With Competitors Like These, Who Needs a Winning Business Strategy?

Posted on 28 Nov 2008 by The Manufacturer

Jon Miller on "the three stooges" of US automotive

Jon Miller of Gemba Panta Rei reveals some disturbingly large rates of pay for the CEOs of the three automotive firms whose multi-billion dollar losses have led them to seek $25,000,000,000 of US tax payers cash…

The three stooges
Image credit: Wall Street Journal

As we are grateful this Thanksgiving holiday for all hard diligent public servants, executives and working men and working women who do their best to keep our economy going in trying times, the cold spotlight shines on those who give very little, take much and ask for more. Twenty five billion dollars of taxpayer money more, to be exact. Although long overdue, and woefully underexposed, excessive CEO compensation in the U.S.A. has the attention of Congress and some journalists.

Recently General Motors CEO Rick Wagoner, a consistent and steady hand in GM’s decline, responded to a House Committee suggestion to cut his salary to $1 by saying, “I don’t have a position on that today.” What about tomorrow Rick? Or the day after tomorrow? We will wait. Munch some turkey and take your time and formulate your position. Rick Wagoner, the $7,850 per hour man, led GM to a loss of $19,350,000 per hour in 2007.

Chrysler’s CEO Bob Nardelli raised the level ludicrousness in the room by saying he would accept a $1 per year salary, in effect giving himself a $1 raise from his current salary… his compensation from Cerberus Capital is apparently on a profit-based payout, which as a private company it is not obligated to disclose.

But Alan Mulally, formerly of Boeing and the one CEO among the Big 3 who has a genuine clue about lean manufacturing and how to not only manage but lead, disappointed me the most. When asked by members of Congress last week whether he’d cut his $2 million salary to $1 per year Alan Mulally replied, “I think I’m ok where I am.” Mulally only led Ford to losses of $1,360,000 per hour.

As a CEO earning in 8 hours what most of their entry level factory workers would be happy earning in a year, Mulally must practically walk on water at Ford. Perhaps he meant that his compensation was in line with the market for CEOs. And we all know that the market is the ultimate authority, sense and truth… unless of course the market is not in your favor in which case we turn to the government to ask for few billion dollars.

It’s a good time to be in the automotive business in the U.S. market, if you are not one of the Big 3. With competitors like these led by out of touch, out of ideas, out of time CEOs like these with an utter sense of personal financial security, who needs a winning business strategy?

Hourly compensation rates based on 2,000 working hours per year and figures from Wall Street Journal article Ford Resists Pressure to Cut CEO Compensation.

GM 2007 losses: $38.7 billion
Rick Wagoner 2007 compensation package: $15.7 million

Ford 2007 losses: $2.72 billion
Alan Mulally 2007 compensation: $21.67 million

Chrysler: not disclosed

Having competitors whose CEOs are completely disconnected from the rank and file: priceless

By Jon Miller of Gemba Panta Rei blog.

What can be done? Do the Americans needs legislation against this sort of thing? What about here in Britain? Are there any similar stories? Leave a comment or Email [email protected]