GM’s ‘Looming Train Wreck’

GM logoUpbeat reports of GM’s “progress” have prompted politicians to pronounce the auto bailout a “success” and rocket the share price to 37. But do these reports reflect reality? The unrelated declines of both the American automotive and daily newspaper businesses have resulted in even less reporting on a beat that was thinly covered to begin with.

Right now, news about GM is what GM says it is. Business editors have little choice but to recycle GM press releases. They do not have the troops to do actual reporting. Even in the heat of the IPO coverage, GM’s financial data was uncritically repeated, never mind that the company could not even attest to its own financials.

Now comes Peter De Lorenzo, an automotive journalist who actually knows what he is talking about. These days he practices his craft on the website. De Lorenzo is not buying the GM hype. In fact, he has just penned a column titled “The Looming Train Wreck at General Motors.”

What has De Lorenzo seeing red is the “leadership” of GM CEO Dan Akerson, who took the company’s reins on September 1. According to De Lorenzo:

Marching to the dulcet tones of a soundtrack based on his own unimpeachable convictions – even though they are unencumbered with any real depth of knowledge or understanding of what this business of making cars is really all about – “Lt. Dan” Akerson has launched an offensive to put his stamp on the company, no matter what the cost. And I predict those costs will be cataclysmic for GM and may just cripple the company down the road, just when it needs to be firing on all cylinders.

De Lorenzo has a sense of car industry history that the current press corps lacks. In Akerson, he sees the reincarnation of former Proctor & Gamble CEO  John Smale, who was GM chairman from 1992 to 1995. Smale was criticized for trying to sell cars like soap, setting the stage for the company’s future problems. Here’s De Lorenzo’s comparison:

Let’s see, carpetbagging interloper plucked from corporate obscurity by a flat-out incompetent board of directors and then handed the keys to the candy store just for showing up that day? Check.

Instant “expert” who has studied the business for oh, about ten minutes, and who now boasts as to how he will set the industry straight and show everyone how it should be done? Check.

Talking “customer-focused” decision making while putting product development on a cost-cutting binge that takes precedence over everything else, because after all, we’ll fix it in marketing, right? Check.

Guess what? I’ve seen this movie before and it doesn’t end well. The only difference between GM then and GM now is that this is a company that has only recently emerged from the Abyss of bankruptcy, one that can ill-afford a single misstep brought upon by misguided leadership, even though it has the most competitive lineup it has had in decades. And make no mistake: Dan Akerson’s “leadership” is at the very least misguided.

This is strong stuff, and only time will tell whether De Lorenzo is right. But I do know one thing. The American people are only getting one side of this story, and GM’s critics should be heard. This conversation should not be only between car junkies who follow the fortunes of these companies like some people follow baseball teams. It should be a broader debate, because it affects us all.

Even under the rosiest scenario, the American taxpayer is the big loser in the auto bailout. The unintended consequences of GM’s fake bankruptcy are just now starting to be felt. Private property rights were thrown out the window and contract law was eviscerated. GM bondholders were ripped off to the benefit of the United Auto Workers. NLPC Associate Fellow Mark Modica observes today that the GM bankruptcy may provide a model for insolvent states where union-backed politicians will protect union contracts, while bondholders and taxpayers take the hit.

Akerman is a former telecom executive who was installed at GM by political operatives in the White House. He previously directed buyouts on a global basis for the Carlyle Group. At Carlyle, they look for big results in short periods of time. Akerson may be able to promote himself as a success for a period of months. And I don’t know how exactly it will be done, but I guarantee that he and his cronies will walk away with huge amounts of money, just as politically-connected Cerberus did in the GMAC bailouts. None of this portends well for the long-term success of GM. Akerson will be long gone when the company comes crashing down, but by that time the business model will be perfected and GM again will turn to the taxpayers for another bailout.

As De Lorenzo puts it:

Now, I know some of my esteemed colleagues in the media and the blogosphere have bought the spin generated by GM’s PR troops on Akerson’s moves hook, line and sinker, regurgitating such pre-packaged pap as, “Visionary moves by GM’s CEO,” “Akerson puts his stamp on a new, tech-savvy, customer-focused GM,” and “Akerson promotes diversity in the new GM,” etc., but the real story has none of that sheen or carefully orchestrated gloss.

No, the real story is that “Lt. Dan” is an egomaniacal corporate opportunist with an overwrought sense of himself, one who will shake the neck of GM until it falls limp in his hands so that he can then rebuild it in his image. And believe me that image is not pretty. It’s not one of a customer-focused, enlightened, tech-savvy automotive company of the future, by any means. Instead, it will be a company stripped to the bone in the interest of delivering short-term eyeball-popping profits for the next couple of years, but which will then be left a woefully uncompetitive hollowed out husk of a company by 2016 because of a product development “process” decimated by functionaries imbued with the Akerson gospel of speed and cost cutting – product relevancy and integrity be damned.

So please spare me the hyperbole associated with Dan Akerson and how he is the latest in the long line of saviors for General Motors. “Lt. Dan” is a corporate blunderbuss masquerading as a “switched-on” visionary auto executive, except there’s nothing visionary about the shallow reservoir of knowledge that this guy brings to the table every day. Instead, it just falls under the time-honored dictum of a little bit of knowledge is a very dangerous thing.