GM Zombie Watch 21: Headshot!

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.