THROW WAGONER OFF THE TRAIN

Kirk Kerkorian (pictured above) had amassed nearly a 10% position in GM, and earned a seat on the board, but GM management blocked Mr. Kerkorian's initiatives (such as a merger with Nissan/Renault) to such an extent that Mr. Kerkorian dumped the entire position at a loss nearly two years ago.

After decades of obstructing the sort of change that Detroit really needed, the management of GM is now in Washington, hat in hand, looking for enough cash to get them through the winter. All I can think is, "I wonder what Mr. Kerkorian would have to say about it?"

I imagine that the first thing he would say is, "Throw the bums out!", referring of course to GM management. The idea that all that GM needs is more cash is absurd. The writing was on the wall as far back as 1973, and again in 1979 when Jimmy Carter was pushing for the kinds of changes that GM is going to have to embrace if they are to prosper. We are talking NEARLY 30 YEARS OF OBFUSCATION AND OBSTRUCTION.

The miracle is that GM has survived this long, which can only be attributed to America's love of American cars, especially the Chevy brand.

However, this love has been long in decline, as Japanese, and now Korean, automakers have really gotten their finger on what the median U.S. car driver in looking for (I can't tell you exactly what it is, but I can tell you that GM doesn't make it).

What did Detroit do in the face of massive market-share loss in the all-important midsize sedan segment? They put all their energies into the next generation of the large-platform SUV segment which had been generating most of their profits. However, in the face of nearly $4 gasoline, and after more than a billion dollars in R&D, GM completely pulled the plug on this project (which, allegedly, was developing an even BIGGER family of SUV's than the current crop of Suburbans and Tahoes).

So, what can or should the U.S. public do in the face of an impending Chapter 11 filing by GM? Some say nothing at all, let GM be controlled by their creditors to reemerge a different company. However, I don't think that GM would emerge on the other side. I believe that the combined weight of market-share loss, loss of public confidence, legacy costs, labor unrest, and the credit crisis would doom GM to implode in absolutely horrendous fashion, bringing down with it a large swath of the U.S. manufacturing sector.

So, if this is true, we probably should craft a plan to inject capital into GM, but the new U.S. administration should have at least one seat on the board and the capital should come in the form of convertible preferred shares (assuming we as a nation are committed to maintaining a domestic auto industry). And, I'm sure the plan would be better received if it came with Rick Wagoner's head on a platter.

Update 12/2/2008

DRIVING FROM DETROIT TO DC? How much clearer can they make it that they just don't get it than by making the announcement that Rick Wagoner will drive a Malibu Hybrid from Detroit to D.C.? Who drives that distance for ONE DAY OF HEARINGS? What, is he going to DRIVE BACK TOO? A quick check on Expedia shows that, by booking as little as one week in advance, Rick could have flown non-stop from Detroit to Washington in coach on Northwest Airlines for $194, including taxes. Detroit to Washington, round-trip, is 1,048 miles; at $0.27/mile, driving will cost him $283.00, never mind the cost of his time. Rick Wagoner costs shareholders of GM $2,833/hour plus benefits, so his decision to spend an extra 14 hours driving is costing the company $39,662 vs. flying non-stop in coach.