Disagreement is a good sign at new GM

November 17, 2009 http://detnews.com/article/20091117/OPINION03/911170345

Disagreement is a good sign at new GM


General Motors Co. is poised to begin returning $6.7 billion in loans from the U.S. Treasury for the simplest of reasons: In the battle for perception, it’s good business — and even smarter politics.

A leaner, less debt-laden GM seen to be moving quickly to complete its post-bankruptcy restructuring, as detailed Monday, and paying back taxpayers would send a positive signal to would-be car buyers about GM’s staying power. It also would give bailout critics, particularly in the Republican Party, one less rhetorical hammer to use against the Obama White House in a mid-term election year.

All positives, in theory, evidence that using federal money in escrow to make good early on taxpayer loans could offer tangible PR benefits to GM and the politicians who risked public capital to rescue the automaker. But perceptions also can work against you, witness the growing list of public disconnects between CEO Fritz Henderson and Chairman Ed Whitacre.

Whitacre’s recent comments, ranging from downplaying the likelihood of a GM initial public offering next year to questioning apologies in the aftermath of GM’s decision to keep and restructure its Adam Opel GmbH operation in Europe, could signal high-level discord, dissatisfaction and communication lapses that stand to hurt the automaker more than they help.

Not good. Because the contradictions are too easily viewed through the prism of GM’s past, in which potted-plant directors publicly spoke only in support of management — when they spoke at all. Anything more would be akin to a corporate death sentence, not a misstatement and certainly not the ego of a new chairman trying to remind everyone who is in charge.

Unofficially and not for attribution, word is that Whitacre is "not trying to undermine Fritz at all," one person close to the situation told me, an assessment echoed by other insiders familiar with the board’s thinking. Maybe not, but it sure looks that way.

Which is curious, considering a few obvious facts: First, the more Whitacre speaks (and stars in company ads), the more he (and his fellow directors) share ownership in whatever the future brings for GM. Second, he privately complains about management’s over-exposure in the news media even as he engages in a fair amount of exposure himself.

And, third, an Obama administration eager to stanch losses in mid-term elections, partly by retaining crucial independents, cannot be seen as moving through its hand-picked GM chairman to fire yet another Detroit CEO. The faster the feds can unhitch themselves from GM — by repaying the loans, green-lighting an IPO and selling shares to the public — the better it will be politically.

The simple fact is that GM is in danger of developing a new perception problem that has less to do with its solidly competitive car and truck lineup and more to do with who’s leading, who’s following, who’s making the decisions and how they impact GM’s business and its stewardship of public money.

Like it or not, high-level auto industry machinations are reported, parsed and analyzed in an industry town. Add public money, the political calculations of 535 members of Congress and the electoral prospects of a sitting administration and the scrutiny is even more intense than usual.

The political ramifications of how GM’s management and directors run the company is under renewed scrutiny as the dark days of bankruptcy recede, the financial outlook improves and members of Congress eyeing elections next November seek partisan advantage in everything from GM’s earnings and cash position to its decision on Opel and its operations in China.

"There’s no question being stuck in the middle of the political vortex (stinks) big-time," a company executive close to the situation told me. "It’s all about momentum. We can’t kill our momentum faster around here."

Examples: Henderson is perceived to back the sale of a majority stake in Opel to a consortium of Opel employees, Canada’s Magna International Inc. and Russia’s Sberbank. Then GM’s directors reverse course, saying they’ll keep Opel and finance the restructuring themselves if the Europeans refuse to help.

Henderson apologizes last week to the Germans for the timing of the Opel decision, but Whitacre tells a German reporter GM has no reason to apologize for its decision on Opel. Two different issues, to be sure, that are nonetheless conflated to be the same, apparently pitting the CEO against the chairman.

Henderson says GM will be ready to execute an IPO by the middle of next year, but Whitacre says paying off the loans trumps issuing stock in 2010. The reality is that both are financial priorities for the coming year, driven partly by the Treasury’s desire to exit as soon as possible the government’s ownership of a GM stake.

The sooner GM repays its loans to the feds, the sooner it’s likely to reap the benefit among would-be car buyers and the anti-bailout crowd. The sooner GM can issue shares to its owners, giving them an exit path, the sooner GM can make business decisions without the added second-guessing of Congress and the sooner Team Obama can rid itself of a potential political liability.

You want evidence of the new GM? It’s coming from management and the directors at the same time. They don’t always agree. They don’t parrot one another. They aren’t afraid to change positions when conditions change.

They don’t consider the status quo acceptable when it clearly is not, as the downward spiral into bankruptcy attests. They don’t assume whoever’s in whatever job, from the CEO on down, will stay until the retirement date of their choosing.

That isn’t the way it’s been at GM — until now. Which is a very good thing.

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