There are a lot of perks that come with being famous and powerful, one of them is that you can write a fairy tale with yourself as the hero and someone will publish it Don Sessions from Calzone Case shared one such yarn with me. This one spun by Steven Rattner describes how, once upon a time a prince named Steven Rattner rode his white horse to Washington where he rounded up a troop of gallant knights on their white horses, then they all rode to Detroit to valiantly save two damsels in distress. General Motors and Chrysler. Then Alexander Hamilton smiled down on them and everyone lived happily ever after.
True stories like - Once upon a time Joe and Vin Calzone set out "to build the highest quality custom case in the world, at a fair price with on-time delivery"; So they did it, building three factories, taking over the market, employing a lot of people, pumping a lot of good into three communities and making customers very happy along the way – don't get published in big time forums like Fortune Magazine bacause guys like Joe and Vin don't really have the right pedigree or the right connections. Calzone Case mainly makes cases for musical instruments and Joe Calzone is a musician at heart – as are a lot of people who work for him. How good they are is a matter of judgment. You can listen yourself to the company band (Fancy that - a company manufacturing products for the music market run by musicians who have a company band) called Trainwreck.
The fairy tale, on the other hand was written by the guy who "saved" the auto industry. While the Calzone boys built a business based on the notion that their knowledge of and passion for music gave them some ideas about how to make products that would have a lot of value for musicians, the Prince who saved Detroit came from a little thinner background. Brown University , reporter for the New York Times (losing money and struggling to survive), Lehman Brothers (bankrupt), Morgan Stanley(well, what can we say about Morgan Stanely that hasn't been said before), Lazard Freres (lawsuits, investigations, sleaze…), and then founder of the Quandrangle Group (under investigation by the New York Attorney general). Nothing in there about cars, manufacturing, or delivering an honest product for an honest price.
With this rather odd curricula vitae for a prince on a white horse to save the automobile industry, Mr Rattner describes how he first leaped into action by hiring a guy named Harry Wilson – a natural to get things going since Harry's mother had been ill treated in her manufacturing career, but Harry rose above it to get a degree from Harvard and made it big in the banking business. So Harry was put in charge of hiring a gang of bankers and lawyers – a "mini investment bank" and a "mini law firm" – to get GM and Chrysler back on track. Nobody who knew the first thing about the products or manufacturing was solicited – just a lot of people like our white knight - a 180 from the Calzone Case theory of business.
"The question for us was whether GM would be better off with Fritz [Fritz Henderson – GM CFO at the time and now the guy in charge] or with an outsider, as Ford (F, Fortune 500) had done in bringing in Boeing executive Alan Mulally. While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil."
Heaven forbid the GM cultural boat get rocked; so rather than bring in anyone who knew something about cars or manufacturing, our white knight opted for the shrewd move of putting the current GM financial guy in charge. Can't go wrong with a money guy at the helm, I suppose, especialy since the Prince and his fellow knights determined that GM's problem was purely a cost problem. (There's a real surprise - a bunch of finace people got together and came to the stunning conculsion that GM's problems were financia!)
All of this is a long-winded exercise in preaching to the choir. With all of the investment bankers, economists, regular bankers, McKinsey wizards and the assorted collection of America's best and brightest running GM into the ground, then bailing it out, and now scheming and planning absurd moves like buying back bankrupt Chinese manufacturer Delphi – all with billions of dollars in taxpayer money – they demonstrated an amazing ignorance of the obvious.
GM failed because their cars do not provide value to the people who buy cars – regular people. So did Chrysler. Toyota, Honda, Ford, Hyundai and others did not need bailouts and salvation by the likes of our financial experts because they make better products.
It is hardly a coincidence that, if you were to list the car companies in order of best finacial performance to worst over recent years, the list would be in about the same order as the reliability rankings. It does not take great genius to know what Joe Calzone knows – you make money selling products that represent a good value to the customer – you lose money when you don't. Even a wisp of that idea is nowhere to be found in the narration of the GM/Chrysler bailout project. It is as if the product never crossed their minds.
The saddest part of all is that people like Rattner take well deserved, hard earned money from guys like the members of Trainwreck and put it in the hands of their financial community cronies – most of whom wouldn't know an honest dollar if they ever came across one. He then has the gall to seek the blessing of Alexander Hamilton. Hamilton, author of the Report on Manufactures pointing out the critical nature of manufacturing to American success, and a driving influence to create the financial systems on Wall Street to provide capital for manufacturing would not "have been proud of you", Mr Rattner, your self-serving version of events notwithstanding.
I suspect he just might have enjoyed tapping his toe to Trainwreck, however.