After billions of federal bailout dollars put President Barack Obama in the automobile industry’s driver’s seat, the clear message from the commander in chief is, “Shape up or ship out.” For starters, Obama forced the resignation of General Motors Chairman and CEO Rick Wagoner, saying GM’s restructuring plans are not strong enough and that the auto industry isn’t moving fast enough in the right direction to succeed.
Several of the country’s largest black-owned companies supply parts for U.S. automobile manufacturers or sell American-made vehicles in franchise dealerships. What do they think will result from the President’s awe-inspiring take-charge actions?
GM is one of the largest customers for Detroit-based Bridgewater Interiors L.L.C. (No. 3 on the B.E. Industrial/Service 100 list with $1.3 billion in revenues). The firm manufactures car seats and overhead systems. CEO Ronald E. Hall says Wagoner has been a good friend to Bridgewater and a champion for minority suppliers, supporting diversity in GM’s purchasing practices. Hall believes, however, that Wagoner represented the consensus thinking at GM. His exit hopefully will not endanger GM’s commitment to its supplier diversity program.
“I don’t think how they do business is necessarily going to change because of his ouster,” says Hall, “but it certainly sends a message, particularly to the bondholders and the United Auto Workers union (UAW), which we understand have been stumbling blocks to coming up with an acceptable plan between the government and General Motors. Clearly, it does say there needs to be change, and the expectation is that everybody needs to come to the party, [and that] nobody’s untouchable. So to that degree, I’m thinking it’s more of a symbolic message.”
General Motors is also a customer of Troy, Michigan-based TAG Holdings L.L.C. (No. 6 on the BE Industrial/Service 100 list with $605 million in revenues). TAG Chairman and CEO Joseph B. Anderson Jr., says Wagoner’s departure will not have any direct bearing on the future of his manufacturing business.
Unlike Hall, however, Anderson does believe that because leadership guides and directs a company, GM’s change at the top will affect the company’s practical operations. “I think it will have a substantive impact,” Anderson says. “I’ve known Rick Wagoner and worked in General Motors with Rick Wagoner. I like him, respect him, and regret that it had to happen this way.”
The president also put bankruptcy on the table as a further detour for GM and Chrysler L.L.C. Considering that GM is a key customer for his firm, Bridgewater CEO Barima Opong-Owusu says, “We have a lot of receivables tied up. We bought materials, we produce the parts, we ship to General Motors, and so we are hoping that they can be viable and continue to pay us so that we don’t have to lay off all of our 1,500 employees. Obviously, GM bankruptcy is not a choice that we are hoping for.”
Though some sort of controlled restructuring may be needed at GM, measures as drastic as traditional Chapter 11 bankruptcy would be unfortunate
for creditors taking partial losses or not getting paid at all, says Bridgewater CEO Hall. “I think there would be more unemployment, suppliers would be hurt, there would be more people going out of business, and I think it would frighten the public. It would hurt sales, which we all need,” Hall says.St. Clair Shores, Michigan-based Prestige Automotive Group (No.1 on the B.E. Auto Dealers list with $828 million in revenues) owns GM, Ford, and Mercedes-Benz dealerships.
Wagoner’s ouster is more symbolic than likely to produce a functional impact on GM operations, says Prestige CEO Gregory Jackson. While he gives Wagoner credit for building minority ownership of General Motors auto dealerships, he says, “I think Rick did what he had to do relative to the minority program because it was good business for GM. If you ask most of us who are not trying to be politically correct, there’s still so much more to be done.”
Jackson’s reaction to the President’s astonishing move to force a corporation to change its chief executive is, “I think Obama is demonstrating bold leadership. The understanding is that from where America sits, America owns General Motors. That’s the reality, because of the amount of money put on the table. America has given GM more money than GM’s total capitalization. Essentially America owns GM, and President Obama is the CEO of America. These are bold times, and they require people who are not faint of heart.”
Bankruptcy for GM or Chrysler has always been in play and has been discussed for the past year, says Jackson.
“I think it would hurt us, because anytime you consider a company in bankruptcy, there are going to be some buyers that run scared away from the product,” says Jackson, who doesn’t know whether the long-term effect of an automaker’s bankruptcy would be good or bad. “What I’m more concerned about is the particular peril that so many minority dealers are in and the fact that there doesn’t seem to be enough help out there for those people.”
“There is a lot of lobbying going on by NAMAD [National Association of Minority Auto Dealers] and the other associations, and we’ve spoken on Capitol Hill a couple of times, but no one has really reached down and said, ‘Hey, we are going to make sure we don’t lose all these gains that we’ve made over the years and lose a whole group of minority business people,’ ‘” Jackson adds. “America needs minority businesses to be thriving for this country to truly live out the promises it has made to all people.