What Took You So Long, Mr. Whitacre?

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.