He could have been a contender

Rick Wagoner is a hard-working, well-meaning guy who could have been remembered as one of GM's greatest CEOs.

By Alex Taylor III, senior editor

GM Chief Executive Rick Wagoner

NEW YORK (Fortune) -- The resignation of General Motors chairman and CEO Rick Wagoner has been rumored for weeks, if not months.

After all, GM has lost more than $80 billion over the last four years and is dependent on handouts from the federal government for survival on a day-to-day basis. Something had to give.

The past several months have not been Wagoner's finest hour. He looked uncomfortable and out of sorts during congressional hearings. And his public statements to present a rationale for the federal aid needed to keep GM alive have seemed lame and unconvincing.

But, if Wagoner had retired on January 1, 2008 instead of March 29, 2009, he might have been remembered as one of GM's greatest leaders.

Without fanfare, he negotiated an historic agreement with the United Auto Workers to reduce the burden of pension and health care costs and to make its hourly labor costs more competitive.

He was also in the final stages of the consolidation of GM's North American operations after a century of balkanization. At last, what was then the world largest auto company would be able to leverage its global scale to become cost- and efficiency-competitive.

None of this was accomplished easily, or without the shedding of thousands of blue- and white-collar workers. But through it all, Wagoner retained the respect and loyalty of the vast majority of GM's enormous workforces.

His achilles heel

What finally did Wagoner in was his misplaced respect for GM's traditions and his failure to foresee a spike in oil prices followed by the collapse of credit markets and the onrushing economic meltdown.

With the memory of GM's disastrous 1980s reorganization still fresh in his mind, Wagoner resisted the large-scale restructuring that GM demanded. Instead of making the company more efficient by doing things differently, he was content to keep doing things the same way but with fewer people.

At a time when Japanese competitors like Toyota (TM) and Honda (HMC) were constantly making improvements, that strategy proved inadequate. Even Ford (F, Fortune 500) began to perform more dynamically than GM (GM, Fortune 500). The dictum that you can't cost-cut your way to prosperity was proved in spades by GM under Wagoner.

Secondly, Wagoner remained loyal to GM's outmoded structure of brands, nameplates and dealers. As GM's market share continued to shrink, he kept trying to develop enough new models to feed eight separate brands and nearly as many separate dealer groups. He never developed a strategy for disposing of the brands and the dealers through benign neglect.

Under pressure from the government, GM finally came up with a plan to get rid of Saab, Saturn, and Hummer, and to downsize Pontiac, but the company belatedly admitted that it was moving several years too late.

In fact, it was 20 years too late, because GM has struggled for at least that long to maintain a credible rationale for each brand and to allocate enough financial resources to keep them all viable.

Finally, Wagoner failed to make the personnel moves that he needed to assure that GM operated with peak efficiency and to admit some fresh air into its closed, inward-looking culture.

That's astounding because Wagoner's recruitment of industry veteran Bob Lutz to run GM's global product development was one of his masterstrokes. Lutz took charge at GM like the Marines taking Mount Suribachi, establishing a coherent, flexible product planning process and returning GM's design operation to its rightful place at the pinnacle of the process.

But Wagoner never followed up his success with Lutz by recruiting other outsiders, leaving it to Ford and Chrysler to recruit Toyota stars Jim Farley and Jim Press.

And despite the clear failure of several staff functions to perform adequately, Wagoner never let anybody go. He despised ritual hangings to keep survivors on their toes and couldn't find it in himself to move anyone aside for poor performance.

The collapse of General Motors is a tragedy in several regards, but nowhere more so than in the case of Wagoner. Having become chief financial officer at the age of 39 during GM's last crisis in 1992, he performed loyally and uncomplainingly throughout his entire career. In other circumstances, he could have been a superstar.

Whenever anyone asked him whether GM's problems were so enormous and so intractable that he just wanted to throw in the towel, he reminded them that he had had some experience in competitive athletics as a basketball player, and that he enjoyed a good challenge.

The challenge finally got the best of him, and GM will be lucky to find anyone so decent to succeed him. To top of page

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