GM CEO Henderson forced out; Whitacre takes over — for now

detnews.com



December 2, 2009 http://detnews.com/article/20091202/AUTO01/912020364

GM CEO Henderson forced out; Whitacre takes over — for now

CHRISTINE TIERNEY AND DAVID SHEPARDSON
The Detroit News

General Motors Co. marked an abrupt break with its past Tuesday when Chairman Edward Whitacre Jr. expanded his role to include chief executive after the resignation of Fritz Henderson.

Henderson, 51, had been president and CEO for less than nine months, but his lifelong career at GM appeared to be a handicap in the board’s view.

"Fritz has done a remarkable job in leading the company through an unprecedented period of challenge and change," Whitacre said at a brief news conference at GM’s Detroit headquarters. "While momentum has been building over the past several months, all involved agree that changes needed to be made.

"To this end, I have taken over the role of chairman and CEO while an international search for a new president and CEO begins immediately."

GM did not say how long Whitacre expected to run the company, but officials said privately the search for a new CEO was likely to take three or four months.

Henderson’s departure stunned GM executives. But sources familiar with the board’s thinking said directors were frustrated by the slow pace of change at GM and Henderson’s apparent inability to transform the corporate culture.

In recent months, public disagreements had broken out between Whitacre, an activist chairman who is a former chairman and CEO of AT&T Corp., and Henderson, who was appointed chief executive by the U.S. government’s auto task force in March.

On Nov. 2, Henderson’s standing began to look doubtful after the board reversed the management’s decision to sell control of GM’s Adam Opel GmbH carmaker in Germany. It was the biggest decision Henderson had put to the directors.

"In recent months, the board and Henderson appeared as if they were not on the same page," said Michelle Krebs, senior analyst at the automotive research site Edmunds.com. "Henderson wanted to sell Opel. The board overruled" him.

The subsequent collapse of GM’s deals to sell its Saturn brand to Detroit tycoon Roger Penske and Saab to a Swedish firm "suggested to the board that Henderson couldn’t get the job done," Krebs said.

GM notified the task force of Henderson’s resignation after Tuesday’s board meeting, GM spokesman Chris Preuss said at the news briefing. Whitacre declined to take questions.

He and the other directors were installed by the government, which became 60.8 percent owner of the new GM that emerged in July from the automaker’s brief bankruptcy.

Despite its controlling stake, the government has remained distant from the corporate decision-making, with Obama administration officials saying they’re relying on the hard-nosed business people they’ve appointed to oversee GM’s management.

It was unclear what triggered Henderson’s resignation. He was scheduled to be the keynote speaker at the Los Angeles Auto Show press preview today.

No replacement ready

GM’s board didn’t have a replacement lined up, analysts said, and it might have trouble finding one.

"The more fundamental management challenge facing GM now … is its likely limited ability to attract high-quality outside executives," because of pay restrictions and other risks, said J.P. Morgan analyst Himanshu Patel.

As short-term CEO, Whitacre said he would work "on a daily basis" at GM’s Renaissance Center headquarters.

Whitacre, who is the third CEO at GM this year, said he wanted to assure employees, dealers, suppliers, union workers and "most of all, our customers," that GM’s daily business operations will continue normally.

He said he believed the automaker would remain a leader offering high-quality cars and trucks. "We now need to accelerate our progress toward that goal, which will also mean a return to profitability and repaying the American and Canadian taxpayers as soon as possible."

Unlike Rick Wagoner, who was widely viewed as having fallen short as chairman and CEO of GM, Henderson has strong advocates in the company and in the industry. He has broad international experience, having run GM’s Asian and European operations, and he was also chief financial officer under Wagoner.

"He’s the best automotive guy in the business, and GM will suffer because of this," said Warren Browne, a retired GM executive who formerly headed GM Russia.

But Henderson was thrust into the top job without strong backing. The task force seemed ambivalent toward him, and Wall Street wrote him off as a GM lifer.

"The choice of Henderson to replace Wagoner failed to impress the investment banks and private equity funds that held much of GM’s debt," said a fund manager who spoke on condition of anonymity. "We wanted them to bring in an outsider. We don’t want anyone running GM who helped put it where it is today."

GM Chief Financial Officer Ray Young’s position also has been reported as being shaky. The announcement of Tuesday’s news conference stirred speculation that his replacement was imminent.

"Ray Young remains the CFO, and we’ll give more details on that," Preuss said.

Vice Chairman Bob Lutz remains in his job and will give the keynote speech in Los Angeles, Preuss said.

Auto show upheaval

Henderson’s departure threw GM’s auto show plans into disarray. The company canceled interviews and ordered executive committee members, including U.S. sales chief Susan Docherty, to stay in Detroit this week for meetings.

George Fowler, general manager of Superior Buick Pontiac GMC truck in Dearborn, said he had heard rumors that Henderson might be gone soon.

"Fritz was really respected in the dealer ranks," Fowler said. "He was one of the good old guys who grew up in the business."

But Fowler said he was open to new leadership. "Maybe fresh blood at the top will help."

Ford Motor Co. has thrived under the management of CEO Alan Mulally, an outsider who came from Boeing Co. in 2006.

But Chrysler LLC suffered after being acquired in 2007 by Cerberus Capital Management LLC, which installed former Home Depot CEO Bob Nardelli as chairman and CEO.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said the board’s expectations for Henderson may have been too high.

"You can only change the culture so fast," said Cole, whose father Edward Cole was a president of GM. "When you have a board that doesn’t know anything about the auto industry, they may expect things to happen faster than they can happen.

Detroit News Staff Writers Robert Snell, Alisa Priddle and Bryce G. Hoffman contributed.

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