TASK FORCE SAYS GM, NEW CEO - Second in a Series

The Task Force recommended that new leadership is required for GM. After you read their brief report, it is obvious that new management is required. Now a few comments.

A number of people are saying the government is going too far when it requires a new CEO. I am not for government intervention in business beyond a certain point. But I view this very differently. The government is the lender of last resort. The lender of last resort, not the government, demanded a change in management. Lenders of last resort, usually banks, have been demanding CEO changes as a condition of further lending for over 25 years. It is a good and necessary business practice. And in this case, it was the right thing to do. Clearly Wagoner's plan fell short and he has had enough years.

Incumbent management is often incapable of seeing the radical changes that must be made. So, I am not so sure promoting the COO to CEO is the right thing. The way the process works is that the lenders tell the company, usually the board in a public company, that the CEO is not longer acceptable to the lenders. The lenders usually give the board three names of crisis managers to interview and make the retention of one of those individuals a condition that needs to be met before more financing is made available. Sometimes, the lenders will provide enough financing to allow the crisis manager time to develop a restructuring plan.

I see the government acting as a lender. Requiring a new CEO was the right move. It should now require a crisis manager who is able to develop and implement an operational restructuring plan and a financial restructuring plan.

Cheers, Mike