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GM board hurries toward hazy future

December 2, 2009

Howes: GM board hurries toward hazy future


In the end, it wasn’t about Fritz Henderson. It was about a new board of hotshot directors excising the last vestige of Old GM atop the automaker.

Henderson, pressed into the CEO’s job after President Barack Obama’s auto task force fired Rick Wagoner last March, is unceremoniously out, Chairman Ed Whitacre is in and the federal government’s largest industrial holding is in the unenviable position of continuing a transformation while looking for the two most important jobs in all of GM — a CEO and a CFO.

Why now? Because Henderson could never meet the expectations of the new directors, on the job little more than three months. He and his team couldn’t move fast enough, even if they were moving faster than any team in GM history (or the history of the Detroit auto industry). He and his team couldn’t stanch the market share loss fast enough; they couldn’t change the culture fast enough; they couldn’t close deals to sell assets fast enough.

And speed, for the new GM, means everything. It’s the difference between success or failure, between readying GM for investors to buy new shares or not, between giving Team Obama an exit from an unpopular bailout with taxpayer money or giving its opponents a ready-made political club.

"Nothing he did would have been deemed fast enough because he’d been here 30 years," a source close to the situation told me Tuesday, hours after the directors shocked GM staffers with word that Henderson was out. "Every board meeting was a p—ing match."

The public signs of discord were there. Henderson backed a plan to sell GM’s Germany-based Adam Opel GmbH unit to a consortium of Canadians, Russians and Opel employees, but GM’s board reversed the decision. Henderson apologized to the Germans for the timing of the Opel decision, which Whitacre countered by saying GM had no reason to apologize for the decision itself.

In detailing financial results, Henderson said GM would be ready to execute an initial public offering of GM shares by the middle of next year — a planning assumption built into the automaker’s 2010 business plan and approved by the directors. But Whitacre said paying back $6.7 billion in government loans trumped issuing stock next year. In reality, GM is on track and under orders to do both.

Henderson’s exit won’t bring an end to contentious board meetings rife with frustration over the pace of change, dismay (and sometimes encouragement) at monthly sales results, scrutiny by the news media (especially now) and implied (but unmistakable) political pressure from Washington.

Because the CEO’s ouster and the interminable search for a successor to CFO Ray Young means Whitacre and his fellow directors effectively "own" the future performance of GM — the deal closings, the product execution, the inter-connected global management, the culture change that is deemed to be so easy but is anything but.

The deeper they reach into managing the company, which their predecessors habitually failed to do, the more they will be personally identified with its success or failure. That includes finding two world-class executives amid federal pay caps and a growing reputation for micromanaging a CEO.

"Momentum has been building in our company over the past several months," Whitacre said in a bare-bones statement that raised more questions than it answered. "I remain more convinced than ever that our company is on the right path." Still, "we all agreed some changes need to be made going forward."

Like firing the CEO on the eve of the Los Angeles Auto Show, which makes GM corporate intrigue the story of the day today on the Left Coast? Forget the small cars GM was keen to show, or the Chevy Volt ride-and-drives, or the reintroductions of Chevrolet and Cadillac to the automotive press at the first major U.S. auto show since GM emerged from bankruptcy.

Evidently GM’s penchant for corporate self-mutilation didn’t disappear with Wagoner, its former directors and the cleansing fires of bankruptcy. For Henderson’s ouster and the free-for-all among corporate headhunters will suck up whatever oxygen isn’t already consumed by befuddled employees wondering when the newest wave of instability will be replaced by a new normal.

How this helps GM execute its U.S. business plan, restructure its European operations amid difficult political conditions and keep generating profits in regions like China and Latin America is unclear. Henderson’s departure surprised those closest to him, his eight-person executive committee, who learned about the change only hours before the public.

"I was totally shocked," a ranking GM executive told me, calling Henderson’s dismissal a "destabilizing event. This is the second time this year a superb problem-solver has been asked to leave the company. We are making progress on so many fronts. I wonder if the pace of expectations … is realistic."

Doesn’t matter. GM’s directors are in a hurry because they are accomplished business people recruited to oversee what is arguably the biggest, most fraught industrial revival in American business history. They’re also in a hurry because GM’s principal owner, the Treasury, wants to see its $6.7 billion in direct loans paid back and, secondly, to see GM shares floated to would-be investors sometime later next year.

Summarily dismissing Henderson effectively cuts one of the remaining ties binding the Old GM to its leaner, smarter replacement — which is exactly the point, right or wrong.

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