Saving the US Auto Industry

[xoxoxoBruce]

By Al Lewis
Dow Jones Newswires

A government bailout of General Motors Corp. is an all-American vote of confidence in CEO Rick Wagoner.

"What the industry needs now is the most competent, most experienced, most capable leadership team they can have at each of the companies," Wagoner said in video interview with Automotive News on Monday. "And I think we have a great team at GM."

This great team led the industry with a 45 percent plunge in October car sales.

GM's stock recently hit a level not seen since 1943, a decade before Wagoner was born. And soon taxpayers may be forced to cover the $2 billion a month GM is guzzling like a rusting fleet of Chevy Suburbans.

So Wagoner — despite his clean- shaven face, neatly parted hair and self-professed greatness — was asked whether he should consider resigning.

"The issue hasn't come up, and I expect it wouldn't come up," Wagoner said, even though the issue had just come up in the interview.

And then Wagoner declared that U.S. taxpayers should trust him best to run GM.

"Any support we get is going to be based on the fact . . . that it's a good investment on the part of the taxpayer," Wagoner said. "That the business will actually be better in the future. And one of the key aspects of that is to make sure you have the strongest possible leadership in the company."

Wagoner has said he's willing to accept limits on golden parachutes and even executive compensation. But getting rid of him? "It's not clear to me what purpose would be served."

Hmm. Now there's a puzzler.

Let's go back. Way, way back. To seven weeks ago, when Wagoner appeared certain his perennial turnaround efforts were finally complete, despite whatever rocks an avalanching economy might dump on the road ahead.

"GM is here to stay," he declared, announcing a new 4-cylinder engine plant in Flint, Mich., on Sept. 25. "And today we celebrate the latest evidence."

A few weeks earlier, on Aug. 18, Wagoner was on PBS's Charlie Rose Show, boasting of a $26 billion liquidity position that would carry GM through at least 2009.

"We believe, under conservative market scenarios . . . we're good through '09," he told Rose. "And we've got capability to work beyond that. . . .

"At this point, I think the message I would like to leave you with here is GM is here to stay. . . .

"We've put together plans based on conservative industry, economic and market forecasts, conservative oil prices," he continued. "And under those scenarios that we look at, the answer is GM is going to be around and healthy and robust."

Can a CEO this wrong be trusted with shareholders' money, let alone taxpayers' money? What's wrong with a basic bankruptcy reorganization?

In a Nov. 7 interview with Fox Business News, Wagoner said consumers will simply stop buying GM cars if the automaker files Chapter 11.

"We would not be talking about reorganization," he said. "We would be talking about a liquidation. It would be a catastrophe."

But millions of U.S. consumers have filed bankruptcy themselves. Perhaps they would understand. After all, they spend money at bankrupt phone companies, bankrupt retailers and bankrupt airlines. Right?

"Sure," Wagoner conceded in the Fox interview. "So they buy a $300 ticket and use it three days from now. It's quite a bit different from paying $25,000 and planning on getting service and support for the car you just purchased for the next five to 10 years."

So I guess if GM is forced to file bankruptcy, its CEO has already put consumers on alert that he doesn't expect them to buy his cars.

Even if they are great cars.

Back to the Nov. 10 Automotive News interview:

"People will say, 'Well, boy, you can't do great cars,' " Wagoner said. "People who say that today are just not looking at the facts. They're not looking at Chevy Malibus or Cadillac CTSs or other products."

I hate when an entire market is wrong.

"Let's be honest," Wagoner said. "This industry is running at 11 million units today (as opposed to the 14 million Wagoner had expected), not because the OEMs (manufacturers) all of a sudden began to deliver poor products. We're running at 11 million units because the credit system in the country has failed. . . .

"It seems a little silly to use problems that come as a result of the credit crisis as an excuse to wipe out, really, the most important industry in the country."

Not to mention a great management team.

So for these reasons Wagoner wants another big piece of the American Pie. But maybe we should play him a verse from the song, "Drove my Chevy to the levee, but the levee was dry."

Al Lewis: 201-938-5266 or al.lewis@dowjones.com

See tw, it's not his fault.