When I heard that Rick Wagoner resigned his post as CEO of General Motors on Sunday, I was shocked and stunned. In its effort to hasten the overhaul of the US auto industry, the Obama administration essentially said, the only way you get more money is if you get rid of Wagoner. In the president’s defense, Washington (and much of the public) has been asking for more fuel-efficient cars long before the current crisis, and in fact GM’s woes began long before the widespread economic downturn. The message clearly is: We want real change, and we’re not kidding.
As an insider, I have witnessed firsthand the incredible changes going on inside GM with hybrid powertrain development, Lithium battery technology, plant closures, product portfolio management, labor negotiations, and the like. Unfortunately, these things take time, and time has officially run out for Rick Wagoner. It has not, however, run out for GM—or Chrysler.
Having met Wagoner on several occasions, I can say he is a sincere and honest man, and he did not deserve the tongue lashing he got in Congress last month. Nevertheless, Wagoner is a big picture guy, and understands the way these things work. He saw the writing on the wall, and did what he could with a shrinking set of options. He’s probably relieved to some degree, because he can watch what unfolds next from a more protected vantage point. So what is going to happen next?
It’s just my hunch, but making Wagoner the sacrificial lamb really opens the options for GM, Chrysler, and the Obama administration. The first item on the hit list is the uncompetitive labor contracts with the United Autoworkers Union. The bondholders, labor union, and the board of directors blinked first, and Obama sent the message that Detroit isn’t getting a blank check every few months—GM and Chrysler need to buckle under and make real sacrifices. Everybody involved with GM and Chrysler is going to take a hit, rich and poor. (Of course, nobody’s talking about the folks who took the first hits—the rank and file white collar work force that designs and engineers all those great cars with continuously dwindling resources.)
Look out labor unions, your salad days of vastly inflated benefits at taxpayer and car buyer expense will be coming to an end. Very soon, you’ll get the same deal as everybody else in the real world (which includes the white-collar GM worker): no job banks, no guaranteed work contracts, no pensions, health care that you have to help pay for (gasp), no matching 401k plan, and a smaller vacation package. But unlike Rick Wagoner, at least the union folks will still have a job. And if the unionized work force doesn’t get that message soon, they’ll pay the ultimate sacrifice with their jobs.