Tag: GM


What Took You So Long, Mr. Whitacre?

December 9th, 2009 — 2:40pm

Edward Whitacre, the Chairman of the Board of GM, has been very active during the last few days. On December 1, he – formally GM’s Board – fired CEO Fritz Henderson. An Associated Press article in The New York Times reported on opinions expressed by two – unnamed – people who were close to Mr. Henderson. It noted that “…the board upset that the automaker’s turnaround wasn’t moving more swiftly and Henderson frustrated with second-guessing …” The same people also suggested that “[Henderson has] was frustrated from the beginning by the board and government push for faster change and other questions about his decisions.” Mr. Whitacre has taken on the task of interim CEO while the Board searches for a replacement. In all likelihood, he/she will be from outside the industry.

Three days after making this decision, Mr. Whitacre appointed a new management team. He reached down into the senior middle management cadre and appointed Mark Reuss, a recent GM for Australia and a newly appointed VP for Engineering, GM for North America. He expanded the responsibilities of three women executives and sidelined Robert Lutz, the Vice Chairman who ran product development and who had hinted publicly that he would be replacing Mr. Henderson. In a public statement about these decisions, Mr. Whitacre noted that GM’s top heavy management was stifling good mid-tier managers, and he wanted to “… give people more responsibility and authority deeper in the organization, and hold them accountable.”

Of course I cheered! In this blog, last December (“What’s Good for General Motors is Good for America”) I wrote, “… this company cannot be trusted to reform itself …” and listed five conditions that the US government should ask for in return for bailing out GM. These included: “Mr. Wagoner and his top lieutenants must resign in an orderly fashion …;” “ … over the next five years GM … must be reduced in size, so they are no longer ‘too big to fail.’ This will require mandatory spin-offs of relatively independent businesses …;” and “…no one in the top spots in any of the restructured companies should come from the senior-most ranks of these companies …”

Then, in January (“Marie Antoinette’s Soulmate”), I tore into Mr. Lutz: “If anyone has any doubts about why GM is really flirting with bankruptcy, Mr. Lutz comments (during an NPR interview) should have clarified the issue. The Vice Chairman of a company which went with a begging bowl to Congress acted as if he was Marie ‘Let them eat cake’ Antoinette’s soul mate. CEO Rick Wagoner and GM’s Board should have repudiated his statements by publicly firing him …” I also opined that a pre-arranged bankruptcy would not solve GM’s core problem. During the negotiations, I said, “No one will be focusing on changing the culture that allow people like Mr. Lutz to be top dogs. And without changing culture – encouraging collaboration, being open to others’ ideas, being willing to take considered risk, managing learning every day, etc. – these companies will stumble from one disaster to another. Changing culture takes great effort, committed leadership and time. All three will be in short supply during the negotiations …” I added, “I would like to see … an orderly departure of people like Rick Wagoner and Bob Lutz, and a shifting of power to less jaded executives running smaller companies created by splitting up the behemoths.”

Then in April (“The King is Dead! Long Live the King”), I challenged the criticism made of the firing of Rick Wagoner: “Imagine, for a moment, that a President of the US (… ‘POTUS’) was at the end of an eight year tenure and he … had not been able to turn around the economy. Would you call him a failure? Sure you would! Mr. Wagoner has been CEO for 8 years; prior to that he was GM’s CFO, President of North American Operations, and COO. A comparable track record in US national politics would have been Secretary of Treasury, (a hands on) Vice President and then POTUS. In effect, Mr. Wagoner had many more then 8 years to fix GM. Under the circumstances, the fact that he might have ‘made progress,’ is simply not good enough!” I ended that post with, “The King is dead. I hope the new King – or kings, as I have argued earlier – come from middle ranks or better yet, from outside the industry.”

So, Mr. Whitacre has made many of the executive changes I wanted. Hopefully, the new blood will transform GM’s ossified culture and structure and take the strategic steps I suggested. As long as Mr. Henderson was the CEO, there was no hope of this happening. His concern that the Board was pushing too hard indicates that he, like Mr. Wagoner, would have found eight years too short for reforming GM.

Now there is hope that at least some of the money the US government used to bail out GM will be returned.

Comment » | Company Performance, Corporate Culture, Leadership, Organizational structure, Politics

The King is Dead! Long Live the King!

April 1st, 2009 — 9:51am

Night before last, I was watching AC 360, the Anderson Cooper news show on CNN. Anderson asked David Gergen, the former advisor to four presidents and current member of CNN’s team of political analysts, and two others, about the summary dismissal of Rick Wagoner. Mr. Gergen was generally supportive of the government’s position, but was critical of the fact that the government had forced Mr. Wagoner out, given that he had made progress in transforming GM.

Well, readers of this blog probably anticipate my reaction well: Firing Mr. Wagoner was not only necessary, but essential. So, let me take on the David Gergen’s argument. Imagine, for a moment, that a President of the US (whom I’ll henceforth refer to by the customary acronym POTUS) was at the end of an eight year tenure and he (think of Mr. Obama for now) had not been able to turn around the economy. Would you call him a failure? Sure you would!

Mr. Wagoner has been CEO for 8 years; prior to that he was GM’s CFO, President of North American Operations, and COO. A comparable track record in US national politics would have been Secretary of Treasury, (a hands on) Vice President and then POTUS. In effect, Mr. Wagoner had many more then 8 years to fix GM. Under the circumstances, the fact that he might have “made progress,” is simply not good enough! He has not delivered on the most important issues – GM’s culture, organization and strategy – and indeed, according to published reports chose to bypass these fearing that they would keep him from improving GM’s cost structure.

One of the other guests on the CNN program, an economist who supported the firing, pointed out that GM and Chrysler are so large that they account for almost 2% of America’s GDP. Consider this data point from a different perspective. We want our POTUS to turn around 100% of the GDP (while battling non-economic problems like wars, natural disasters,) and — by recent public criticism — do it in his first 100 days. Yet, we are OK with a very highly paid executive not being able to turn around a company in eight years that is only about 1% of the GDP?

Focusing an 8+ year role at the top on labor costs is leadership? Not in my books. Labor accounts for only about 8% of the cost of a car and on a global basis, as economist and journalist Ben Stein has pointed, even this cost is not wildly uncompetitive. But wait, he hired Bob “Mary Antoinette’s Soulmate” Lutz as Vice Chairman for Product Development and they turned out a few good cars, did they not? A few cars among how many? And what did GM do on core new technology? Oh yes, it caterwauled about unreachable mileage standards. Surely they were producing cars for Europe, where generally the laws are tougher and an End of Vehicle Life law already exists demanding near total recyclability?

No, the issues Mr. Wagoner chose to bypass – GM’s culture, organization and strategy – are the ones which could have saved the company. Had he broken down the Not Invented Here silos that existed within geographic and brand specific fiefdoms, he would have transferred innovations faster. Heck Saturn’s “no haggling” policy could have transformed the industry, instead of remaining a niche strategy. But that would have meant engaging with GM’s vast network of dealers in a new way. Think this does not matter? Then consider this: a couple of months back Hyundai came up with a brilliant idea to stimulate sales by addressing the fear consumers have about the economy. About the same time, I articulated a similar strategy in a radio interview I did that aired in the Boston market. How long did it take GM to do something similar? Until earlier this week!

The King is dead. I hope the new King – or kings, as I have argued earlier – come from middle ranks or better yet, from outside the industry. Ford’s Alan Mulally, after all, has been making faster progress and has so far, not had to reach for the begging bowl.

Comment » | Business Environment, Company Performance, Corporate Culture, Financial crisis, Leadership, Organizational structure, Politics

“There’ll Be Spring Every Year Without You”

December 5th, 2008 — 5:01pm

At this week’s Senate auto industry hearing, Senator Christopher Dodd noted that a death sentence focuses the mind. It does, but for the US auto industry, it took a humiliating public whipping of its CEOs for this to happen. In my last post, I took Rick Wagoner to task; in The Spider’s Strategy, in a chapter I mostly wrote two years ago, I expressed extreme pessimism about the industry and called Chrysler “the canary in the coalmine.” I can only shake my head in disbelief at Boards of Directors which trust executives who lack basic common sense: You don’t go begging for alms wearing Armani suits and flying corporate jets!

I have had the good fortune to work with several C-level executives, including CEOs and Board members. The common trait across the very best of them: they are astute politicians, who understand how to build coalitions, not just of the like-minded, but of those whose interests are not aligned with theirs. Detroit’s top executives, in contrast, did not see this in political terms. That they publicly displayed such naïveté speaks volumes about their companies’ culture: Imperialistic, with CEOs as monarchs who believe that the world would be truly worse off if they were not around. No wonder they are isolated from the real world!

In contrast, a very successful Chairman of the Board of a global company I’ve worked with had an office with glass walls which was about half the size of typical bedroom. It was located next to the operating area of a key business unit. It is not unusual for the CEO to walk into the company’s break room to pick up his own coffee. He had lunch with small groups of new hires. When I reported that a long-time employee had asked when old timers would be similarly invited, he immediately asked his secretary rectify his error; he invited his critic and a few other long-timers whom the critic thought he should know. If this CEO ever had to go to Capitol Hill and ask for help (I doubt he’d ever have to), he would not make the errors the Detroit CEOs did. Oh, by the way, this gentleman is probably as rich as, if not more than, them.

In Lerner & Leow’s My Fair Lady, Eliza Dolittle sings to Professor Henry Higgins, “There’ll be spring every year without you/England still will be here without you/ …/And without much ado/We can all muddle through/Without you.” Perhaps Mr. Wagoner, Mr. Nardelli and Mr. Mulally should play this snippet of the movie a couple of times a day on computer/video screens in their offices. It might induce them to leave the rarefied atmosphere of their sanctums and visit the real world more often. Who knows, that might cause them to rebuild their companies with policies more suited for a networked world and so create cars people want to buy. Ironically, of course, there may not be much of a spring for the American economy if these companies are not saved, despite their incompetence.

In the next post – which I promise will be soon – I’ll comment on the substance of the plans and the hearings.

Comment » | Business Environment, Corporate Culture, Financial crisis, Leadership

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