Other Editorials


Jim Dollinger
Monday, May 25, 2009

Bankruptcy sure looks inevitable by June 1. Of course it will lead to more of what we've been seeing for decades...layoffs, plant closures, reduced wages and benefits, less tax revenue leading to fewer police and firemen, cuts to community services, and shuttering of schools.

What's different this time though is forced terminations of franchises and a UAW contract that eliminates negotiations in 2011, effectively disarming the union.

If allowed to stand, the decision to remove thousands of dealers across America will lead to tremendous hardship nationwide. This will add a huge drag on our country's economy. People don't fully realize how harmful this is going to be. Personally, I believe it is criminal and would never stand without the protection of CH11. Regardless of what you might be told, there is no ethical or rational reason to so drastically cull the dealer body. They are after all, the customers of the manufacturer. You can bet there are reasons for this well beyond what is publicized.

When the UAW members wake up and realize they are forced to accept wages, work rules, and benefits on a par with non union in 2011, they will be in for a shocker, particularly after the transplants themselves reduce everything during the next couple years. It is a race to the bottom.

More importantly though, I feel the real story is how we got into this shape, and how even bankruptcy won't save GM from impending dissolution. Our trouble isn't what's most often discussed...wages, benefits, regulations, exchange rates, material costs, the weather, fuel prices, or the economy. GM's market share has been in decline for decades and the reason is FAILED MANAGEMENT! This company made money in the depression, but then we had Alfred Sloan.

Back in '94 Wagoneer was promoted to CFO without even an accounting degree (small wonder we disclose "material weaknesses in financial controls" in the Annual Reports). He was promoted to lead North America even after a disastrous tenure heading up purchasing. He proceeded to lose market share every year, then was promoted again to CEO. Still more losses including the FIAT FIASCO and DELPHI DEBACLE. Guess what? He becomes Chariman, of all things. He stripped the company of assets, borrowed beyond belief, allowed disastrous marketing to continue and lost the entire valuation of the company while steering us directly toward bankruptcy.

This is not the only example of GM's lack of accoutability. Bill Lovejoy ran GMAC when a NJ dealer, McNamara, burned us for $400 Million. Mr Lovejoy was simply shifted to GMSPO, then to running NA sales. Deloitte, the same auditor we've had for 70 years, stayed on. John Smith, a complete failure running VSSM was shifted to worldwide product planning, and on and on. GM holds no one accountable, people are put in charge of businesses they have no clue how to run. It's the good old boys spun out of control.

What really should be looked into is how to fix this thing once and for all. We need to examine the cause rather than effects. Managment's repeating one "turnaround" plan after another is getting us, and our country, nowhere.