Now GM has an owner, even if it is the government, and I hope that changes things. Ownership gives you a different view.
Recently I had a conversation with a local real estate developer, and he told me a brief story. A few years ago, he found a development partner with a very substantial net worth, enough so that my friend’s guaranty on the loans on the real estate projects he was working on was really not meaningful compared to his partner’s much larger net worth and guaranty. He asked the bank to make a loan based solely on the partner’s guaranty. The bank said no, it wanted his guaranty as well. The bank wanted him at risk as well—not because of the money involved, but because that would guaranty his full concentration on the project.
The maxim, “Nothing concentrates the mind like the prospect of a hanging,” is attrib
uted to various people, including Mark Twain and Judge Roy Bean, but it seems to have originated in some slightly different lines by Samuel Johnson, in any event I think it gets to the truth of this situation. When you are at risk, then you bring a whole different level of concentration to a problem. No one person or group of people has had the responsibility of owning GM for many years now.
Without a personal risk, GM’s management just went on doing things the way it had always done them and expecting the same results. Even when Kerkorian tried to tell GM’s management in 2006 that it wasn’t 1970 anymore, and that GM would never again have a 50% share of the automobile market in the United States, nobody would listen. Just a couple of months ago, GM’s CEO Rick Wagoner was forced out because he kept submitting reorganization plans that made unrealistic assumptions about GM’s potential market share.
It’s hard to know if the government will make the right decisions to bring GM back to health or not. I hope when President Obama said, “I don’t want to run auto companies” that the missing corollary was, “but I’ll do it if I have to.” The culture at GM is entirely incapable of facing the current realities. If somebody doesn’t take ownership and force GM to do what it needs to do to survive, then it will fail. I am optimistic that the bankruptcy filing means that GM’s management has been forced to concentrate, given what’s going to happen otherwise.
Recently I had a conversation with a local real estate developer, and he told me a brief story. A few years ago, he found a development partner with a very substantial net worth, enough so that my friend’s guaranty on the loans on the real estate projects he was working on was really not meaningful compared to his partner’s much larger net worth and guaranty. He asked the bank to make a loan based solely on the partner’s guaranty. The bank said no, it wanted his guaranty as well. The bank wanted him at risk as well—not because of the money involved, but because that would guaranty his full concentration on the project.
The maxim, “Nothing concentrates the mind like the prospect of a hanging,” is attrib
uted to various people, including Mark Twain and Judge Roy Bean, but it seems to have originated in some slightly different lines by Samuel Johnson, in any event I think it gets to the truth of this situation. When you are at risk, then you bring a whole different level of concentration to a problem. No one person or group of people has had the responsibility of owning GM for many years now.Without a personal risk, GM’s management just went on doing things the way it had always done them and expecting the same results. Even when Kerkorian tried to tell GM’s management in 2006 that it wasn’t 1970 anymore, and that GM would never again have a 50% share of the automobile market in the United States, nobody would listen. Just a couple of months ago, GM’s CEO Rick Wagoner was forced out because he kept submitting reorganization plans that made unrealistic assumptions about GM’s potential market share.
It’s hard to know if the government will make the right decisions to bring GM back to health or not. I hope when President Obama said, “I don’t want to run auto companies” that the missing corollary was, “but I’ll do it if I have to.” The culture at GM is entirely incapable of facing the current realities. If somebody doesn’t take ownership and force GM to do what it needs to do to survive, then it will fail. I am optimistic that the bankruptcy filing means that GM’s management has been forced to concentrate, given what’s going to happen otherwise.
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