By on March 8, 2010


One of the arguments in favor of GM Chairman/CEO Ed Whitacre’s use of AT&T corporate jets is that “given the role he plays and the decisions that need to be made worldwide, you want this guy to be working 24/7.” But like so many of the “answers” we’re given about GM’s turnaround, this merely raises another question: besides learning such arcane auto-industry jargon as the term “segment,” what exactly is Ed Whitacre doing at GM? Thus far, the answer seems to be “firing executives,” as the last several months have seen a number of executive reshufflings at the RenCen. And though GM’s bailout left a number of GM lifers in positions they had mishandled prior to bankruptcy, the recent firings and re-orgs aren’t simply motivated by the desire to revitalize GM’s corporate culture. A look inside Whitacre’s reign of terror shows a more traditional GM impulse at play: the desire for quick spikes in volume.

Automotive News [sub] takes on the subject of GM’s executive maelstrom by first explaining that it’s OK to be confused by the rapid cycling of jobs, org structures and responsibilities at the highest level of GM’s management.

If you’re puzzled by the serial reorganizations of General Motors Co.’s sales and marketing staffs, here’s the simple explanation: Ed Whitacre wants to sell more cars — NOW.

The CEO doesn’t care to watch another PowerPoint presentation showing that sales will improve next year. Whitacre wants higher sales immediately, informed sources say, and will keep applying pressure until he gets results.

On the one hand, this seems like good news. After all, a lack of accountability has long been identified as a central contributor to GM’s dysfunctional executive culture. But just because execs are being fired or transferred doesn’t mean real accountability has arrived at the Renaissance Center. After all, the latest executive reshuffle split marketing and sales responsibilities after ousted CEO Fritz Henderson unified them, and yet despite this clear rejection of his leadership, Henderson is being retained as a $3,000/hr consultant. Mixed messages much?

Indeed, the major takeaway from GM’s ongoing game of musical executives seems to be that Whitacre’s desire for volume outpaces the need for consistent strategy. For example, the recent decision to reinstate over 600 culled GM dealers who were once bashed as a burden to the company, was undertaken solely to increase volume. Because GM has been secretive about its criteria for axing dealers in the first place, it’s difficult to say if the presidential task force on autos was wrong to endorse the cull in the first place, but one thing is clear: by reversing the earlier decision to cut GM’s dealer ranks, Whitacre has admitted that the past nine months of political headaches were pointless. Any bankruptcy-era desire to slim down GM’s organization has faded in the face of Whitacre’s unequivocal demand for improved volume.

The fact that all of Whitacre’s major moves are motivated purely by volume considerations is yet another reason for concern. Just as generous compensation packages didn’t prevent past failure at GM, there’s nothing in The General’s recent history to suggest that pressure to push volume hasn’t been a fact of life at the RenCen for decades. The problem is that pressure to increase volume often led to some of the most self-destructive practices in Detroit’s inglorious history: channel-stuffing, incentive addiction, fleet-sales dependence and product development shortcuts. That GM’s fleet sales have expanded dramatically for the last two months shows how volume pressure alone can not ensure sustainable success. That GM is trying to go toe-to-toe with a reeling Toyota by boosting cash incentive and finance deal spending confirms the worst fears of a volume-driven return to mediocrity.

Worst of all, GM is only able to return to these poorly-considered practices because it sits on tens of billions of taxpayer dollars with which to purchase its much-desired volume. If taxpayers were told that their money would be used to fund a return to past practice, they’d likely have been even less enthusiastic about the auto bailout (if such a thing were possible). Moreover, because of the bailout, GM is able to hide the real effects of its consistently high post-bankruptcy incentives and recent low-profit fleet sales. At least until its first post-bankruptcy GAAP-approved earnings report comes out later this spring. And when it does, weaker per-unit results will mean the US and Canadian taxpayers should expect even less payback from an eventual IPO than the government has warned. But then, if GM’s leadership is still thrashing around trying to give Big Ed enough volume to make him stop firing people by then, that might just be a foregone conclusion anyway.

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21 Comments on “Inside GM’s Exec-Go-Round...”


  • avatar
    rnc

    Since he’s been there all he’s probably heard from Lutz and below is how good GM cars are and he’s probably sitting there going “b#llshit” I wan’t to see it and pulling the trigger each time he doesn’t. It sucks to work in but fear is an effective tool for a company that never felt it.

  • avatar
    ClutchCarGo

    IF you’ve got good product, pumping up the volume to get that product into the hands of drivers could be a good way to change public perception about the quality of your product. However, if the product isn’t that good, volume is just more of the same-old same-old from GM that Whitacre was supposed to change. And restoring culled dealers may make sense if the initial cull went too far, and you’re bringing back dealers that are needed/good, not just the squeakiest wheels with the most political clout. That devil is in the details of the cull/reversal process, something which is sorely lacking.

  • avatar
    bmoredlj

    I just hope Ed doesn’t lead GM back into a ditch of overproduction and too many dealers with too many cars on the lots, resulting in too many incentives.

  • avatar
    crash sled

    Chasing volume and market share got them into this mess, no doubt about that. I don’t care which Grosse Pointers get fired, and that’s no concern for the taxpayers. But holding up unprofitable volumes is a continuation of past sins. Big Ed better plan on showing some good news come that Springtime earnings report, or he’ll be next on the chopping block.

  • avatar
    tced2

    Re-shuffling is good up to a point but at some point it becomes counter-productive because the managers/workers quit doing productive work and worry about their existence.

    I am amused about AT&T paying for transportation of big Ed while doing GM business. The appearance is poor. Eventually GM should be accounting for his travel in their own business plan. It’s a cost of doing business – and the auto business is not AT&T problem. (The original forbidding of the “private-jet-fruit” by the District of Control folks was for show. Congress flies “private” frequently.)

  • avatar
    mtymsi

    Whitacre needs to get some outside qualified talent into GM’s upper mgt. and his former speech writer doesn’t count. IMO he has already missed several opportunities to do so. Just shuffling the existing upper mgt. isn’t going to accomplish anything. If anybody at GM needs to show some progress it’s Whitacre himself, he’s had enough time. I would hope he knows better than to expect different results from the same ingrained culture just because he wants it. To me this isn’t the time for Whitacre to learn about the auto industry it’s time for him to hire people that are already successful in it along with those having success in other industries. I see his primary role as being the one that brings in the people that will make a difference.

  • avatar
    JSF22

    There’s certainly merit in this article and the other comments, but overall my impression of Whitacre is favorable. I see nothing wrong with Big Ed firing a bunch of GM lifers who haven’t brought results, and who probably were still dancing him with their usual “wait until next month” lies. Putting an outsider in charge of GM’s PR staff seems fine, given how bad GM’s communications have been ever since Tony DeLorenzo retired. Of course, I will believe he is serious when he brooms that arrogant airhead Susan Docherty.

  • avatar

    Gov’t Motors has already proven unable to attract top talent in its current form — as evidenced by the unsucessful search for a CEO last year. (If memory serves, a new hire — formerly of Ford — also ran from GM within his first week there, sometime around October 2009.)

    Those with industry experience outside the dark shadow of GM appear unwilling to cast their lot with the current iteration, either because of a) government meddling, b) restrictions on pay, or c) fear of a Gov’t Motors failure leaving a dark mark on their professional resumes.

    Add the apparent Czar-like regime of terror in Whitacreland, and it’s no wonder few are beating down Gov’t Motors’ door. That leaves former AT&T speechwriters, and the likes of overpaid no-nothings Docherty and Fritzie. Certainly not the ingredients necessary to rebuild the company.

    I have zero faith they’ll be able to turn things around long-term.

    • 0 avatar

      Michael D. Richards was the one who bolted from Gov’t Motors, just 8 days after his hiring December 1:

      http://www.bloomberg.com/apps/news?pid=20601209&sid=a7RCwGRIHYjo

      No one leaves a job just 8 days in, unless it is because they’ve realized they want NO PART of what’s going on behind the scenes. Things haven’t gotten any better for Gov’t Motors since — if anything, Ed and the Feds have only asserted themselves even more, to the obvious detriment of the company.

      It’s already been proven Gov’t Motors can’t attract or retain top talent (this may be why Lutz is bolting, too.) So, I truly doubt GM could fill the top positions very quickly, even if all the “know-nothings” were shown the door.

      Well, unless F/Ed was among them.

    • 0 avatar
      Wheeljack

      Either that or GM brass figured out that Richards was a useless d-bag who added no value to FoMoCo and would add even less to GM.

    • 0 avatar

      Fair point… though isn’t it more typical of Gov’t Motors to first fire useless d-bags, then rehire them back as $3000/hr “consultants?” Or reinstate their dealerships?

  • avatar
    porschespeed

    Sadly, Whitacre is living down to expectations.

    Had he gone in guns a-blazin’ and cleaned out the ranks of lifers, there may have been a chance for a culture change.

    Instead, we have drag it out and drag it down management. Slowly executing the group of non-performers does not inspire improved performance among the remainder, rather, it just puts people in the wrong type of survival mode.

    Beyond that, the painfully obvious is still – GM lifers are simply incapable of doing the job. They are not necessarily evil or unintelligent, rather, they have been trained a way of doing business that was never sustainable.

    Until the system is totally liquidated, it can never be effectively reformulated.

    • 0 avatar
      Tortoiseme

      But Porschespeed, how was EW supposed to know WHICH GM lifers to fire without first evaluating what he had? Contrary to popular opinion, you can’t fire ‘em all. Bringing in executives he knows and trusts is a common corporate practice, and makes sense in this case, to a point.
      Eventually he will have to steal a top exec from a competitor, someone to replace himself, someone with a successful track record.
      Until then, this is his ship to steer.
      Signs of concern: Continued reliance on discounting and incentives, and
      carrying 60days inventory (why bother with JIT on the input if your just going to load up on the backend anyway?)

    • 0 avatar
      mtymsi

      IMO Whitacre just isn’t moving fast enough. While it is true you can’t just fire everybody especially without the replacements lined up how long do you think it should take Whitacre to figure out who he needs to replace? As mentioned, until the house cleaning is done there is no possibility of moving forward on a long term sustainable path. I know I’m not CEO caliber but it seems pretty obvious to me and I’m sure many others what Whitacre needs to do.

  • avatar
    Christy Garwood

    Quote from EN above

    “Because GM has been secretive about its criteria for axing dealers in the first place, ”

    http://www.thetruthaboutcars.com/pre-new-gm-dealer-cull-evaluation-process-revealed/

    GM was not secretive about the criteria – it was given to the those who needed to know, the dealers; then passed along to Farago.

    And as far as when and by whom Marketing and Sales responsibilities were together or split, please go back and read the GM Media historical documents. They were together pre-BK, Lutz reversed his 2009 retirement decision when he was given Marketing just after NewGM was born. Dec. 2009 Fritz quits, and Ed Whitacre assigns Lutz a mentor role and puts Sales and Marketing back together. Check Sales records for Dec. 2009, Jan. 2009, and Feb. 2009 (you have them here on this site) and see if it makes sense why Sales and Marketing were spilt again.

    RE: Whitacre being driven by volume only – pure supposition on your part unless you have had an interview with him. Internal communications have asked us to focus on profits, both the revenue and cost sides simulataneously. We have been told that Ed Whitacre wants people who are impatient to achieve postive results now. It isn’t too hard to figure out that he is giving people 90 days to produce results.

    Please revisit and follow the facts. Thanks, from a GM employee.

  • avatar
    porschespeed

    While I understand that there is always a reaction to the sentiment of “fire them all”, you really can fire them all. You don’t have time to save the few, you have a responsibility to a much larger group.

    Agreed, wholesale housecleaning is an extreme measure, not to be undertaken lightly.

    But, when you have a company that has a fatally flawed corporate culture, there is simply no other alternative if you wish to change said culture. None.

    If you have ever been in ANY major corporation, especially ones with (functionally) 5 layers plus of vertical, with the added bonus of 5 horizontal fiefdoms, you know that subordinates perform every essential function for the top 3-ish layers.

    The upper 2 to 3 levels of any org this size are responsible for strategy, politics, and people management, culture. That’s all.

    To be clear, ALL of GM’s senior management -and the rest of the company- would be unemployed at this point without a whole lot of taxpayer funding.

    This being said, the failure of GM already established beyond any argument that GM corporate chieftains are unable to perform any of the job requirements of leadership – strategy, politics, people management, culture. (At least to perform them in a way that leads to profits…)

    So the company would be worse off without them how, exactly?

    The day to day running of the company? That’s being done by people 3 levels down the totem pole.

    If the top 500 at GM were simply gone for the last year, essential work would have gone on just fine. Likely better.

    Lining up 500 top quality replacement executives in this economy? From scratch? I need a staff of 10 and 120 days.

    Or, as is common practice, I would bring in about 150 that I know and trust. They all bring a couple of theirs, then we get down to business.

    I’m here to re-invent, not repeat.

  • avatar
    jimboy

    Its all very well to give someone 90 days to perform if they have something to perform with. I’ll say it again, “Long Lead Times”. It takes time to change product in the auto industry, and time to change perception. If GM truly wants to win the game, they must make haste slowly. Focusing on quarterly returns is what got the domestics in trouble in the first place, now you want them to re-visit that scenario? Mr Whitacre can push all he wants, but he isn’t going to accomplish anything by chasing off talented people so he can LOOK effective. This is exactly what GM doesn’t need, a return to shoddy quality and bean counter mentality.

  • avatar

    With the loss of Saturn, Pontiac and even Hummer it is unlikely GM will ever have the volume to hit 20% of the US market. I say 17% is the best they are going to do. However, 15% is the most likely especially when you look at Cadillac’s decline. They can fire all the executives they want, but it won’t change a thing. I think we can all agree 20% is completely out of the question now. Despite some new and impressive models Buick sales are still horrible.

    • 0 avatar
      John Horner

      Buick has lost too much mindshare in the US to ever become a strong brand again. Heck, Pontiac probably had more residual mindshare when axed than Buick does today. The only possible way for Buick to be profitable in the US is to do with it like Ford does with Mercury and GM does with GMC. Just make it a nose job and trim package sitting on top of Chevys and sell it for a few hundred dollars more. Sure that it bad old Badge Engineering, but if you have a marginal brand which does some business … do that bit of business at the lowest cost possible. Now GM has the worst situation. Low volume vehicles with their all their own body panels and interiors. That is a whole lot of tooling being used to build very few vehicles.

  • avatar
    Robert Schwartz

    Time for Death Watch II?

  • avatar
    ajla

    Has Whitacre fired whoever created the 3.0L SIDI engine and then decided to put it into just about every new GM vee-hickle?


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