we are all in agreement on the decision - then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about."

Now juxtapose that with the lightweights and con artists of today like GM CFO Dan 'the scam' Ammann. Now tell me your shocked he worked in investment banking at Morgan Stanley. So long as he's sorry, has apologized and really promises not to do it again I really am okay with dirt bags like this rising to the top, getting caught and everyone letting bygones be bygones. Of course this is definitely NOT cronycapitalism nor selective justice just.  Sign of the times I should think. Now contrary to popular opinion and while I may be pessimistic when the facts support it, I don't believe even for a NY minute there is not another Alfred Sloan out there in this great country amongst the reams of Dan Ammanns out there. We simply have to know where to look for him or her. To save us all some time I can most readily assure you Harvard, Princeton, Yale and Wall St. are the very LAST places you will find him or her. 

I would assume that such a person will, by having an engineering or production background and NOT someone having that country club coveted Ivy league MBA. This lack of Ivy league MBA most assuredly guarantees his/her comprehending that 2+2=6 no matter what your Wall St. financiers and investment bankers tell you! Being MBA-less will also indicate that he/she understands that when you build an garbage product (think Vega, Aztec, Cimarron, Citation and Catera) it bombs and when sell your product to people who cannot pay, bad shit happens to your profits, period! 

I am definitely no expert nor do I possess an Ivy league MBA (thank my lucky stars) but I do believe that better people and better products win out as least they did in a true free market capitalist system.

1 comment:

samantha jacob said...

I believe that better people and better products win out as least they did in a true free market capitalist system.....

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