How Will Wagoner’s Leaving GM Drive Up Its Stock Price?

Just this past week, GM’s CEO Rick Wagoner stepped down at President Obama’s request as head of the company. GM’s Chief Executive Officer Wagoner stepping down is all but the last outward sign of the head brass in Detroit throwing in the towel. In truth, Wagoner did as good a job as anybody could have done running GM, but the headwinds he was up against with all of the decades of built up structural costs and inefficiencies doomed him from the start.

However, even with everything working against Wagoner, many people are still holding on to their beliefs that GM, with a new CEO, can somehow evolve and become a profitable entity. Let me tell you why this isn’t gonna happen and why Wagoner did in fact do everything he could to make GM profitable already.

First: He revamped all the product lines and released unprofitable brands. Remember Oldsmobile? Oldsmobile had chugged along as a name brand under the General basically as a rebadged, sometimes souped up version of its Buick and Chevrolet lines. Making all that extra sheet metal didn’t end up being profitable for the company, so away it went. GM’s remaining brands (besides Saab), remained lucrative so they stayed.

What price can you buy GM stock at now?

Secondly: He brought in quality product lines that consumers actually wanted to buy. Hiring an ex-superstar like Bob Lutz as product manager can be a tough thing for a CEO to do. Many people asked at the time: “Why not just axe Wagoner and give Lutz his job?” The reason this never happened, which Lutz also acknowledged, was that Wagoner was doing a good enough job already and would most likely continue to do so. Lutz did do a great job on his side, bringing in new products and improving quality across the board at GM. So much so, that Buick (one of the brands once considered on the chopping block with Oldsmobile but highly profitable in China), is as of 2009 rated the highest brand name in initial quality.

Thirdly: He organized concessions with the UAW and Washington that neither of his Big Three Automaker peers were able to do. Over a year ago when the last UAW contract came due for renegotiation, Wagoner held firm on forcing big healthcare and pension concessions out of the Union. While it unfortunately hasn’t proven enough, Wagoner’s foresight into the coming economic recession allowed him to make headway that nobody else thought possible. In addition to that, the loans that the Big Three have been able to get from Washington were mainly at the initiative of Wagoner. Sure, he looked like an idiot the first time around flying in on GM’s private jet, but he was also the first to hitch up his skirt and humble himself to go ask in the first place.

Is Ford Stock in any better shape than GM?

Sometimes, being on the front end of a trend is not always the healthiest thing for an individual – especially when that trend is not publically or politically popular. I would like to commend Rick Wagoner however, for his real action and foresight in dealing with GM’s decades long structural issues. Though what he did may not have been perfect, his efforts were nearly the best anyone else could have done and were not wasted.

Who has the real fault in the downfall of the American Auto Industry? Look first to the shortsightedness of our politicians to see what real lack of foresight and honest initiative looks like.

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