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The auto industry has been in the news a lot lately. Most of the news has to do with how the industry is struggling in today’s economic malaise. Most of the news has been about the manufacturers but there are also disquieting hints that the problems are flowing downhill. Yesterday the Chicago Tribune ran an article, Credit crunch: Auto dealerships struggle, close as ‘floorplan’ financing dries up, about the effect on Chicago area dealerships. I am not sure how I feel about this. I feel for the employees of the dealerships, as I do for the employees of the auto manufacturers. These are tough times to be out of work. On the other hand I think that both the manufacturers and the dealerships have needed to change the way they do business (and what they sell) for quite some time now. There is one exception to my sympathy for former employees. That is ex-Chief Executive Rick Wagoner of General Motors Corp.
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“On Friday I was in Washington for a meeting with administration officials,” … “In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have”
Rick Wagoner as reported in the Wall Street Journal
Wagoner was forced to resign by the feds (here, as well as in WSJ). Wagoner consistently supported SUV and truck sales instead of greener alternatives – the profits on trucks and SUVs are better. As a 30 year employee of GM management, he was a champion of doing business in the same old way. The way it has always been done at GM. Apparently the lessons of the 1970s were lost on him. Those lessons were lost on many of us. The difference is that he was paid a lot more than the rest of his co-workers and the rest of us. The theory for higher pay (and bonuses, stock options and etc) is that the recipient is worth more because of his superior judgment and abilities. GM has done nothing but continue on its decline since he took over as CEO in 2000. I’ll reserve my sympathy for the thousands of workers affected by his bad decisions.
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Rick Wagoner is not the only one (in GM or the auto industry) desperately trying to keep things the way they have always been. The last time I shopped for a new car (2006) I shopped on the internet first. I checked a lot of auto websites and asked for many quotes from local dealerships. About half of the time the only information I got was a phone call – which I never answered but listened to the voicemail. Sometimes when I didn’t respond they then sent me an email saying: “We have tried to contact you but…” The email always included a phone number where I could contact them. I would then reply back and ask why they were phoning instead of sending me an email with the information I requested. One dealer had anticipated me and sent an anonymous email (reply not possible). I keep the email as a reminder. That email was from a GM dealer. Most of the GM dealers I sent requests to did not respond except to send me their phone number. That was one of the reasons I did not buy a GM product.
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I think there is a connection between the leadership of Wagoner and my experience with car shopping. The dealers that wanted to talk and not send me information (and I have to admit other brands did also – GM was just the worst) were accustomed to doing business that way. Like Wagoner they balanced profit against change. It is significant to me that Wagoner is an accountant. They had always made more profit by talking than by sending information. Like Wagoner, the dealers have failed to realize that a fundamental shift has occurred, both in the way consumers buy and what they buy.
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To my way of thinking there is some irony here. Ronald Reagan implemented trickledown economics in the 1980s by pushing tax reforms that benefited the wealthy and large corporations more than individuals with lower incomes. The theory being that wealth flows downhill. The present crises are a result of policies started in Reagan’s era. However I don’t believe that they are a direct result of those policies. The shunting of a disproportionate amount wealth to individuals at the top of the economic pyramids seems to have diverted the downhill flow. The irony is that the removal Mr. Wagoner is part of starting at the top. I hope the benefits trickle down.
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I have a question. What about the board that appointed Mr. Wagoner?