# GM head Wagoner quits at Obama's request. And? **URL:** \ **Category:** Great Debates\ **Created:** [March 30, 2009, 12:58am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240 "2009-03-30T00:58:30Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Sinaijon](https://avatars.discourse-cdn.com/v4/letter/s/dc4da7/32.png) [@Sinaijon](https://boards.straightdope.com/u/Sinaijon)\ **Post date:** [March 31, 2009, 6:24pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/81 "2009-03-31T18:24:36Z")
> [@Sam\_Stone](#): > > No, I’ll be they’ve NEVER asked themselves, “have we consolidated enough unprofitable brands?” I think it’s pretty obvious that it’s his code for ‘green’ cars. Every one constantly harps that GM and Ford aren’t selling the ‘right’ kind of cars. \*\* Yet despite all that, Chevy Silverado and Ford F150 trucks were still the top selling vehicle last year\*\*. Not the hybrids, not the sedans, or the ‘green’ cars that everybody thinks they need to be selling in order to survive. If GM and Ford want to be more profitable, they’d kill their green car lines and concentrate on trucks. But that wouldn’t be palatable to the Democrats. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 31, 2009, 9:13pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/82 "2009-03-31T21:13:50Z")
> [@Sinaijon](#): > > I think it’s pretty obvious that it’s his code for ‘green’ cars. Every one constantly harps that GM and Ford aren’t selling the ‘right’ kind of cars. \*\* Yet despite all that, Chevy Silverado and Ford F150 trucks were still the top selling vehicle last year\*\*. Not the hybrids, not the sedans, or the ‘green’ cars that everybody thinks they need to be selling in order to survive. > > If GM and Ford want to be more profitable, they’d kill their green car lines and concentrate on trucks. But that wouldn’t be palatable to the Democrats. Actually they would do best if they sold both. But then that is a political hotcake now. They can green up the bigger vehicles though. ---
**Author:** ![MichaelQReilly](https://avatars.discourse-cdn.com/v4/letter/m/df705f/32.png) [@MichaelQReilly](https://boards.straightdope.com/u/MichaelQReilly)\ **Post date:** [March 31, 2009, 10:49pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/83 "2009-03-31T22:49:49Z")
> [@Fotheringay-Phipps](#): > > …But what we’re discussing is whether the new management that Obama puts in will do a better job of running GM - I don’t see any reason to assume that this is the case. Is it really possible for them to do any worse? ---
**Author:** ![Gyrate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gyrate/32/3588_2.png) [@Gyrate](https://boards.straightdope.com/u/Gyrate)\ **Post date:** [March 31, 2009, 10:53pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/84 "2009-03-31T22:53:43Z")
Never say that. There is always a “worse”. ---
**Author:** ![MichaelQReilly](https://avatars.discourse-cdn.com/v4/letter/m/df705f/32.png) [@MichaelQReilly](https://boards.straightdope.com/u/MichaelQReilly)\ **Post date:** [March 31, 2009, 11:09pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/85 "2009-03-31T23:09:35Z")
> [@Gyrate](#): > > Never say that. There is always a “worse”. Over Wagoner’s tenure GM has lost something like $100 billion and seen its share price decline from $70 to $3. I’m not sure they _could_ have done worse. Maybe if they decided to stop making cars all together and just set piles of money on fire? ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [April 1, 2009, 1:17am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/86 "2009-04-01T01:17:37Z")
> [@Fotheringay-Phipps](#): > > I don’t think anyone is denying that Obama has every _right_ to demand these or any other changes. The question is whether this type of thing improves the situation. > > If I understand him correctly Sam (and others, e.g. me) are not saying that the Gov should have bailed out the carmakers with no conditions attached. They’re saying that the Gov should not have bailed them out altogether, and that one downside of bailing them out is having management by government. I’d agree with that, and would have been happier if the government (I’m Canadian but on this issue the two governments act in lockstep) had simply let them die. But that’s NOT the tone of Sam’s last two posts, which essentially amount to “The government should not tell GM how to run their business.” Actually, they should, if in fact the bailout happens. I can’t agree more that it never should have come to this, but it has. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [April 1, 2009, 2:52am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/87 "2009-04-01T02:52:21Z")
The professional engineers and managers that run the auto companies are irreplaceable. They are the only ones who can figure out how to run them and they have many years of experience . We should give them large bonuses and salaries. The factory and office personal have been trained and they must be kept in their jobs. Training new people would be expensive and it would not be smart to remove any of them. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 1, 2009, 5:50am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/88 "2009-04-01T05:50:54Z")
> [@BrightNShiny](#): > > So? Whether Obama does it or a bankruptcy court judge does it, some government official is going to be injecting himself into GM’s board room. Obama doesn’t want GM to go the Chapter 7 (liquidation) route, and while we can debate the merits of that, quit acting like there’s magic alternative out there where the government won’t be running GM. The Obama administration will in the end probably exert far less control over GM operations than any bankruptcy judge would. Hey, they should have let them go bankrupt six months and many billions of dollars ago. A lot of us were saying that then. GM needed to go bankrupt to survive, and continual bailouts were just giving transfusions to a patient bleeding to death. What I was snarking at wasn’t the fact that GM is being pushed into bankruptcy - I was snarking at the fact that the Obama administration’s plan for recovery read like a first year business student’s answer to the question, “Describe five things companies must do to be successful”. Gee, all GM has to do is have good cash flow, make profit, invest heavily in R&D, and make the best, most fuel efficient cars around! Thanks for that, guys. Good work on that deep analysis. Also, Obama saying condescending things like, “They must ask themselves: have they consolidated enough unprofitable brands?” First of all, what the hell does Obama know about making cars? And does he really think GM has never asked themselves that question? That particular question has been repeated in the automotive press many times, and GM executives have answered it at length. They KNOW they have too many unprofitable brands, thanks. It’s just really freaking hard to do something about it. They have contracts with dealers, they have so much parts sharing between brands that they are tied tightly together - for example, if a part goes in two cars, you get certain economies of scale. Cancel one brand, the costs for the other can go up. Scrapping Oldsmobile cost GM a fortune. Also, closing an unprofitable brand isn’t as easy a decision as it seems. These brands do have value. And closing them down and paying out dealers and employees and closing factories can be even more expensive in the short run, so if you can turn the brand around in a few years, that might be a better choice. That’s what GM tried to do with Saturn. They may have managed it with Pontiac - a few years ago, all the analysts were saying Pontiac was dead brand walking. But it seems to be doing better now. GM isn’t being run by idiots. It does not need Obama telling it how to make cars. It knows what needs to be done - it just can’t do it. It owes too much money and carries too much liability to be competitive. That’s the real problem, and has been for a long time. What GM has to do is go into chapter 11, arrange DIP financing, through the government if necessary, and have some flexibility to restructure its debt, get out of some contracts it can no longer afford, shed some dealers, and renegotiate a better compensation package with its union. What it doesn’t need is a bunch of Washington hotshots parachuting in and telling them how to build cars. And it doesn’t need the President of the United States as Quarterback of the team. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [April 1, 2009, 7:09am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/89 "2009-04-01T07:09:09Z")
> [@Sam\_Stone](#): > > Hey, they should have let them go bankrupt six months and many billions of dollars ago. A lot of us were saying that then. GM needed to go bankrupt to survive, and continual bailouts were just giving transfusions to a patient bleeding to death. > > What I was snarking at wasn’t the fact that GM is being pushed into bankruptcy - I was snarking at the fact that the Obama administration’s plan for recovery read like a first year business student’s answer to the question, “Describe five things companies must do to be successful”. Gee, all GM has to do is have good cash flow, make profit, invest heavily in R&D, and make the best, most fuel efficient cars around! Thanks for that, guys. Good work on that deep analysis. That analysis reads exactly like any number of business plans I’ve read from Harvard MBAs over the past twenty years of my career. Initial business plans are often high level (and to my taste, usually moronically simplistic), but that’s quite often the way it’s done. > [@](#): > > Also, Obama saying condescending things like, “They must ask themselves: have they consolidated enough unprofitable brands?” First of all, what the hell does Obama know about making cars? And you think the bankruptcy court judge is going to be some car making expert? > [@](#): > > And does he really think GM has never asked themselves that question? > > That particular question has been repeated in the automotive press many times, and GM executives have answered it at length. They KNOW they have too many unprofitable brands, thanks. It’s just really freaking hard to do something about it. They have contracts with dealers, they have so much parts sharing between brands that they are tied tightly together - for example, if a part goes in two cars, you get certain economies of scale. Cancel one brand, the costs for the other can go up. Scrapping Oldsmobile cost GM a fortune. > > Also, closing an unprofitable brand isn’t as easy a decision as it seems. These brands do have value. And closing them down and paying out dealers and employees and closing factories can be even more expensive in the short run, so if you can turn the brand around in a few years, that might be a better choice. That’s what GM tried to do with Saturn. They may have managed it with Pontiac - a few years ago, all the analysts were saying Pontiac was dead brand walking. But it seems to be doing better now. > > GM isn’t being run by idiots. It does not need Obama telling it how to make cars. It knows what needs to be done - it just can’t do it. It owes too much money and carries too much liability to be competitive. That’s the real problem, and has been for a long time. What GM has to do is go into chapter 11, arrange DIP financing, through the government if necessary, and have some flexibility to restructure its debt, get out of some contracts it can no longer afford, shed some dealers, and renegotiate a better compensation package with its union. > > What it doesn’t need is a bunch of Washington hotshots parachuting in and telling them how to build cars. And it doesn’t need the President of the United States as Quarterback of the team. Let’s be clear here. Your proposed solution is to have another Federal government official - the bankruptcy court judge - do similar things that you are criticizing Obama for doing. You want the Federal government to run GM for at least the next few years and possibly as long as a decade, you just want it done through a bankruptcy court judge. Fine. But, again, your solution is not one that doesn’t involve “Washington hotshots.” It’s a different set of “Washington hotshots.” That’s what I’m objecting to in your posts. If you think a bankruptcy judge is better suited to running GM, then make that argument. Quit trying to characterize your argument as one that doesn’t involve the government. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 1, 2009, 7:23am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/90 "2009-04-01T07:23:01Z")
> [@BrightNShiny](#): > > Let’s be clear here. Your proposed solution is to have another Federal government official - the bankruptcy court judge - do similar things that you are criticizing Obama for doing. You want the Federal government to run GM for at least the next few years and possibly as long as a decade, you just want it done through a bankruptcy court judge. Fine. But, again, your solution is not one that doesn’t involve “Washington hotshots.” It’s a different set of “Washington hotshots.” That’s what I’m objecting to in your posts. If you think a bankruptcy judge is better suited to running GM, then make that argument. Quit trying to characterize your argument as one that doesn’t involve the government. A bankruptcy judge is operating within a legal framework that everyone understands. Bankruptcy gives the company legal protection, and the ability to renegotiate contracts. Bankruptcy has a framework for interim financing. Bankruptcy has an exit strategy, and is a procedure that investors understand and can work with. Bankruptcy involves trade-offs, and has a harsh ending for companies that can’t or won’t make hard decisions. That tends to clear the minds of management. Finally, if the company just can’t make it, bankruptcy gives a systematic method of winding down the assets of the company in a way that is most fair to creditors and which is not even remotely politicized. That’s why bankruptcy is important. Yes, a judge is involved, but that’s not the feature. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [April 1, 2009, 7:38am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/91 "2009-04-01T07:38:40Z")
> [@Sam\_Stone](#): > > A bankruptcy judge is operating within a legal framework that everyone understands. Bankruptcy gives the company legal protection, and the ability to renegotiate contracts. Bankruptcy has a framework for interim financing. Bankruptcy has an exit strategy, and is a procedure that investors understand and can work with. Bankruptcy involves trade-offs, and has a harsh ending for companies that can’t or won’t make hard decisions. That tends to clear the minds of management. And supposing the judge decided to replace the management? Who’s minds would there have been to clear? Obama also has a lever to clear the minds of management. If they don’t make tough decisions, then they don’t get the bailout money. > [@](#): > > Finally, if the company just can’t make it, bankruptcy gives a systematic method of winding down the assets of the company in a way that is most fair to creditors and which is not even remotely politicized. Hey, you know under your plan who becomes a creditor? The US government, since it will have to provide the DIP financing, since the DIP market is frozen. You know what that means? That the US government - ie, Obama, is still going to have pretty big input into what happens in the bankruptcy proceedings. So, if you think Chap. 11 somehow alleviates the politicization problem, then you are mistaken. > [@](#): > > That’s why bankruptcy is important. Yes, a judge is involved, but that’s not the feature. The judge is more than “involved.” The judge is the one who makes all the determinations about what happens to the company and how it’s run in the until it emerges from bankruptcy. He may delegate out to others (and usually he does), but in the end, it is his decision to make. When you put a company into bankruptcy court, you’ve essentially made the bankruptcy judge the equivalent of the board of directors. FTR, I wouldn’t have been opposed to GM entering Chap. 11 with the government providing DIP financing, but your characterization of what would have happened there is simply not correct. With a company this large, your proposed solution amounts to six of one, half-a-dozen of another. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [April 1, 2009, 7:45am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/92 "2009-04-01T07:45:12Z")
> [@Sam\_Stone](#): > > A bankruptcy judge is operating within a legal framework that everyone understands. I want to address one last point here. The idea that there is some clear legal framework in bankruptcy court is only partially true. Bankruptcy courts are not like other courts. Bankruptcy judges are given wide latitude to make decisions, and it’s not unheard of for legal decisions to come out of bankruptcy court that can’t be cited anywhere else, because they don’t comport with the standard body of law used in other courts. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 1, 2009, 8:00am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/93 "2009-04-01T08:00:08Z")
That’s true, but bankruptcy as a process is something the market understands and works with all the time. The risks are known, and priced. That doesn’t mean it’s perfect or leads to optimum resource allocations, but it generally works. Many very large companies have gone through it. Some have liquidated, and some have survived. But the process generally works. When large decisions are made outside of any legal framework at all, at the whim of the administration, it scares the crap out of people. Obama says that the key to GM’s survival is that it must make small, fuel efficient cars. How’s that going to play out? Will GM be forced to change their product lineup for political purposes? If GM needs to close a factory in the district of a powerful Democratic senator, or with a powerful Democratic constituency, will Obama allow it? Just what will they force GM to do? No one knows. No one knows the limits right now. No one knows what the exit strategy is. Under those circumstances, the market is not going to do a good job dealing with GM. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [April 1, 2009, 8:01am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/94 "2009-04-01T08:01:23Z")
On another note, having the government do so much meddling in GM’s affairs may open the door to trade complaints from foreign auto makers. And they’ll have a point. GM is blowing out cars with huge incentives right now, essentially using government money to do so. ---
**Author:** ![Gyrate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gyrate/32/3588_2.png) [@Gyrate](https://boards.straightdope.com/u/Gyrate)\ **Post date:** [April 1, 2009, 9:57am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/95 "2009-04-01T09:57:00Z")
> [@Sam\_Stone](#): > > On another note, having the government do so much meddling in GM’s affairs may open the door to trade complaints from foreign auto makers. And they’ll have a point. GM is blowing out cars with huge incentives right now, essentially using government money to do so. Most of the European auto makers are getting their own government handouts of one form or another. Not sure about Japan/Korea. ---
**Author:** ![E-Sabbath](https://avatars.discourse-cdn.com/v4/letter/e/e19adc/32.png) [@E-Sabbath](https://boards.straightdope.com/u/E-Sabbath)\ **Post date:** [April 1, 2009, 10:38am UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/96 "2009-04-01T10:38:11Z")
Toyota certainly is. Actually, always has been, in one way or another, as the car industry runs parts of the government. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [April 1, 2009, 1:55pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/97 "2009-04-01T13:55:50Z")
I saw a special on GM last week. They are expecting 2 future cars to save them. One is the Volt. It seems to be a couple steps ahead of its competition but the price tag makes it a question mark. In this climate of unemployment going up and people feeling insecure about their economic futures ,I wonder if a 40 K car can sell. The other is a hot new Camaro. They have spent a fortune trying to recapture the past. It looks pretty nice but a street rod would be a self limiting car. it is not making gas mileage much of a consideration. It seems to be a mistake to me but I hope I am wrong. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [April 1, 2009, 3:31pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/98 "2009-04-01T15:31:54Z")
GONZOMAX is right-the VOLT will NOT save GM-it will instead be its coffin nail. GM ought to be the world’s most efficient automaker-with its vast buying power, it should be paying less for components, than any other automake. The fact is, it isn’t, and the reasons are decades of bad management and concessions to the UAW. Bankruptcy and reorganization is the only way, but it may just be too far gone by now. But heck, NISSAN revived itself-maybe we ought to hire Carlos Ghosn. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [April 1, 2009, 3:46pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/99 "2009-04-01T15:46:25Z")
> [@ralph124c](#): > > GONZOMAX is right-the VOLT will NOT save GM-it will instead be its coffin nail. GM ought to be the world’s most efficient automaker-with its vast buying power, it should be paying less for components, than any other automake. The fact is, it isn’t, and the reasons are decades of bad management and concessions to the UAW. It’s a bit more complicated than that. A lot of the parts that the auto makers buy are brought from independent companies that used to be divisions of the automakers themselves. In the case of GM the major company is Delphi, but there may be others. Ford has theirs. I believe the companies may be locked into certain contractual arrangements involving buying parts from the former divisions, but even if they’re not, they are effectively required to anyway because they have financial guaranteed the spin-off’s liabilities in various ways, e.g. responsibility for retiree benefits or laid off workers (I forget which - possibly both) so that they can’t allow the spin-offs to fold. These spin-offs are saddled with many of the same problems as the former parent company, declining sales, too much overhead, restrictive UAW contracts etc., and the former parents don’t have as much influence in dealing with them. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [April 1, 2009, 4:51pm UTC](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240/100 "2009-04-01T16:51:01Z")
Ford has Visteon. All the suppliers have made wage concessions. All the unions have caved. I doubt we can get them to work for Chinese wages though. You can not survive in America at under a dollar an hour. Since we can not get our wages low enough ,we have to get all Nafta ,Cafta and others to honor the agreements and pay better and protect the environment. All the wage pressure can not be down. Somebody in the line has to make enough to buy products. [Previous page](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240.md?page=4) [Next page](https://boards.straightdope.com/t/gm-head-wagoner-quits-at-obamas-request-and/491240.md?page=6)