In Defense of Rick Wagoner

It’s been a bad year for CEOs, and Rick Wagoner, the head of General Motors, seems poised to join an ignominious crowd: Corporate leaders who have resigned after their firms sought federal help. Key members of Congress have said that Wagoner should step down before GM gets a big chunk of a $15 billion automaker aid package, and incoming President Barack Obama has said that GM’s leadership “has to move on.” It’s hard to imagine Wagoner staying on, in defiance of his new lords in Washington.

But even if he leaves, Wagoner doesn’t fit the mold of the rapacious CEO. Like his Motor City colleagues – Alan Mulally of Ford and Bob Nardelli of Chrysler – Wagoner showed poor judgment by flying a corporate jet when he came to Washington in November to ask for aid. And his insistence that “bankruptcy isn’t an option” for GM has seemed presumptuous – as if the feds are obligated to rescue his company.

But the sprawling automaker has actually become a better company since Wagoner took the top job in 2000 – just not fast enough. “He hasn’t gotten credit for what he’s accomplished,” says analyst Tom Libby of J.D. Power & Associates. Whether Wagoner stays or goes, here’s why history should look more kindly on Rick Wagoner than on the men who ran Bear Stearns, Lehman Brothers, AIG, Fannie Mae or Freddie Mac before the government intervened:

Modesty. Wagoner earned total pay of about $14.4 million in 2007, $10.1 million in 2006, and $5.4 million in 2005. That’s obviously a lot for the CEO of a company that lost more than $50 billion during those three years. But Wagoner wasn’t engineering windfalls for himself while running a company on the side, like some of the fallen gods of Wall Street. Richard Fuld, CEO of the now-defunct Lehman Brothers, pocketed about $240 million during the same period of time, for running a company with about one-tenth as many employees as GM. Bear Stearns CEO James Cayne earned about $90 million during those three years, until the implosion of his firm augured the entire financial crisis last spring. Merrill Lynch CEO Stan O’Neal pocketed a staggering $161 million in 2007 alone, while making decisions that would leave Merrill so damaged it could no longer exist as a standalone firm.

Wagoner’s 2007 pay was about average for all CEOs of big, publicly traded companies. It was also less than the $22 million that Ford chose to pay Alan Mulally in exchange for the turnaround expertise he learned during his prior job, at Boeing. Wagoner may have failed to turn around GM, but he didn’t raid the company coffers in the process.

Reforms. It may not have been obvious at the time, but when Wagoner took over GM in 2000, it was a bloated conglomerate that was more likely destined to fail than succeed. Since then, Wagoner has cut costs by $9 billion a year and shuttered 12 assembly plants. He’s also steered GM away from its former lifeblood – big trucks and SUVs – toward higher-quality smaller cars.

All of that has taken way too long, and there are other things Wagoner should have done but didn’t: Reduce GM’s oversized umbrella of eight brands, kick the deep-discounting habit, embrace fuel-economy standards instead of fighting them, sharpen the company’s image. That seems obvious now, at the edge of disaster. But it didn’t a couple years ago. And all along the way, unions and dealers have fought changes that would adversely affect them, even if they would have benefited GM. Wagoner could have abandoned his collegial style and tried to manage with a cudgel, but it’s not clear that would have been any more effective.

Stable management and smart hires. “Wagoner isn’t your typical egomaniac,” says Libby. “He’s content to sit in the front row and watch somebody else introduce the cars.” He brought on flamboyant Vice Chairman Bob Lutz, for example, who’s widely credited with improving quality and turning a lackluster product lineup into a portfolio able to compete with Toyota and Honda. One possible successor is CFO Fritz Henderson, who has risen to the front office under Wagoner. And GM is still considered to have a deep bench of engineering talent. It may not be Wagoner who ultimately engineers GM’s revival. But if it happens, Wagoner got the company at least halfway there.