By on December 1, 2009

Recently, it’s become popular to believe that when a zombie loses its head, it dies. With today’s resignation of Fritz Henderson, the reanimated corpse of General Motors is testing that theory. Henderson was the latest in a line of GM lifers to hold the company’s reigns, hand-picked by ousted CEO Rick Wagoner and put in place by a presidential task force that couldn’t say no to another insider. In theory, Henderson’s resignation shouldn’t come as a surprise, let alone a disappointment. In practice though, the move leaves the zombie GM in a precarious position at a challenging moment. For the first time since (your guess here), GM is in the hands of an outsider.

Though Fritz Henderson’s decision to resign was officially made by “Fritz and the board,” the man of the moment is clearly Ed Whitacre. Had GM posted Chrysler-like 25 percent sales decline today instead of its two-percent drop, there would be little question as to why Fritz was being shown the door. And had Whitacre not recently overturned Henderson’s Opel to Magna sale and repudiated his CEO’s assessment that a 2010 IPO was worth talking about, one might even believe that the decision really did belong to “Fritz and the board.” Clearly, Whitacre laid down the law.

But the real surprise isn’t that Whitacre wanted Henderson out, it’s that he wanted Henderson out so badly he was willing to compromise this week’s coverage of the Volt, Cruze and CTS Coupe debuts at the LA Auto show. Three enormously important US-market products will now be surrounded by questions of GM’s executive turmoil instead of the PR-prepared talking points, especially since nobody from GM has properly answered a question about the situation yet. Like his decision to halt the Opel sale precisely when Angela Merckel was visiting D.C., Whitacre’s seems not to have considered the timing of Fritz’s defenestration. That might indicate that Whitacre is tone-deaf and egotistical, and it might mean he’s a hardass with a low tolerance level for failure. One thing is for certain: we’re about to find out what kind of auto executive Whitacre is.

Remember, even though the head of the presidential task force on autos, Steve Rattner, described GM’s Henderson-run finance department as “the weakest any of us had ever seen in a major company,” he allowed Henderson to take over for Wagoner. Rattner was spooked by Wagoner’s warnings against bringing in an outsider to GM, and ended up letting the next lifer in line take the top spot. Just as GM was considered “too big to fail,” the corporate stance has always been that GM is too big to be run by an outsider.

And if there ever were any truth to that position, it would be doubly valid now. After all, GM is not only without a permanent CEO, it also lacks a CFO with any kind of job security. It was reported back in September that current CFO, Ray Young, would be replaced. Though he has yet to officially leave his position, it’s fairly clear that Young won’t be around for much longer. In a firm that traditionally replaces its CEOs with its CFOs, this means Whitacre has to replace the top two levels of leadership, in addition to the several vice-presidents, GM International’s CFO, the head of GM Europe and other recently-vacated spots in GM’s org chart.

And filling those positions won’t be easy, as GM is still subject to pay limits which severely limit Whitacre’s ability to hire outside talent. Promoting another insider like Sales Manager Susan Docherty or Chevy Boss Brent Dewar would be foolish and counterproductive for Whitacre’s campaign for change, but there aren’t exactly a wealth of alternative candidates. And here we find yet another reason why Whitacre’s coup d’corporation might have been poorly timed: had he waited until GM’s escrow account closed in June, the firm would have been free of the government pay restrictions, even if GM had not fully repaid the loans. GM’s pay restrictions are part of its credit agreements with the Treasury, not a condition of taxpayer ownership.

But, as usual, GM is between a rock and a hard place. There’s little doubt that the government wants an IPO to happen before the 2012 election, if not next year’s mid-terms. And yet, clearly GM was not going to be able to attract private investment with Henderson behind the wheel. Though Whitacre’s hiring options will be limited by government pay restrictions, at least the next CEO will have an opportunity to create a track record prior to GM’s IPO.

Meanwhile, GM faces a host of pressing issues. From its teetering Daewoo division to its unfunded Opel Rescue, from the legislative wrangling of culled dealers to a raft of failed brand sales, Whitacre will have his hands full. If he’s the guy for the job, his ouster of Fritz will be helpful, having consolidating power in his own hands. His preference for action over timing and deliberation indicate that this might be the case, and we may be in for a few months of Whitacre’s forceful change. On the other hand, if this was an impulsive ouster, driven by ego and frustration, Whitacre could have just destroyed a crucial sense of stability that the company has clung to in the wake of its traumatic bankruptcy.

If the sense of stress and confusion surrounding the announcement of Henderson’s resignation is anything to go on, this second scenario can not be discounted. As an industry outsider, Whitacre’s ability to operate an automaker as large and troubled as GM remains very much to be seen. And in the precarious position where GM finds itself, that’s a gamble with truly existential implications. Whitacre may have eliminated a thorn in his side, but he’s also discarded one of the last of his ancien regime scapegoats. If he purges the few remaining notable lifer holdouts (here’s looking at you, Docherty and Dewar), hires some sharp outsiders and takes decisive action on GM’s major challenges, the zombie spell might be broken. Just as likely though, is the possibility that GM’s inertia, infighting and external challenges will thwart Whitacre’s impulsive attempts at reform, and keep GM shuffling lifelessly towards a future that shows no sign of ever arriving.

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25 Comments on “GM Zombie Watch 21: Headshot!...”


  • avatar
    Extra Credit

    If the pay restrictions expire in June, then are they really a deterrent to finding a qualified outside candidate now?  Wouldn’t the “winning” candidate simply have to wait until July to cash in?  Or am I missing something?

    Oh and one last question: Why do all reports of GM’s activities simply raise more questions?

  • avatar
    th009

    “For the first time since (your guess here), GM is in the hands of an outsider.”
     
    I don’t believe that GM has ever hired an outside CEO in its history.

    • 0 avatar
      likethetruth

      Not CEO, but CFO – remember John somebody from Proctor and Gamble? What about a guy GM had from  that sunglasses company – Ray Ban or something  (the guy who lied about his educational background)?  All gone; simply not cut out for the job, but …

      I really like Mullaly at Ford. He just proves the potential effectiveness of an “outsider” with lazer sharp focus coming in to turn a complex company around. Fritz was good, but him leaving isn’t the end of the world for GM. I am sure Fritz will make his mark in a differnt sector/company, no doubt.

  • avatar
    porschespeed

    If only decapitating the zombie were as easy (however Henderson left).

    Henderson was but one very visible cell of the cancer better known as ‘GM corporate culture’.

    I’m sure there might be two or three competent people at the VP level, but there is no evidence of it. 

    The only prayer for this company is the top 10% goes in one fell swoop.  Anybody with a pulse can do the job at least as well as any of them. Cheaper. That would signal a real change. 

    Anything less than total elimination of that top 10% is shooting the zombie with your Daisy Ryder. 

  • avatar
    educatordan

    Sigh.  I’m gonna go polish my girlfriends 2005 Pontiac Vibe and dream of a day when the best small car GM makes isn’t a rebadged Toyota.

  • avatar
    Ingvar

    Aren’t there any yong and talented people out there, that just happen to wait to seize an opportunity like this? Where are the McNamara and his “whizz kids” of today?

  • avatar
    ajla

    We’ll have to see how it all goes, but I’m happy with Whitacre’s move today. I think that the only stability Fritz’s GM represented was a steady state of failing combined with no accountability.
     
    Now, I’m just hoping that in the near future Docherty gets canned and Lutz decides to ride off into the sunset.

  • avatar
    tparkit

    GM is about to wash some laundry… and that always requires a fall guy.

  • avatar
    psarhjinian

    Henderson was but one very visible cell of the cancer better known as ‘GM corporate culture’.
     
    True, but his departure sends a very, very clear message to every other GM lifer that perhaps now is the time to start producing actual results, because the teflon coating you thought was so impermeable is now more than a little sticky.   That he did it with perhaps less elegance and timing than you’d usually expect underscores that message.  Twice.  In Red.
     
    GM’s problems are rooted in accountability, or the lack thereof.  That’s no longer the case: Wagoner was given chance after chance by his board, and wasn’t fired after losing a few billion to FIAT, failing to broaden GM’s product line, failure to reduce the marketshare slide, etc, etc.  He was never,  ever held accountable.  Henderson, who probably expected much of the same and was generally reading from Wagoner’s script, very definitely was held accountable for it.  Now, the people at GM who have ridden coat-tails and play politics might refocus, not just because of Whitacre’s superficial lesson, but also because all the talent within GM that previously has been locked up and beholden to them is now, suddenly, smelling blood in the water.  Now it’s no longer a career-ending move to show up one of the golden boys.
     
    Whitacre is not an car guy and that’s not really a bad or good thing at this level because, quite frankly, neither were Henderson or Wagoner—and neither were the likes of Watanabe or (in a way) Ghosn.  What matters is that you can lead. Whitacre’s job is get the people who can do the job to do the job, and this is a reasonable strategy for doing so.

  • avatar
    John Horner

    Rattner viewed Fritz as an interim CEO from the get-go. Fritz asked not to have interim officially part of his title, but he was always at best an interim seat warmer. Had Fritz surprised everyone and channeled a heretofore unseen inner Donald Petersen then I’m sure he would have turned into the real CEO for real. But, we all saw that ol’ Fritz just doesn’t have the chops to play this gig.
    Fritz should have been given the boot months ago. The question now is, who is his replacement? Someone tell me it isn’t Susan Docherty! Talk about teflon, everything she touches has turned to not-gold!
    Government pay restrictions should not be an impediment to hiring the right people for these jobs. You want people who are really smart, really driven and who know how to get by on a few hundreds of thousands of dollars of cash per year. Then you give ‘em huge out-of-the-money stock options off which they can make a fortune by making GM into a robust public company again. This is the model which drove Silicon Valley in its heyday and it is still very valid. You don’t want the people who are looking for a sure thing multi-million dollar per year contract with “guaranteed bonuses” and perks out the wazzo.
     
     
     
     
     

  • avatar
    John Horner

    “I don’t believe that GM has ever hired an outside CEO in its history.”
    Alfred Sloan was brought into GM when GM bought his company and had only been a part of GM for a few years before the DuPonts elevated him to CEO. So technically he wasn’t an outside hire, but he certainly was no GM lifer who worked his way up the ladder.
    Business Week had a good piece several months ago on the lessons GM of today should relearn from Sloan:
    http://www.businessweek.com/managing/content/jun2009/ca20090612_387205.htm
     

  • avatar
    Mark out West

    Roger Penske.  1) He’s already rich, 2) He’s from Detroit, 3) Has a long history with GM, 4) Knows how to build things, 5) Wouldn’t take guff from Whitacre, 6) Has always wanted to be the next Alfred Sloan.

    He’s one of America’s best entrepreneurs and CEOs, by far.

  • avatar
    psarhjinian

    Business Week had a good piece several months ago on the lessons GM of today should relearn from Sloan:
     
    Some of GM’s issues come from excessively venerating Sloan’s legacy: namely, the slow, cumbersome, accounting-centric process that haunts them to this day, and the pathological need to wallpaper the market with barely-differentiated product.  Sloan was a necessary instrument for fixing the kind of mess Durant left, but his legacy stifled GM for decades.
     
    I don’t think you can blame Sloan directly, but GM never really got out from under his shadow, and business has changed a lot in that time.

    • 0 avatar
      DweezilSFV

      Sloan was long gone when the “pathological need to wallpaper the market with barely differentiated products”. It started in the late 50s, accelerated with the compact and intermediate markets and the centralization of GM’s manufacturing operations in defense of being broken up due to anti trust threats by the US Government. Continuing blow was the conversion of all plant production to be headed by GM Assembly Division in the early 70s, further distancing and diluting the brand’s autonomy over their product.

      Sloan’s idea was also about centralized management and fairly independent divisions, something that was dismantled after his tenure for more homogenous production.

      “A car for every purse and purpose” did not mean what it became under the bean counters that followed from the mid 50s : each brand had a compact, a mid size, a full size and a luxury offering. And more thinly veiled as a corporate piece rather than a brand offering until it reached the peak of idiocy in the 80s under Roger Smith.

      All very well laid out in “On A Clear Day You Can See General Motors”. Delorean was even then wanting to get away from what was going on in the 60s to what Sloan had devised.

  • avatar
    OldandSlow

    Maybe not so much as Chrysler, GM has been bleeding talent over the past couple of years either through layoffs or attrition.   Those that are left, probably aren’t the happiest of campers.
     
    What is Whitacre’s vision for a new GM?  If he has one, has he clearly communicated it within GM?
     
    Ed Whitacre comes from a service company that mainly sold products made by others.  GM is a product company that needs to be getting new vehicles into the pipeline or they will be as outclassed as Chrysler.  Does a non-car guy understand this?
     
    Even with a clear vision of success, it will be damn difficult to delegate its execution to a building full of empty chairs.

  • avatar
    panzerfaust

    The firing of Henderson does put a great deal of power in Whitacre’s hands.  He surely has gotten the attention of the executives at every level.  Now he will have to bring a change of direction and leadership before everyone CYA’s and goes back to what they were doing; eventually forgetting that Fritz Henderson ever existed (which at GM could be a matter of days).  I hope that Witacre already has someone in the wings to take over for Fritz. 

  • avatar
    Carlson Fan

    “Does a non-car guy understand this?”

    The CEO for GM doesn’t need to be a car guy, he needs to be a strategic planner. He certainly needs to surround himself with car guys in the right places. For GM to be successful long term corporate culture needs to change. A daunting task that I suspect few at the GM exec level understand and/or are capable of.  Bring in the fresh blood!

  • avatar

    Fritz is a good man and gave many years of loyal, dedicated service to GM. although I disagreed with some of his actions like dealer closings and further reliance on distress marketing, I truly believe he cared about the company, it’s employees, and customers. Best wishes to you Mr Henderson.

  • avatar
    psarhjinian

    Ed Whitacre comes from a service company that mainly sold products made by others.  GM is a product company that needs to be getting new vehicles into the pipeline or they will be as outclassed as Chrysler.  Does a non-car guy understand this?
     
    It doesn’t matter: at the level he’s at, he’s not really handicapped by not knowing the nuances of retail vs. heavy manufacturing vs. service delivery vs. whatever.  I’d hazard that he’d actually be in trouble if he was getting his hands sufficiently dirty to require it.
     
    A president and/or chief executive’s role is to be a leader, not an operational manager.  He’s got CFOs, COOs and any number of VPs to handle the more nuanced aspects of upper management and his job (as CEO, not Chairman) is to manage them, and by his example, the provide leadership to the company as a whole.  Under Wagoner, Henderson or any number of executives before that, there was no incentive for VPs to do better (and thusly, no incentive for upper and middle management, either), only to keep in the good books of the President/CEO, who in turn was, well, not accountable to anyone.  Not rocking the boat was what you did.
     
    Well, playing “Don’t Worry, Be Happy” is no longer going to work.  Pointedly so.
     
    I’d like to point out that gracefully allowing Henderson to leave would give the “Meet the New Boss, Same As the Old Boss” impression to the rest of management.  The way he was publicly contradicted and subsequently shot down after only a few months of nonperformance should make the new culture of results and accountability apparent the rest of the Golden Boys

  • avatar
    superbadd75

    From Bloomberg;

    In August, Whitacre’s board accelerated the schedule for unveiling some new models and made “tweaks and changes to the business plan,” he told reporters during a conference call.
    “Ed can be very, very tough with people who refuse to make decisions,” said Jim Kahan, a former AT&T senior executive, in a July interview. “This is an action-oriented guy. If you want to just study things and stick with the status quo, it’s not going to be a good match.”

    This guy’s serious about turning GM around, and he’s obviously doing what he thinks it’s going to take to get it done. I’m really liking this guy a lot.

    • 0 avatar
      superbadd75

      More from Bloomberg;

      Whitacre suggested to Mark Reuss, vice president of GM global engineering, that he and his top executives call every customer who initiates the return of a GM vehicle through the automaker’s 60-day money-back guarantee program. Starting in November, the executives have been charged with interviewing the customers to see why they returned the vehicle and what they purchased instead, Reuss told reporters last month.

      Wow. Just, wow.

  • avatar
    guyincognito

    I can’t disagree with getting rid of Henderson.  I would mainly question, why now and not during the bankruptcy. Unfortunately, since they waited, GM’s  lost precious time on making real change.  Whitacre should clean house of lifer execs and underperformers, similar to what Mulally did at Ford. There is no question, however that this will impact their ability to keep pace with the design and quality updates that are critical at this time. The necessary culture change is going to take time and strong leadership. This was the right move but it leaves chances for success still quite limited.

  • avatar
    porschespeed

    A president and/or chief executive’s role is to be a leader, not an operational manager. 

    In the meta, that’s certain.  I would however suggest that one also has to have a certain level of mechanical knowledge if one is leading in a manufacturing scenario.

    Mullaly may, or may not, know how to assemble an engine, be aware of the finer points of combustion chamber design, etc.

    But he does seem to know that there’s no reason to have 12 different seat sliders when you can do it with 3, that one does not need 10 different antenna masts, etc. (don’t remember the exact numbers)

    True, but his departure sends a very, very clear message to every other GM lifer that perhaps now is the time to start producing actual results, because the teflon coating you thought was so impermeable is now more than a little sticky.

     I agree that it sends a message to the lifers that they gotta start producing. The problem is they don’t know how. They may or may not be bright enough, but at the end of the day, the only thing they know is the GM way.

    Any educated outsider has known the GM way is the wrong way since, oh, ’bout 1970. GM people simply do not know how the real world works.   


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