It takes a big man to admit a mistake, especially when the mistake almost crippled an industry giant. Rick Wagoner, former GM CEO, came clean this week admitting his mistakes. Now, no one likes to see anyone lose a job, but this mistake placed General Motors (NYSE_GM) in jeopardy years ago.
So what was Rick Wagoner's big mistake?
First off, I think you have to look at the man himself. By all accounts, Rick Wagoner was a very popular person both in Detroit and with the press. Maybe his Achilles' heel is that he came from GM's accounting department and was not thought to have a great feel for the automotive business.
Now GM is in the energy and transportation business. Of course, without the energy market (crude oil), you wouldn't have a transportation business. So surely they must have known somewhere along the line (maybe after the gas crisis in the 70s), that gas was going to be a problem sometime in the future.
So being in a business with a double edge sword, where one revenue stream flows from another, you must keep your eyes on both areas. I'm sure that's not an easy thing to do
It seems as if General Motors got it right when they made a decision to go into the electric car business in the late 90s where they produced an outstanding electric car named the EV 1. Had they stuck with this plan, they would be in much better shape than they are now. It was Rick Wagoner's decision to kill this project and that is what he calls his biggest mistake.
Like I said, General Motors by default is in the energy and transportation business. Regardless of whether the energy is provide by gasoline or electricity, it literally is the fuel that drives the automobile business.
I think you'll enjoy this post that we put up six months ago about the share price of General Motors (NYSE_GM).
One of the biggest keys in business is to dynamically change with the times and to resist complacency. There are always competitors out there that are going after your share of the market. Sometimes companies become so big that they become arrogant and take their eye off the ball. In the case of General Motors, the world was zigging while General Motors was zagging.
There is no doubt in my mind just like I said six months ago, that General Motors is not going to survive in its present form. I expect we're going to see General Motors go into bankruptcy and emerge as a completely different company. This is going to affect thousands and thousands of people, both former General Motors employees and also its suppliers. But it has to be done if we're going to move forward in this economy. Companies should be allowed to fail no matter how big they are.
There used to be a company named F. W. Woolworth Co. and it was the biggest five and dime store in the US. In 1913, this company built the tallest building in the world in New York City and paid for it in cash!! F. W. Woolworth Company, in its hay day, was a very big company that employed thousands of people around the world.
In 1997, F. W. Woolworth Company converted itself into a sporting goods retailer, closing its remaining retail stores operating under the "Woolworth's" brand name and renaming itself Venator Group. By 2001, the company focused exclusively on the sporting goods market, changing its name to the present Foot Locker, Inc. (NYSE: FL).
In other words, the company evolved into something totally different. I expect the same will happen to General Motors as it too will evolve into a totally different company and will remain in the energy transportation business but under a new identity with a fresh start.