Thursday, July 20, 2006

Dumb and Dumber (Part 1, the Dumb Part)

I never cease to be amazed at executives’ perpetual search for quick fixes to complex problems. These searches are not merely fruitless and counterproductive, they’re often just plain dumb. Case in point: What to do about a hemorrhaging General Motors.

The dumb quick fix idea that seems to have so many people salivating is a GM-Renault-Nissan “joint venture” headed by Carlos Ghosn. I thought the days of the celebrity superhero CEO were over. Yes, Ghosn has done a fabulous job with Nissan, and amazingly, he’s now also doing a good job with Renault, even though he’s running both companies while jetting back and forth between 12 time zones.

But while Ghosn may be bionic, he’s not superman. No one person can run three enormous global firms scattered around the world. Yeah, yeah, I know the arguments: cost savings for GM, broader access to China and U.S. for Renault and Nissan, a new personal challenge for Ghosn, etc. etc.

On paper, it looks great. But apart from the massive difficulties in integrating three huge companies with vastly different corporate personas, there’s an even bigger problem. GM’s challenges are colossal: runaway legacy costs (health care, pensions, and such), antiquated labor-management relations, hideously inefficient operations, sclerotic bureaucracy, irregular product quality, and yawner design. Small wonder the company lost $10.6 billion last year and had to sell 51% controlling stake in its profitable GMAC finance arm in order to raise some cash.

To get fixed, GM needs a courageous, disciplined, and visionary CEO (that’s Ghosn) who’s undistracted, totally focused, and fully committed solely to GM’s problems and GM's future (that’s not Ghosn).

Current CEO Rick Wagoner has done a lousy job. The board ought to dump him. If Ghosn quit his positions at Renault and Nissan and took over the helm at GM and GM alone, I’d buy it. So would the investment community. Otherwise, the trifecta idea is another fruitless search for a quickie fix, and it’s just plain dumb. Next week, I’ll discuss an even dumber plan to fix GM.


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