Posted 6:24 AM by steve

By process of elimination, political symbolism is the only reason the White House is forcing GM CEO Rick Wagoner to resign.

Let's go through the legitimate business reasons for replacing a CEO:

Violation of the law or company policy, such as stealing company assets, harassment of subordinates or colleagues, taking bribes or offering kickbacks in order to win business or falsifying company records. Such violations, no matter how good the manager otherwise is at his job, justifies termination.

Absent one of the above, replacing a CEO is justified when ownership (acting through the board of directors) concludes (1) the company is not performing at a desired level AND (2) the current CEO is seen as a hindrance to improving performance AND (3) someone else if viewed as having the skill set to meet expectations.

The first point ought to be self-explanatory; there's no reason to replace a CEO if the company is meeting performance expectations. As to the second point, note that I did not write that the current CEO is responsible for the poor performance, as what has happened in the past is less important than how the company is going to recover. This is why even AIG employees who are viewed as responsible for AIG's problems could be asked to stay; yes, they made mistakes but, to steal a phrase from the radical left, it is more important to move on, to fix what is broken and counter-intuitively, the people who made the mess are often the best ones to stick around and fix things. It is only when someone else is seen as better that it becomes justifiable to get rid of the current players (if no one else is seen as better, then you're just hurting yourself by replacing current employees).

As for GM, Wagoner isn't responsible for the mess GM is in, as their problems long predate his employment, but he is responsible for not having fixed things... but while he hasn't done so, he is not an obstacle to making things better.

Wagoner knows what needs to be done, he hasn't had the ability to do so. He knows he has too many dealers, he knows GM's labor costs are too high, he knows that environmental laws force GM to make more (money-losing) small cars than is optimal, he knows GM has too many models which leaves GM unable to revamp their product line often enough to satisfy fickle consumers, he knows GM has a huge albatross in the form of retiree pension and medical benefits hanging around GM's neck, he knows GM has an incredible amount of debt and he knows that GM is putting billions of dollars into so-called green car technology that GM can't afford and will never recover in the form of car sales.

And here is the argument that should disappoint anyone hoping that a new CEO is just the thing that GM needs: just as Wagoner has been unable to extricate GM from its problems, so too will any replacement CEO be unable to make things any better. A new CEO isn't going to be any better at Wagoner at getting states to modify the franchise laws that effectively preclude GM from terminating surplus dealers, he isn't going to be any better at getting the UAW to agree to the wage and benefit cuts that are needed, and he isn't going to be any better at convincing GM's creditors to convert their debt into equity.

The ONLY thing a new CEO could do that Wagoner wouldn't is to put GM into bankruptcy (and note that Wagoner should NOT have done so, as Wagoner works for the shareholders whose equity would be wiped out in bankruptcy; that GM might emerge from bankruptcy a stronger company doesn't affect the fact that the CEO doesn't work for the workers, the customer or the dealers, he works for the shareholders and thus should NEVER look to take the company into bankruptcy).

But if the Obama Administration wanted GM to go into bankruptcy, they didn't need to force out Wagoner to make that happen, all they had to do was withhold any additional bailout dollars and GM would have had no choice but to declare bankruptcy.

Thus I infer that Obama isn't looking for GM to go bankrupt, and since they aren't looking to push through the legislative changes necessary for GM to restructure itself outside of bankruptcy, any CEO they hire will be no better able to fix GM than Wagoner was. And if the new guy ain't going to be any better, it's a violation of rule #3 and thus definitive proof that there is NO business justification for replacing Wagoner... which leaves only one option, that the Obama Administration is looking for a cheap P/R stunt to fool the public into thinking that Obama is taking the hard steps to fix GM. He isn't, but unfortunately, the public isn't going to figure that out for some time.