How GM Kills InnovationS

When GM canned its chief marketing exec Joel Ewanick, there was much buzz about his controversial sponsorship deal with the Manchester United soccer team and its $560 million price tag.

There was also buzz about other deals Ewanick may have made, including a questionable real estate purchase and a charity his family was involved with. A source tells us GM investigated these claims and continues to investigate every deal Ewanick ever made.

In an industry where most executives quietly resign to 'pursue other opportunities,' Ewanick's controversial departure has been the nastiest in recent memory as the company tries to send a message and someone tries to sully the former executive's name.

From the moment that the Ewanick firing was announced we started to receive tips from people indicating that we should look deeper into the suddenly former exec's financial details. Curiously, they all followed a similar script:

  • 1. Look into his real estate dealings.
  • 2. Check out his wife's charity.
  • 3. There were kickbacks

Most rumors in this business, even true ones, suffer from the same problem you have with a game of telephone. Eventually, the message becomes garbled. Not in this case. They were all identical.

The implication was that Ewanick took advantage of Man U's desperation — they're owned by the Glazer family, who wanted badly to go public in order to stop losing money on the team — for personal gain.

How GM Kills InnovationS

The charity is clearly a reference to CureDuchenne, an organization whose mission is to help find a cure for Duchenne, a form of muscular dystrophy that impacts children. Ewanick's wife, Elizabeth Ewanick, has been involved with the charity and GM did donate its Super Bowl tickets one year to the organization to raise money.

Mrs. Ewanick isn't a current board member and apparently came to care about this charity when the Ewanicks met another family with two kids suffering from the disease. As for moving funds from the Manchester United family/organization to the charity, the founder of CureDuchenne denied this.

And what about the property details? Did Ewanick suddenly and mysteriously move into a big fancy house? Records from Oakland County obtained by Jalopnik show that Mr. Ewanick did indeed buy a house around the time of the Manchester United deal, although before the deal had closed.

Records show the Ewanicks took out a 30-year, $1.452 million mortgage from Wells Fargo on July 3rd, 2012. According to HotPads.com, the seven-bedroom house in Birmingham outside Detroit was listed at one point for $2.195 million. Assuming the price was brought down from there by $200K that still leaves a down payment of as much as $500,000.

How GM Kills InnovationS

It's possible, of course, that money came in from elsewhere to pay for this deal but it would still leave Ewanick, currently without a job, on the hook for a large amount of money in mortgage costs. The Ewanicks also own a house in Truckee, California, which appears to be valued for less than what they paid for it.

A source told Jalopnik that GM was aware of the rumors and investigated them but found no evidence of wrongdoing.

An oblique reference to this rumor may have appeared in the Bloomberg article yesterday when they stated:

There's no evidence that Ewanick profited personally from the transaction said two of the people, while another said the investigation continues.

The rest of the article says his swearing and his attempt to hide the total cost (as revealed by a whistleblower) of the deal led to his ouster. Reuters added that the amount hidden could be as much as a third of the $559 million deal.

A source tells us that GM approached Ewanick multiple times to discuss the money for the Manchester United deal but Ewanick, essentially, lied to them.

If Ewanick didn't break any laws or take any kickbacks, and no one has been able to prove he's profited from the deal, where did these rumors come from? Ewanick led the charge to consolidate the ad agencies representing GM. The deal was created to save GM nearly $2 billion, which is $2 billion not going into someone's pockets.

Evidence this this might be the case comes from what could be a source of some of these rumors, a comment on an advertising blog that says much of what we'd heard from other sources:

Oh my dear Georgie you have not a clue how deep a pool of poop the former CMO is in.
Kickbacks? Yep. Wife's charity involved? Yep. A personal property paid off once the ink was dry on the Man U deal? Yes Yes Yes!
Said CMO's last name will be synonymous with toxic once this breaks. At last Julie Roehm can rest at night without the scarlet letter - for Joel has inherited it.

That last bit is a reference to former Wal-Mart ad exec fired for her questionable involvement with the business chief of an ad agency.

But there could be other sources. Various articles also describe his tenure as controversial, with many decisions upsetting various parts of the company (many detailed here). The Manchester United deal is only the most recent version of this trend.

Two sources denied to Bloomberg that Ewanick was under investigation. A third source told them he still was. That third source is correct. Ewanick is still under investigation because now GM may feel the need to go through every deal he's made in his time there to determine if he'd ever tried this trick before, although they don't appear to have turned anything up yet.

So why not just let Ewanick go quietly if he didn't do anything illegal, just something questionable that he then potentially misled the company about? Ewanick appears to have done plenty to get himself fired — he hasn't gone public with his side of the story — but other executives have done arguably worse and gotten better treatment.

Is it because he swore in public? Unlikely. For critics and enemies it's a chance to pile on, for GM it's a chance to send a message to any new execs who might try to do the same.

A company that wants to move on from a sticky situation says nothing. A company that wants to use the situation as an example to others will let it continue to play out in a very public way. That's how GM seems to look here. GM's message to its employees is clear: cross us and we will make you pay. It's intimidating and bold, but it also makes GM look like a nasty place to work right now.

As head of marketing, Ewanick was doing a good enough job that they're not changing his strategies, as they've said, and the Man U deal is going forward despite the cost.

Ewanick was known as an innovator and he stuck his neck out multiple times in pursuit of big changes at GM. He also cared enough about this Man U deal to go far beyond standard protocol to get it passed. The conditions of his ouster send a clear message about innovation at a company that desperately needs it.

Specifically, you shouldn't be an innovator.

Micheline Maynard also contributed to this report