However, we view this as a positive sign. The government is showing serious signs of wanting to ACTUALLY fix the problem effectively. Leaving aside politics, this is a marked difference from the Bush administration which had a penchant to appoint unqualified idiots to positions, solely based on their pre-campaign proximity to the power base. Obama & Co. have moved away from the mindset that the Federal gov't is their private treehouse and towards a results-oriented approach. This has been evident in a number of actions including the (failed) hiring of Nancy Killefer, keeping on Robert Gates as SecDef, and now this. By showing that they are willing to swallow their ego and ask (and pay) for outside help, this is encouraging news that GM/Chrysler may not continue to be a cash sinkhole indefinitely.
Aside from their horrible hunter-green color scheme, BCG is a solid choice to execute this project. There is a valid argument to be had about the effectiveness of the management consulting industry as a whole, and whether there was a better alternative (Treasury guys, existing GM/Chrysler strategy groups) but this strikes us as situation where the government made a likely unpopular decision that they believe will lead to the best outcome. The only real criticism we have is that the Treasury should have at least negotiated the fees a little. At a time like this, BCG's auto practice must be desperate for work and would certainly have done it for a lot less (especially given the marquee nature of the assignment).
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17 comments:
I agree it's a good choice but spare me the Obama versus Bush comparison. Bush kept on Clinton's CIA chief who turned out to be a diaster. Also the implication that Obama 3 month policy choices are towards "results-oriented" is a joke. It's more like let's throw this on the wall and see it anything sticks.
Booz Allen may have been more appropriate given deeper operational expertise in manufacturing, but BCG is a solid choice. BCG tends to stick a bit too much to the numbers at a time and not get out of the spreadsheets to look at operational realities. A quibble, but not a big one. Good move. And yes, I'm glad that sanity is returning to hiring decision at the federal level. Having Liberty University being your law school of first choice for hiring purposes was always puzzling.
An executive level of tax evaders is always a good sign...right?
Single, unrelated data point combined with an unproven, soundbite criticism? Sounds like a partisan evaluation to me.
Fourthestate, not a single one of the questions that Treasury is looking to answer are manufacturing related.
"this is a marked difference from the Bush administration which had a penchant to appoint unqualified idiots to positions, solely based on their pre-campaign proximity to the power base. Obama & Co. have moved away from the mindset that the Federal gov't is their private treehouse and towards a results-oriented approach"
The above quote is subjective and partisan in itself....I'd hate to have to take the time and space to list all the data points.
Fair point - but the contrast between Bush rewarding his cronies vs. Obama's trying to hire the best people is far from disproven by highlighting Bush's CIA pick. Additionally, it seems pretty unfair to label Obama's approach as "throw it at the wall and see what sticks."
As a disclosure, I am not a Democrat and we have done quite a bit to highlight the shortcomings of the Obama regime but I do believe in giving credit where it's due.
Cornelius-
To your point, "not a single one of the questions that Treasury is looking to answer are manufacturing related." IS PRECISELY THE POINT. Living only in the spreadsheets without understanding the core assumptions going in is what led the geniuses on Wall Street to the current outcome. Not knowing fucked up incentive lead to fucked up behaviors is core to Wall Street naivete. Per Bloomberg, "Treasury wants the Boston-based firm to examine the value of Fiat technology offered to Chrysler, the track record of Fiat management in turning around the company and how competitive the Chrysler-Fiat products would be, the notice April 8 showed." As such I think understanding possible synergies with expertise in the manufacturing and large Ops space would be extremely relevant. Booz Allen has historically (and in my personal experience) a better track record in helping heavy industries go to market in terms of Ops, marketing, and supply chain issues.
Actually, I would also recommend McKinsey over BCG for similar reasons. Both BCG and Bain are excellent quant jocks but often yield bizarre operationally, organizationally, and politically difficult to implement recommendations. Not trying to be argumentative, but my only point is that it's a good choice, but IMHO I may have made a slightly different one. In the end, there are really smart people devoted to making the client successful among all these players. They often care about the outcome than the employees of the clients they serve from my personal observations.
":but the contrast between Bush rewarding his cronies vs. Obama's trying to hire the best people is far from disproven by highlighting Bush's CIA pick"
I'm not a Bush supporter either but as you show again by the above quote your comment is purely subjective. The word "trying" for example. Does one get credit for trying if they fail (ie Treasury secretary)? How do you know Bush didn't "try" or thought he was hiring good people? As far as cronies I see quite a few in the Obama administration. Remember Obama didn't have an executive position before coming into the White House as Bush did being Governor of Texas. Wouldn't you hire people you had worked with for 8 years as a Governor?
All of it is clearly subjective.
Bush has a clear track record of poor appointments (see Mike Brown at FEMA, Dr. Hager at the FDA who refused to prescribe contraceptives to unmarried women). I'm somewhat surprised that this is a point of contention; most reasonable people I know (even Republicans) don't find this controversial.
don't you wish you'd had john snow in charge of the treasury last year?
BCG did a study at my old company, where I worked in the Strategy group, but was not involved in the study. One of the criticisms from the "rank and file" when the results were presented was that there was "nothing new" in there.
I also worked at a strategy firm for a while and put together a study on a Big 3 company we were pitching to and eventually got work from. My takeaway from that was that it's the legacy costs that are the main hurdle, not necessarily operations, although there is definitely some dispersion in things like assembly line errors, recalls for faulty parts, etc. There were also big issues in terms of dealer contracts and not being able to have free reign to shut down brands that just weren't working in the marketplace anymore.
Getting rid of those costs is and legal constraints, as far as I could tell, the only way to make those companies profitable on an ongoing basis, i.e. when they aren't selling tons of SUVs and pickups, which are profitable.
GM and Chrysler are in deep distress and so why are the best turnaround professionals not being used...but rather management consultants. BCG will put together a huge nothing new report that will only state what we already know.
The problem is not that BCG was selected, the problem is that there was no clarity on the bidding process. Maybe the article just left this out, but I find it bizarre that there was no mention of the project being put out for bid. Every major consulting firm would definitely have competed for this, and the Treasury could easily have ended up with a much higher discount on fees. BCG might be a good firm, but you can't tell me that there aren't at least a few other firms out there that can do work that's just as high quality. If this was sole sourced, it's idiocy at best, and cronyism at worst.
Here's the part I don't get:
"Most of the work must be completed within the next three months."
Um, Isn't Chrysler/Fiat on a May 1 deadline, and GM on a June 1 deadline? What's with the extra month or 2+?
Issue is not who has been awarded the contract .. but how transparent was the bidding process .. what was the price paid..
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