GM stabilizing despite leadership shuffle; Chrysler plan stalling out

December 6, 2009

GM stabilizing despite leadership shuffle; Chrysler plan stalling out

But rescued automakers are in different places on the road to reinvention

BY GREG GARDNER
FREE PRESS BUSINESS WRITER

Nearly six months after exiting bankruptcy, Chrysler Group LLC and General Motors Co. present a clear, but puzzling, contrast.

Chrysler has a charismatic, focused leader, Sergio Marchionne, who laid out an ambitious and detailed plan to recapture lost glory, profits and market share. But sales remain in free fall. Redesigned vehicles are months, even years away.

It may face mission impossible, but Marchionne’s leadership team is ready to run through walls.

GM Chairman Ed Whitacre jettisoned Chief Executive Officer Fritz Henderson and took his title on opening day of the Los Angeles Auto Show, dampening buzz around the 2011 Buick Regal and triggering new anxiety among employees who already have endured substantial turmoil.

But GM is stabilizing its U.S. market share, even as it phases out Saturn, Pontiac, Saab and Hummer. New products such as the Buick LaCrosse, Cadillac SRX and Chevrolet Traverse are selling well. "I’d take GM’s situation in a heartbeat," said IHS Global Insight analyst John Wolkonowicz. "GM has a cold. Chrysler has pneumonia."

In the end, success might be a matter of which leader delivers the appropriate medicine.

GM, Chrysler healthier

Believers and skeptics of General Motors Co.’s and Chrysler Group’s government-backed rescues can agree: Both companies are better off today than they were a year ago.

Their respective reinventions, however, are in different stages.

GM seems impatient with itself, incapable of enjoying small successes on its road to recovery.

Chrysler’s executive team members know the scoreboard looks bleak today, but they are running a marathon. If the legs are moving, they’re still alive.

Whitacre is an outsider unfazed by what Detroit insiders think of him. Obsessed with changing GM’s culture, Whitacre’s success in turning a regional phone company into a telecom survivor battling Comcast and Yahoo will serve him well.

Marchionne has already rescued Fiat from oblivion. His primary tool is his sheer force of will and an ability to spot competent people with the talent to conquer tall tasks.

"Marchionne may be the best leader in the industry right now, but sometimes you get yourself in a situation that even God can’t fix," observed John Wolkonowicz, an auto analyst with IHS Global Insight.

Marchionne’s mission

By all accounts, Marchionne’s assignment is harder than the one Whitacre faces at GM.

Years of underinvestment by Cerberus Capital Management and Daimler AG are reflected in Chrysler’s 38% sales decline this year, compared with a 24% decline for the industry.

Terminating 789 dealers may pay off someday. But for now, it means fewer places where consumers can find Chrysler’s products.

Ad spending had been nearly frozen through the first nine months of this year. Now all four Chrysler brands have launched new campaigns that are fresh, out-of-the-box and, in some cases, just plain risky. This week, Chrysler launched an image ad that tied the Chrysler 300 sedan to a global human rights campaign to free an imprisoned Burmese pro-democracy leader.

As for changing the culture, Marchionne is well ahead of Whitacre. He has forced his team to assess its current position with brutal honesty.

"In this market, if you don’t have a competitive" midsize "sedan, you’re a nobody," Marchionne said last month. "That’s where we are."

Chrysler is painfully aware its quality still lags industry leaders. Warranty repair costs have fallen, but much more must be done.

"There’s no lack of clarity," said Doug Betts, senior vice president for quality. "We’ve escaped the turmoil of just surviving from one week to the next."

Ralph Gilles, Chrysler’s young design chief now in charge of the Dodge car brand, said when the top 25 leaders meet for dinner every three or four weeks, "it’s almost like Thanksgiving dinner."

"Sergio expects us to rely on each other. The analogy I like to use is he sees us as the X-Men," said Gilles, referring to the Marvel comics superheroes.

Whitacre’s strategy

At GM, meanwhile, a turnaround that has been years in the making is well under way — delivering strong products like the Buick LaCrosse — but Whitacre’s plan for GM is just beginning to unfold.

Vice Chairman Bob Lutz will advise Whitacre on product matters. Mark Reuss, son of a former GM president, will lead critical North American operations.

Sales and marketing chief Susan Docherty will report directly to Reuss and play a critical role as GM tries to rebuild the image of its four core brands: Chevrolet, Cadillac, Buick and GMC.

"If this doesn’t move the needle in 90 days, he will do something different," said Gerry Meyers, a management professor at the University of Michigan’s Ross School of Business.

Despite all the talk of culture change, the government rescue slashed billions of health care costs and debt. That makes Whitacre’s mission a lot easier to achieve.

His main objective is to keep bringing to market vehicles such as the 2010 Buick LaCrosse and Cadillac SRX and to make sure he can retain and attract talented employees even as the shakeups continue to unfold.

"The bankruptcy has taken $5,000 to $6,000 out of the cost of each vehicle," said David Cole, chairman of the Center for Automotive Research. "For Whitacre or whoever comes in, this is a very fast track to run on."

The biggest challenge GM faces is changing perceptions of GM, especially on the East and West coasts, as it continues to deliver standout cars and trucks.

"Their products are improving a whole lot," said U-M’s Meyers. "But people still believe that Buick is what your father drove."

Contact GREG GARDNER: 313-222-8762 or ggardner@freepress.com

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