• Jeff Matthews

McClellan Awaits Battle…in Detroit

In the early years of the American Civil War, President Lincoln’s greatest frustration was his inability to find the right commanding general for the Union Army.

Lincoln went through generals the way George Steinbrenner used to go through baseball managers—one after the other. And like Steinbrenner, Lincoln even hired the same general twice, and fired him twice.

That general was George McClellan.

Vain, self-righteous, arrogant, and supremely competent at organizing and outfitting an army, McClellan was loved and admired by his troops almost as much as he loved and admired himself. In his first term as leader of what came to be called the Army of the Potomac, McClellan did a terrific job of organizing, drilling and molding into soldiers what had been a disorganized and dispirited bunch of raw recruits.

McClellan had just one big flaw: he couldn’t bring himself to fight.

Every time Lincoln expected “Little Mac,” as he was known, to finally move against the poorly equipped, ill-clad and undersupplied Army of Northern Virginia (brilliantly handled by Robert E. Lee), “Little Mac” protested that the troops weren’t ready or he didn’t have enough wagons or the roads were too muddy or his plans needed perfecting or the Confederate Army was too strong.

With McClellan, as the expression goes, it was always something.

I got to thinking about Little Mac while reading a remarkable op-ed piece by Rick Wagoner, the man at the center of perhaps the nation’s greatest current economic crisis—the melt-down of the U.S. automobile industry—in yesterday’s Wall Street Journal.

That piece is called “A Portrait of My Industry,” but it might just as well have been titled “It’s Always Something,” and its author could have been a corporate ancestor of Little Mac himself.

Mr. Wagoner sets up his premise—that GM is not merely suffering from self-inflicted wounds, but is, along with Ford and Chrysler, the victim of an uneven playing field—with the following howler of a statement: Despite public perception, the answer [to the question of why GM is in trouble] is not that foreign auto makers are more productive or offer better-quality or more fuel-efficient vehicles. In this year’s Harbour Report, which measures manufacturing productivity, GM plants took three of the top five spots in North America, including first and second place. This is written by the CEO of a car company whose dependence on gas-guzzling SUVs caused its sales to collapse 24% in September, while sales for Toyota—led by the Prius hybrid—rose 10%; Nissan rose 16%; and Honda rose 12% the same month.

Mr. Wagoner compounds his McClellan-like obsession with self-justification in the very next sentence:

In the latest J.D. Power Initial Quality Study, GM’s Buick and Cadillac ranked among the top five vehicle brands sold in America, ahead of nameplates like Toyota, Honda, Acura, Nissan, Infiniti and Mercedes-Benz.

Read that carefully: Mr. Wagoner cites the Buick and Cadillac brands, but leaves out Chevrolet, Pontiac, Saturn—in fact, he leaves out 85% of GM’s vehicle sales from the quality comparison.

Thus, like Little Mac, who, before complaining about his lack of horses, guns, blankets, and whatever else was keeping him from marching, was careful to lard his dispatches to Lincoln with encomiums about his soldiers’ parade-ground capabilities, Mr. Wagoner puffs up his own situation with meaningless statistics.

Then, like Little Mac, he proceeds to the it’s-always-something that he regards as the real problem—in this case, the uneven playing field upon which GM finds itself.

First, Mr. Wagoner blames the “social contract” made by “traditional manufacturers” to provide good benefits to American workers, which have left a staggering legacy of health-care costs on domestic auto companies.

Second, he decries the explosion of litigation abuse made possible by an irrational American judicial system.

Third—and I am not making this up—Mr. Wagoner decries a deliberate effort by Japanese policy makers “to artificially weaken the yen.”

I’m no expert in the car business, but I do rent a wide variety of automobiles when I travel, in order to see what is happening in the world of automobile market share.

And I always find it profoundly depressing to open the door of a Ford Taurus or Chevrolet Whatever and feel—just opening the door and getting behind the wheel—the poor quality of a Big Three automobile, compared to a comparable Toyota.

Mr. Wagoner’s protests aside, The Problem has nothing to do the Japanese currency or the health care burden with which Mr. Wagoner finds himself saddled. And the last time I checked, lawsuits do not directly impede the ability of any company to assemble a great car.

I have a brother-in-law in the auto business. I know how it works: everybody gets a nice car as part of their work. They drive it for a while and then they get another, newer model.

And I imagine Mr. Wagoner gets the pick of the GM litter—not a Chevy or a Saturn, but an Escalade or a Hummer. And I don’t doubt that he honestly believes GM’s problem is not in the cars themselves, but in all the other problems his top lieutenants blame their troubles on at every monthly sales meeting.

But if the CEO of General Motors wants to learn something about the quality of the 85% of GM’s production that is being systematically replaced by better-built cars with foreign nameplates—many of them assembled right here in America—he ought to be given a Toyota to drive around for a month.

Then I believe he would stop wasting time writing self-justifying op-ed pieces and more time trying to fix what’s broken at GM: the cars.

Like “Little Mac,” whose organizational abilities were unsurpassed, I imagine Mr. Wagoner is a very good executive for handling certain aspects of a large automobile business.

But not, if his Wall Street Journal piece is any indication, during wartime.

And while I know nothing about the politics within GM, I suspect that, like Lincoln, whose search for a general “who fights” only ended when he brought in U.S. (“Unconditional Surrender”) Grant from the western theater to get down to the bloody but necessary business of fighting Bobby Lee on the battlefields of Virginia, the GM board has not yet found its wartime commander.

Jeff Matthews I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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