GM CFO races to ‘make a difference’ before ‘window’ shuts
GM CFO races to ‘make a difference’ before ‘window’ shuts
Automotive News | July 21, 2012 – 12:01 am EST
DETROIT — Dan Ammann wants it understood he’s not one of the gray-suited “bean counters” who once dominated, and nearly destroyed, General Motors.
To drive home the point, the chief financial officer is ready to challenge the automaker’s resurgent “car guys” on their own turf: a three-mile test track where his gray-metallic Corvette Z06 reaches a blistering 150 miles per hour.
Every lap is a message — this is not the same hidebound finance department that almost ran the top U.S. automaker into the ground.
“You have to have a point of view on how the organization actually goes about making cars,” Ammann said. “You’ve got to be out there and really immerse yourself in the business before you can make a difference.”
The 40-year-old, former Wall Street banker acknowledges GM has further to push to change a corporate culture once marked by arrogance, insularity and bureaucracy that has stifled the company for decades.
And that’s on top of such concerns as ongoing losses in Europe, slowing industry demand in China and GM’s $134 billion in pension obligations at the end of 2011.
Some industry officials believe the issues are so entrenched the most likely scenario is GM never eliminates its underlying problems.
“They have not wrestled their management challenges to the ground,” said Steve Rattner, the former head of the U.S. auto task force. “GM is making a lot of money. It’s just not making quite as much as Ford on a percentage basis because it still has some inefficiencies that need to be wrung out.”
Despite a record profit of $7.6 billion last year, GM’s operating margin of 3.8 percent still trailed such rivals as Hyundai (10.4 percent), Volkswagen (7.1 percent) and Ford (5.4 percent).
The near collapse of GM and its U.S. government-led bankruptcy filing in 2009 put a spotlight on the failings of the finance team, which federal officials viewed as hapless during the reorganization.
In 2009, GM settled accounting charges with U.S. securities regulators related to multiple financial restatements dating back to 2000.
That was a far cry from the five decades starting in the late 1950s, during which seven of nine GM CEOs came up through the finance department.
Ammann, one of only about 30 GM executives certified to drive at high speeds at the company’s Michigan track, is determined to restore the reputation of the money guys.
He has led a revamp of a department once considered the cradle of GM’s chief executives, moving to simplify how success at GM is measured and the data used for decisions.
“We have a window of opportunity to bring some fundamental change to this company,” he said, “and it’s a relatively narrow window.”
If Ammann, CEO Dan Akerson and other top officers fail, shareholders fear a repeat of mistakes that led to GM’s $50 billion U.S. taxpayer bailout.
Get it right and GM remakes itself into a nimble, aggressive competitor, a process Akerson concedes his successor could inherit.
“You don’t change the culture of a 100-year-old company in two years,” said Akerson, a Navy veteran and former telecom executive. “It takes arguably five to 10 years, but you have to start. Every long journey starts with a first step.”
To help speed its transformation, GM named Ammann CFO in April 2011, about a year after hiring the New Zealand native as treasurer from Morgan Stanley.
Identified by Wall Street as a candidate to succeed Akerson as CEO, Ammann was no newcomer to GM’s problems as he advised the automaker during its bankruptcy and restructuring when he was head of industrial investment banking at Morgan Stanley.
His personal history with GM also predates his employment as he owns a light blue 1961 Cadillac Series 62 convertible.
Ammann, who grew up on a dairy farm and loves to sail his Tornado Olympic-class catamaran when he’s not spending time with his wife and 7- and 5-year-old daughters, feels the corporate pressure.
He has changed about half of the 15 executives who report directly to him, hiring from General Electric, United Technologies and Deere.
On Wednesday, GM hired Michael Lohscheller from VW to be CFO of its money-losing Opel unit in Europe.
He also has worked to reshape the 4,200-person global finance team, pushing his team to provide the information someone without a finance degree can understand.
In a meeting last month, Ammann spoke to 20,000 GM product development employees for 30 minutes about operations, pensions and the importance of GM’s stock price as a daily report card from Wall Street.
He used three slides to make his points instead of the 15 it might have taken in the past.
“We’ve never had a problem of not having enough data, but we haven’t always done a good job of distilling it down to what’s really important,” Ammann said, citing cases in the past where company analysts would generate five-year sales predictions down to the last vehicle rather than preparing for possible scenarios.
Ammann’s drive to simplify is echoed by the likes of Tim Stonesifer.
The Shanghai-based CFO of GM’s international operation was lured in by a headhunter about 14 months ago.
The 44-year-old Stonesifer, who had worked at GE for 18 years before shifting to another company, recalls paperwork hitting his desk during his first week requiring eight different signatures.
He has cut that total to two.
“My rule of thumb is if you have more than one signature, then probably people aren’t really looking at it,” he said. “We don’t want folks spending any more time than they need to on the transactional side.”
Ammann and other executives are also working to overhaul the kind of old thinking where GM historically operated as numerous, smaller fiefdoms — and often in petty turf wars — rather than as the $150-billion behemoth it is.
They want people thinking about what’s good for the company, rather than for their particular region or division.
Even fans on Wall Street said shareholders are in for a bumpy ride.
GM’s stock debuted at $33 a share at its fall 2010 initial public offering, but has been trading around $20 in recent weeks, cutting the company’s market capitalization by more than a third.
The shares closed Friday at $19.36 in New York Stock Exchange trading.
“For real investors who have a time horizon and can afford to be wrong at various points in the short term, the GM story can offer an exceptional return,” Morgan Stanley analyst Adam Jonas said. “But if you want to sleep at night, this is the wrong stock.”
GM, founded in 1908, rose to dominate the global auto industry under the stewardship of pioneering CEO Alfred Sloan.
By the mid-1950s, the company had 514,000 employees and accounted for about half of U.S. car production.
Its sales were twice as large as the No. 2 corporation, Standard Oil.
However, complaints inside GM about a failure to execute echo through the decades.
Former U.S. presidential candidate Ross Perot, who sold his company Electronic Data Systems to GM in 1984 but later left the board in frustration, famously said, “Revitalizing GM is like teaching an elephant to tap dance.”
GM still suffers from a laundry list of problems.
Current and former employees describe too many managers operating under too much bureaucracy and a lingering arrogance that some find strange given the company’s missteps.
Almost three years after deciding not to sell its money-losing operations in Europe, for instance, GM is only now looking at combining the warehouse operations of Opel and Chevrolet in that region to save money.
GM executives say they already have gone on the attack when it comes to cutting costs and streamlining operations.
Core vehicle platforms account for almost half of the company’s volume, up from a meager 30 percent in 2010, and GM wants to get that to more than 90 percent by 2018.
In addition, GM aims to halve its engine families globally over the next decade from 20 in 2009.
In March, GM announced a consolidation in its global advertising budget meant to save $2 billion over five years.
In Europe, GM forged an alliance with French automaker Peugeot designed to eventually save another $1 billion annually. GM has a reputation for failing to execute successfully on its plans, notably the costly and ultimately unsuccessful alliance with Fiat.
Former executives describe a lack of urgency to change or accountability to perform, mistrust among competing managers and a feeling of being stuck in an era when GM dominated the market.
Critics argue that below the top executives like Ammann the same old cadre of middle managers who helped drive GM over the cliff in the first place remain.
Some said the company should have cut the top 1,000 officials during the 2009 restructuring, while others say executives like Ammann must instead drive their message more forcefully to managers below them.
“Dan Ammann is the ‘real deal,’ and has already done a lot to strip stupid thinking and analysis out of the finance group,” former GM Vice Chairman Bob Lutz said. “But ‘bean counter-itis’ and short-term thinking are ever present, at many levels, and in all functions.”