With Competitors Like These, Who Needs a Winning Business Strategy?

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Larry, Curly and Moe go to Washington
image credit: Wall Street Journal

As we are grateful this Thanksgiving holiday for all hard diligent public servants, executives and working men and working women who do their best to keep our economy going in trying times, the cold spotlight shines on those who give very little, take much and ask for more. Twenty five billion dollars of taxpayer money more, to be exact. Although long overdue, and woefully underexposed, excessive CEO compensation in the U.S.A. has the attention of Congress and some journalists.
Recently General Motors CEO Rick Wagoner, a consistent and steady hand in GM’s decline, responded to a House Committee suggestion to cut his salary to $1 by saying, “I don’t have a position on that today.” What about tomorrow Rick? Or the day after tomorrow? We will wait. Munch some turkey and take your time and formulate your position. Rick Wagoner, the $7,850 per hour man, led GM to a loss of $19,350,000 per hour in 2007.
Chrysler’s CEO Bob Nardelli raised the level ludicrousness in the room by saying he would accept a $1 per year salary, in effect giving himself a $1 raise from his current salary… his compensation from Cerberus Capital is apparently on a profit-based payout, which as a private company it is not obligated to disclose.
But Alan Mulally, formerly of Boeing and the one CEO among the Big 3 who has a genuine clue about lean manufacturing and how to not only manage but lead, disappointed me the most. When asked by members of Congress last week whether he’d cut his $2 million salary to $1 per year Alan Mulally replied, “I think I’m ok where I am.” Mulally only led Ford to losses of $1,360,000 per hour.
As a CEO earning in 8 hours what most of their entry level factory workers would be happy earning in a year, Mulally must practically walk on water at Ford. Perhaps he meant that his compensation was in line with the market for CEOs. And we all know that the market is the ultimate authority, sense and truth… unless of course the market is not in your favor in which case we turn to the government to ask for few billion dollars.
The $10,835 Per Hour Man

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image credit: Wall Street Journal
It’s a good time to be in the automotive business in the U.S. market, if you are not one of the Big 3. With competitors like these led by out of touch, out of ideas, out of time CEOs like these with an utter sense of personal financial security, who needs a winning business strategy?
Hourly compensation rates based on 2,000 working hours per year and figures from Wall Street Journal article Ford Resists Pressure to Cut CEO Compensation
GM 2007 losses: $38.7 billion
Rick Wagoner 2007 compensation package: $15.7 million
Ford 2007 losses: $2.72 billion
Alan Mulally 2007 compensation: $21.67 million
Chrysler: not disclosed
Having competitors whose CEOs are completely disconnected from the rank and file: priceless

4 Comments

  1. David Moles

    November 28, 2008 - 2:35 am

    If I were Toyota or Honda, I’d be aggressively building factories and hiring workers in Michigan to cut into these guys’ political influence. It’s not like there isn’t plenty of real estate going cheap.

  2. Jeff Morrow

    November 30, 2008 - 9:25 pm

    Kinda surprises me how much commentary (like, almost all) on the bailout starts from unshakable conventional wisdom about labor and medical benefit cost and inability to “get green” fast enough Surprising, because – in my little bubble, anyway – it seemed as though distinctiveness of the Toyota Way was getting publicly apparent.
    Jeff

  3. Jon Miller

    November 30, 2008 - 9:47 pm

    Fair enough Jeff. Certainly a big part of the gap between Toyota and the Detroit three is due to the former’s practice of their superior Toyota Way for decades. We’ve been saying for years that Ford, GM and Chrysler (and just about every other organization for that matter) need to start copying the Toyota Way to get rid of waste and improve performance.
    However at this juncture, with the speed at which the Detroit three are burning through cash, they need something more radical to stabilize them before reinventing themselves with a lean culture. The bailout just gives them more breathing room to follow the same path, which would be a big waste of money in a time when there’s not a lot of it to waste. GM’s board is pushing Rick Wagoner to keep Chapter 11 option on the table, which he is resisting since it would likely mean his job.
    I hope all 3 come out of this stronger, but it seems neither the decisions they have taken over the years on management, labor nor product mix are now in their favor. The conventional wisdom persists because those are the facts.

  4. Jeff Morrow

    December 1, 2008 - 12:31 pm

    Oh, no doubt about the emergency measures’ necessity – put out the fire before starting the lecture on fire prevention. It’s probably also true that some of the commentariat understands something of Toyota’s distinctiveness as a source of Formerly The Big Three problems. Still, I see so little of “on the other hand” in the word blizzard. Dan Jones said last month at AME that he thought the financial/economic crisis would *accelerate* adoption of the Toyota Way, but if we don’t have good root cause analysis of our manufacturing problems …