GM’s Kremlin Wall Shake-Up Gives Off Bad Vibes
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When you want to know how a company is doing, watch its Kremlin Wall of executives. Seeing who’s there and who’s not – who’s in and who’s out - especially when they were there yesterday and gone today, tells you a lot. General Motors (NYSE: GM) is a case in point, and the vibes being sent from one particular casualty aren’t good.
During the Cold War, watching Moscow’s Kremlin Wall where the politburo and assorted senior apparatchiks stood waving at passing phalanxes of military might or parades celebrating cosmonauts was a key to knowing who was in charge in the old Soviet Union. When someone all of a sudden disappeared, and then was often retroactively airbrushed out of official photographs, Kremlin watchers knew there had been a shakeup and a new grave dug at an undisclosed location.
In post-modern American business, executive personnel announcements serve a similar function, so it was an eye-opener to those who follow their comings and goings – I spent 25 years as an executive search consultant to clients in the paper industry – to see a real stunner come out of GM.
In a terse announcement issued this past Sunday – talk about avoiding the news cycle – GM said, “Global Chief Marketing Officer Joel Ewanick has elected to resign effective immediately.”
Translation: GM fired Joel Ewanick.
Usually, these things are accompanied by verbiage wishing the dear departed good luck and best wishes in future endeavors, or that he is leaving to pursue other opportunities. Nope. Instead, there was salt-rubbing from GM spokesman Greg Martin who was quoted in Automotive News saying that Ewanick "failed to meet the expectations the company has of an employee."
Gulp! In the lexicon of corporate canning that’s death-penalty level. It’s a safe bet Joel Ewanick won’t be able to count on GM for a reference.
And this is their chief marketing guy! It’s one thing to fire the salesman who fails to implement the brilliant marketing plan, but when you fire the guy who devised the plan you’re admitting you haven’t got an idea what in the heck you’re doing. Not a confidence-inspiring message.
Ewanick isn’t the only GM refugee. In the past year a raft of senior executives and technical professionals left the company both in the United States and Europe. This type of human resource volatility makes insiders queasy – who’s next? – and outsiders leery – who wants to dive into that pool? After a while, it takes on a feeding-frenzy atmosphere that defies rationality as it becomes self-perpetuating.
Martin’s language is reserved for serious breaches of company policy, often times involving personal behavior. So, what exactly did Ewanick do that caused GM’s headsman to swing the career-ending ax?
Media speculation on Ewanick’s sins abounds. Much of it is centered on an estimated $600 million marketing and sponsorship deal Ewanick cut with English soccer team Manchester United and whether insufficient scrutiny had been given to the financial details.
But take your pick – it’s not as though the company is in clover: GM’s profits fell 41 percent in the second quarter and sales dropped six percent last month after upticks in the first half of 2012, it’s resorting to risky promotional schemes like a money-back guarantee on 2012-2013 Chevrolets and it’s trying to jump-start sales by plunging into sub-prime lending for poor-credit-risk customers.
Don’t forget a series of 180-degree marketing strategy shifts like bailing out of Facebook, which given its poor financial performance looks like a smart move, and dropping its Super Bowl ads.
These are stop-me-before-I-jump promotional schemes only the Repo Man could love.
Whatever happened to “See the USA in your Chevrolet?”
Ewanick’s hastily named successor, long-time GM executive Alan Batey, was quoted in The Wall Street Journal saying the company had no immediate plans to alter its marketing strategy.
Then there’s the big shoe of government. The American taxpayer still owns 500 million shares - 26.5 percent of the company - of what has pejoratively come to be known as Government Motors. It received from Uncle Obama $26.4 billion from the auto bailouts and billions in unique-to-it tax advantages, which dug the taxpayers’ hole $35 billion deep.
To get out of the hole, GM needs to get its stock price up to $53 per share. It closed at 19.14 on Wednesday August 1. For every penny the stock price falls, taxpayers are out another $5 million.
The Soviet of GM is a mess, comrades – avoid at all cost.
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