Precedent says Wagoner should leave

Crunch the numbers, and they’ll tell you Rick Wagoner should be out as General Motors’ CEO.

Set aside his weak performance at congressional hearings, where he appealed for government funds to keep his company afloat. Set aside the clear message from senators and representatives that GM’s management and strategy should change before taxpayers let the automaker feed at the federal trough.

This is purely about his company’s performance and the judgment that GM’s board should render on his time at the helm.

General Motors’ net loss of $2.5 billion in the third quarter marked the fifth straight quarter in the red. Since 2004, Wagoner has led the company to a cumulative loss of $72.3 billion.

What adjective shall I use? “Staggering”? “Phenomenal”? “Jaw-dropping”? How about: “chairman-dropping”? I cite precedent.

In the late 1980s and early 1990s, GM’s board of directors endured catcalls while the company hemorrhaged market share and losses. Directors were derided as “pet rocks,” the epitome of an ineffective, unengaged board.

Finally, the board had had enough. GM’s cumulative losses mounted to $27.9 billion over 1991 and 1992. Officially, then-Chairman Robert Stempel resigned on Oct. 26, 1992. In fact, he left because the board fired his top lieutenants, and he was next on the list.

Even allowing for inflation, Wagoner clearly has passed the financial threshold where his ouster is justified.

Wagoner, 55, has dug the once-proud auto giant into a very deep hole. It may or may not prove to be GM’s grave. But when Wagoner and other top GM executives hoped that a merger with Chrysler, for Pete’s sake, could save the General, well, it’s time to admit that those executives have not gotten the job done.

Wagoner’s defenders hide behind two lame excuses for keeping him in the corner office. Let’s examine both claims:

1. He’s done his best, but the overall economy has moved against him.

I don’t fault GM, Ford or Chrysler for building huge SUVs and pickups in the first half of this decade. Consumers wanted those vehicles.

But I do fault them for their failure to prepare for the day when gasoline prices spiked. We’ve been through this before; it was not impossible to foresee. GM has fuel-efficient cars in Europe. There should have been a contingency plan on the shelf to retool American plants to build those cars in America within 12 months. Not to have a contingency plan is simply lousy risk management. And yes, that’s a management failure.

Can anyone really claim that Wagoner has done his best? If your best is a loss that tops $70 billion, maybe your best isn’t good enough.

And do Wagoner’s defenders claim that the midlevel managers who’ve been offered buyouts did their worst? It seems apparent that after the third round of layoffs, a board ought to realize that the wrong echelon of employees is getting the sack.

2. There’s nobody else who could take his job.

Bogus, bogus, bogus. Usually when you hear that line in Detroit, the speaker means there’s nobody within the company’s North American operations so disloyal as to try to replace the boss.

Personally, I think it’s quite possible GM COO Fritz Henderson is ready to step up to the top job. He has a solid track record for GM in Asia and Europe. There would be no precious time lost while he figured out where the levers are to force changes in GM.

Or look outside.

Look outside North America. Jack Smith replaced Stempel. He came from a successful GM Europe operation. He had been in North America just long enough to understand how dysfunctional GM was and why. He had been in Europe long enough to learn how to run an organization effectively. Jack Smith was by far the best CEO at GM in the past quarter century.

Look outside GM. First, consider GM’s alumni. There are a good number of former GMers who understand enough about the organization to hit the ground running. By virtue of having left, they’re not tied to GM as is. Just to prove the point, and without endorsing anybody, here are two:

Phil Murtaugh, 53, oversaw GM China’s surge into a highly successful organization. His reward: GM sent in a suit over him to take the credit and add a layer of bureaucracy to his operation. Showing more business intelligence and gumption than is common at GM, he quit. He’s now at Chrysler, which means he’s available.

Lewis Campbell, 61, once the youngest vice president at GM, bailed more than 15 years ago. Today he’s Textron Inc.’s CEO.

Are those two the best out there? Maybe not. But there is certainly a list of candidates who both know GM from the inside and have broken with GM’s old-boy culture.

Second, look to the automotive supplier community. Amid the musical chairs at large suppliers these days are a good number of executives with automotive, financial and manufacturing expertise. And they’re tough as nails because they have to be.

Some even have experience in a Chapter 11 filing, which may be useful in GM’s future.

Think a supplier boss can’t run a carmaker? Au contraire. I offer as evidence Nissan/Renault CEO Carlos Ghosn. He earned his chops at Michelin before Renault came calling.

Case closed.

And finally, look outside the automotive world. Ford Motor Co. CEO Alan Mulally, formerly of Boeing, has done the best job during this recession of any Detroit 3 boss. He knew squat about the auto business when he arrived, but he knew how to run a high-cost, high-stakes industrial and manufacturing operation.

He also knows how to talk to Congress.

Wagoner is an honorable and hardworking executive.

But it’s time to give somebody else a shot at saving GM.

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