In the 1960s, psychologist Lawrence Peter described what’s come to be called the “Peter Principle.” Dr. Peter believed that frequently a person who has excelled in one position is promoted to a more substantial job that exceeds his or her expertise. G. Richard Wagoner, the CEO of General Motors from 2000 to 2009, demonstrates the veracity of the “Peter Principle.”
Wagoner joined GM in 1977as a financial analyst. By 1992 he had become GM’s Chief Financial Officer, and two years later he was elevated to lead the company’s North American operations. In 1998, he was named president and chief operating officer.
“He just didn’t understand the American car business,” a writer in Forbes asserted in an assessment of Wagoner’s tenure as CEO. Under his leadership, as noted in a piece in Motor Trend, GM share prices plunged from more than $70 in 2000 to $3.62 in 2009. From 2005 to 2009, the company lost approximately $84 billion and was forced to file for bankruptcy. To save GM, the Federal Government stepped in and provided $52 billion.
The GM bailout is an issue in the 2012 presidential campaign: Republican candidates for the nomination are against it. Mitt Romney, the winner of the Iowa caucuses and the GOP front-runner, has said--as reported in the "Fact Checker" blog of The Washington Post--“My view with regards to the bailout was that whether it was by President Bush or by President Obama, it was the wrong way to go. I said from the very beginning they should go through a managed bankruptcy process, a private bankruptcy process.” Conversely, President Obama believes strongly that saving GM was wise policy.
Another reason to reconsider Wagoner is the new public awareness concerning U.S. income inequality. In 2007, CBS News estimated that the salaries of General Motors workers were “a little less than $60,000 a year in gross income.”
Labor unions have been accused of greed in seeking to raise total worker compensation––with such benefits as pensions and health care. When these––negotiated over many years between GM and the United Auto Workers––are added to basic salaries, each employee in 2007 cost GM about $38 per hour worked. (Workers earn approximately $28 per hour and $10 in fringe benefits. The much higher $70 per hour figure often cited includes payments to retirees.)
Rick Wagoner’s 2007 compensation was $15.7 million––or 198 times more than that of workers. In January 2012, a few years after Wagoner left GM, newspapers like the Chicago Tribune trumpeted that in 2011 GM had "regained its title as the world's top-selling automaker."
The Ugliest Car
In 2001, General Motors introduced the Pontiac Aztek. This vehicle, comedian Jay Leno wrote in Popular Mechanics, “is so odd-looking and weird that people want to collect them…” Time determined the Aztek’s design to be so off-putting that it included it on two lists: "The 50 Worst Inventions” and “The 50 Worst Cars of All Time.” Cars.com called the Aztek “ghastly,” and put it on its “10 Worst Cars of the 2000s” list. The Aztek was discontinued in 2005. A writer in Business Week commented on this fiasco: “The Aztek has been the poster-car for GM’s canny ability over the last decade to survey the marketplace, poll consumers, anticipate style trends and come up with something so wrong-headed as to make Sony’s commitment to Beta look like marketing genius.”
The Aztek and other bad management decisions caused the SmarterSpend.com website to include Wagoner in its “Worst CEOs of the Decade" list.
Wagoner was also responsible for a number of successful moves––including expanding GM’s sales overseas, introducing 0% financing after 9/11, reinvigorating Chevrolet and Cadillac and introducing new products, and renegotiating the UAW contract.
Upon his forced retirement in 2009, The Los Angeles Times reported that Wagoner received an exit package worth $8.6 million: $1.64 million in each of the first five years of separation, and then $74,030 as an annual pension payment. Since exiting GM, he has been named as Duke University’s Chairman of the Board of Trustees; Wagoner is a Duke alumnus, as are his wife and three sons. He also serves on the boards of the Washington Post Company and Aleris International, Inc. It’s doubtful that the 83,623 workers cut by General Motors and its subsidiaries from 2000 to 2008 have done as well in their post-GM lives.
Sources
Wagoner’s 2007 Compensation: Yale School of Management."How Rick Wagoner Lost GM--A Commentary." By Jeffrey Sonnenfeld. June 2, 2009.
Wagoner Post-GM Appointments: Duke University Biography.
Laid-Off GM Workers: General Motors Corporation, “2009-2014 Restructuring Plan.” Table 7: GM U.S. Employment. Page 23.
