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Rick Wagoner's style: Questions, questions, questions

Firm, low-key approach wins staff loyalty — but critics point to red ink, falling market share

Rick Wagoner: Instead of orders, sharply honed inquiry that leads the debate toward his agenda.
In the spring of 2005, Rick Wagoner faced another in a long line of crises. After a couple of years of relative success, the General Motors chairman saw his company's revenue drop dramatically on the way to a massive second-quarter loss.

Wagoner hatched an idea. GM engineers were working on GMT900, a new generation of its popular pickups and big SUVs scheduled for the next year. If those new trucks arrived several weeks earlier, maybe GM could start catching up on revenue.

Wagoner didn't issue orders. He posed questions.

"On the full-sized pickup pull-ahead, Rick asked the question, 'Could we?' '' recalls Vice Chairman Bob Lutz, the boss of GM's product development. "We decided that, with diversion of engineering effort from other programs, it could be done, and we did it. It was his initiative. But no 'orders' were ever issued."

That's how Rick Wagoner, the man leading General Motors into its second century, gets things done. He rarely issues orders. From his 39th-floor office at GM headquarters overlooking the Detroit River, the 55-year-old chief executive raises issues, asks questions and seeks solutions to challenge after challenge to GM's survival.

"Rick tends to have a firm agenda, which he furthers by suggestion, suasion and insightful questions," says Lutz. "Rarely does he take command and tell his subordinates what to do."

Wagoner gets to the result he wants through insisting on facts and sense.

"It's called patience, coupled with a single-minded sense of purpose and direction," says Lutz. "I would describe Rick's style as 'deceptively gentle.' Direction is framed as doubts and questions and is frequently delivered with a great deal of humor."

Rick Wagoner's GM career
1977: Begins with GM as analyst in treasurer's office, New York
1981: Treasurer, GM do Brasil
1988: Group director, strategic business planning, Chevrolet-Pontiac-GM of Canada
1989: Vice president, finance, GM Europe
1991: President, GM do Brasil
1992: GM CFO
1994: President, GM North America
1998: President
2000: CEO
2003: Chairman and CEO

And still . . .

The man who has led General Motors throughout the 21st century is gracious, smart, funny, self-deprecating, approachable, probing and unflappable. He tamed the unruly tentacles of GM into one organization running globally with common systems.

He created a successful Asian operation that leverages the Chevrolet brand worldwide. He attacked GM's uncompetitive wages and benefits. And, recognizing that GM wasn't turning out hit vehicles, he humbly turned over product development to Lutz, a septuagenarian media star who has spun out highly praised cars and trucks that win North America's top awards.

And still, there's this: During Rick Wagoner's eight years as CEO, GM's U.S. market share has plunged by about seven points to just 21.1 percent, multibillion-dollar losses have overwhelmed occasional profits, and the share price of GM stock has dropped to mid-1950s levels.

Every time Rick Wagoner's GM seems poised to break out of its decades of declining North American market share and ugly financial challenges, the company runs into a speed bump that turns out to be a bridge abutment. Sales fall, profits shift into reverse, jobs disappear, somebody calls for Wagoner's head.

The view of Rick Wagoner depends on the view of GM's challenges. Are the challenges so severe that skillful leadership can at best keep the company alive to fight another day? Is he Sisyphus, condemned to rolling the rock up the hill, over and over? Or are the challenges manageable and this leadership team incapable of taming them?

Two crises are instructive.

Wagoner's pull-ahead of the big-truck program was a financial success. For 2006, revenue rose and the loss was substantially narrowed. Now, fast-forward to spring 2008, when oil prices rose like a rocket and gasoline leapt to $4 a gallon. GM's North American sales — especially of trucks — plunged.

This time, Wagoner's team decided to slow work on future trucks and speed up programs for fuel-efficient cars. The company careened from crisis to crisis — into a new bridge abutment.

And yet at every bridge abutment, Wagoner presents a calm, rational front. It's as if he is keeping GM's head above water with his own cool.

"He takes it in stride," says North Carolina megadealer Rick Hendrick, whose empire includes 24 GM franchises from coast to coast.

"He doesn't let it show. If he did, everybody under him would crumble. But he's a great leader. He has the ability to control all of that and still get in front of people."

For at least three years, critics in the media and elsewhere have called for Wagoner's head. This summer, a Wall Street Journal headline asked, "Can Teflon Last for GM's Wagoner?"

Last month a GM board member said the board continues to support Wagoner. In 2006, the board voted to support Wagoner, that time in response to Wagoner's demand for the vote of confidence.

2 schools of thought

Hendrick and the GM board represent one school of thought on Wagoner: The chairman and CEO has assembled a first-rate team of executives, including Lutz, President Fritz Henderson and sales chief Mark LaNeve. They are doing everything possible to overcome staggering handicaps in competing — such as high labor costs, huge liabilities for health care and payments for four retirees for every employed worker in the United States.

"As we stand today, if you give me a list of what you'd do different, I don't see anything," said Hendrick, best known as a hugely successful NASCAR team owner. "And this is the first time that I've been a GM dealer that I've felt that way.

"If the playing field was level and they didn't have the costs of all the benefits and unions and all that, it'd be a different world."

Hendrick doesn't blame the Wagoner team for having relied on truck sales to generate profits.

"In the last eight years, what would you have done different?" Hendrick asks. "As a Chevrolet dealer, I would be raising hell if I had 200 Cobalts on my lot and no Tahoes and Suburbans a year ago."

Says Wagoner's predecessor and mentor, Jack Smith: "He's done things that I didn't think were possible. I could only dream of some of the things he's done. You know, one global product development plan — I didn't think that was possible, and it's there.

"It's a marvelous piece of work. He's got lots of issues on the table, but I think the guy's done a terrific job."

The other school of thought: Wagoner took over North American operations 14 years ago as an athletic, 41-year-old, 6-foot-4 protege of Jack Smith. Thus he has led North America or the corporation for almost a decade and a half. To his critics, the record speaks for itself.

Rick Wagoner shows off the Chevrolet Camaro concept in 2006. The vehicle, which goes on sale next year, is part of GM's effort to upgrade its product image.

Questions, questions

Wagoner's lieutenants describe a calming coach who soaks up information, takes in all points of view and leads to a rational decision through incessant questioning.

What they don't describe is a fiery visionary.

Unlike the flamboyant Lutz, Wagoner can barely bring himself to talk about himself. He humbly modifies his statements with "I guess" or "I think." Rick Wagoner never spikes the ball in the end zone.

In an interview at the conference table in his office, Wagoner modestly described his approach: "I guess I would describe my style as collaborative. I think it's an open management style. I like to get the best input.

"I try to learn. ... Because I think knowing it all can get you in trouble pretty quickly. And I would say I relate well with people, including people around the globe, which I think is important."

Wagoner's people skills inspire awe among many of his lieutenants. And Rick Hendrick praises Wagoner extravagantly for his ability to listen and respond to dealers.

GM executives describe Wagoner's normal decision-making technique as questions, questions, questions until consensus is reached on his own intention or a new solution springs up.

Asked about his use of incessant questioning to reach one of those outcomes, Wagoner described his actions in the passive voice: "I would say both techniques have been employed."

Firm on Daewoo

But sometimes, Rick Wagoner is the decider.

One such decision: When GM bought a controlling interest in the failing Korean automaker Daewoo, Wagoner made one thing clear: GM was not going to take on another brand outside Korea. Wagoner's solution: Vehicles made by GM-Daewoo would be marketed outside Korea as Chevrolets.

In negotiations on the sale, this was a touchy issue for the Koreans, who wanted to hold onto the Daewoo brand, says Nick Reilly, who headed GM's Daewoo transition team. Reilly leaned toward keeping the Daewoo brand for Europe.

Wagoner insisted and made his negotiators stick to switching to the Chevy brand.

Reilly is now GM's president of Asia-Pacific. He says that "99 times out of 100, Rick was in agreement with what we were doing. But in this one instance, he persuaded us that this was the right thing to do. And it has turned out that was the right thing to do."

GM Daewoo Auto & Technology Co., including the globalization of the Chevy brand, has been an unalloyed success for Wagoner's GM.

Wagoner made another, more painful decision on a GM brand.

"He is the guy that made the decision to close Oldsmobile," says Bill Lovejoy, who ran North American sales, service and marketing until retiring in 2002. "It was Rick's call. Rick drove that. It wasn't a 'bottom-up' deal.

"Rick basically said that we didn't have enough money or engineering time to get as many products to the market as we needed in a timely fashion ... and something had to go."

The Oldsmobile experience affected Wagoner deeply. For all of his coolness, Wagoner feels the pain of dealers driven out of business and workers driven out of jobs.

What was so terrible about closing down Oldsmobile?

"It's expensive and it costs a lot of money," Wagoner begins. Then he talks about his feelings: "But the worst part of it is you hear from so many Oldsmobile dealers and it's the story of their life and you feel horrible about it.

"I mean, it's like closing a plant or something. You do things for business reasons, and you've got to move ahead to the next decision, but you sit down and talk to the people who were affected by it. I mean, it's a lot more than a business, and you feel bad about that."

With typical understatement, Wagoner says closing another traditional division is something "to be avoided in the future with the greatest effort possible." The depth of GM's current challenge is shown by its shopping of Hummer, which at least has fewer dealers and no longtime dealers.

Wagoner's gracious people skills may have a down side.

"I don't believe he would ever have a public hanging of a top executive," says Roy Roberts, the retired head of North American sales and marketing. "That's not the nature of General Motors. That's not his nature. He'd deal with issues in his way, and he's very effective at it.

"But some other companies might say: I need a public hanging at least once in my life to let people know I'll do it."

Tough day

In July, at still another press conference announcing dramatic cuts, the reliably cool and unflappable Rick Wagoner was grim to the point of stammering.

Flanked by Lutz and Fritz Henderson under the TV lights, Wagoner outlined another in a long series of North American job cuts. To that, he added benefit reductions for retirees and the cuts in investment in trucks.

Asked by a Detroit TV reporter what he could say to white-collar retirees who were losing their health care benefits, Wagoner lost his customary command, the cool that his admirers depend on.

He stammered: "Yeah, well, uh, uh, you know, we obviously, again, we took tough actions which we really don't, don't, um, enjoy having to take. But you know the future of the company, I think, under these circumstances need, needs to be the thing that we look at first and foremost ..."

He continued stumbling for another minute. The pressure of plunging sales, financial losses, Wall Street's clamoring for liquidity, and broken promises to retirees was palpable. Wagoner's command of facts and his people skills were challenged, his coolness gone.

That evening, he went to the GM Heritage Center north of Detroit, where 250 people were at the retirement party for global marketing chief John Middlebrook.

"He was there, smiling," says an admiring Rick Hendrick.

Says Middlebrook: "When Rick came to the podium, he started by saying this was going to be his best speech of the day. He stayed long after the speeches were over and spent time with my wife, daughters and sons-in-law. A class act all the way."

Rick Wagoner was back in control, his command bucking up GM's people.

Hendrick believes Wagoner has had to respond to uncompetitive labor costs and "something happening in the economy that nobody can control."

"He's had one fire after another," Hendrick says. "I worry about him saying someday, you know, 'I've fought hard enough.' ''

For now, with another vote of confidence from his board, Rick Wagoner remains the boss. If he stays in the job another year and a half, he will become GM's second-longest-serving CEO, behind Alfred Sloan.

Wagoner sees a future even more challenging than the recent past. Emerging markets offer opportunity, and high fuel prices will lead to huge changes.

"I think the next 10 to 15 years in the industry are going to be very exciting," he says. "And it's going to make a lot of the '80s and '90s seem somewhat staid."

And Rick Wagoner will keep his cool.

You can reach Peter Brown at pbrown@crain.com

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