By on August 13, 2010


From the moment GM’s Chairman Ed Whitacre took over for Fritz Henderson as CEO, many wondered how long the 68-year-old Texan would stick around. Apparently GM’s board was not immune from such uncertainty either, as Bloomberg reports that it gave Whitacre an ultimatum: commit to the long haul or get out now. According to reports, several Wall Street banks asked Whitacre whether he would be leading GM long-term during pre-IPO meetings. Whitacre didn’t answer at the time, but the pressure from Wall Street clearly pressed the board’s hand. Since Whitacre ultimately didn’t want to stick around for an extended term (posibly due to the Treasury’s unwillingness to dump all of its stock during GM’s IPO), the board picked Dan Akerson to take over. But how will an unexpected handoff to an unknown executive with no industry experience affect GM’s IPO?

Industry watchers are already giving the leadership changeover a failing grade. Jeffrey Sonnenfeld, associate dean of the Yale School of Management and head of the Chief Executive Leadership Institute tells Bloomberg that

This is not a planned succession as it’s being spun. This is not the way it’s done with an IPO. The IPO should be delayed until GM gives the full story behind the leadership change.

There are also concerns from the businesses that rely on GM. After Ed Whitacre axed a number of established GM executives (including his CEO predecessor Fritz Henderson), Whitacre was the one consistent figure in GM… with his departure, at least one supplier company executive is worried, saying

I thought what they needed right now was stability at the executive level. From our perspective, hopefully it’s the same, the overall structure doesn’t change.

But once again, the government has stayed hands-off on the decision despite the fact that it could severely hurt investor optimism going into the IPO. Treasury was reportedly informed of leadership change on August 10 (the day the decision was made) but had no input in the decision. Like the decision to leave the Volt in place, the government was so anxious to not be perceived as meddling in GM’s day-to-day decisions that it allowed a questionable bit of strategy to play out. Less intervention is good, but with tens of billions of taxpayer dollars riding on the IPO, tolerating GM’s decision to put an unproven leader in the saddle shows perhaps too much respect for GM’s corporate culture.

And the cultural impacts of Akerson’s appointment might well be his most lasting impact. After all, the board clearly feels confident enough in GM’s position to allow an unknown quantity to take over. This sense of satisfaction with GM’s curent position belies the overseas chaos, unfunded pension obligations, and troubled new product plans that GM must vigorously address over the next three years. For a company with a long history of cultural complacency, the fact that GM is trying to brush these inescapable challenges under the rug until after the IPO, while promoting an untested place-holder CEO, is highly troubling.

But, according to the Freep, Akerson is what the board thinks Wall Street wants in a GM executive: a Wall Street guy lots of Wall Street connections. This indicates that Akerson might merely be a placeholder as well, shepherding GM through an IPO until either Mark Reuss or Chris Liddell is ready to take over. Another theory is that Chinese firms or private equity might want to make a play for GM, and Akerson’s corporate buyout experience will help ease such a a deal along. But one thing is for certain: few observers expect Akerson to lead GM into a long period of innovation and change. The real question is whether he’ll have the confidence and authority to prevent complacency from once again infecting GM’s corporate culture.

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23 Comments on “GM Board Pushed Whitacre Out For IPO...”


  • avatar

    The story here isn’t that the board “pushed” Whitacre out. The story here is “why didn’t GM reschedule its IPO and do this transition in a more orderly manner?” The answer there is probably “Because the government is aggressively pushing us to go public before the elections, and a premature IPO is going to end up costing the taxpayers big bucks”, but I don’t have the sources to figure that one out for sure.

  • avatar
    Zackman

    Bye bye, GM. Except for weapons of war, American manufacturing appears D.O.A. Game over. Chrysler in process, then Ford eventually.

    Want fries with that?

  • avatar
    tced2

    Whitacre isn’t being pushed out to the street – he’ll still be chairman of the board.

  • avatar
    Ingvar

    Read all about it! CEO has no confidence in IPO, bails out before the shit hits the fan!

  • avatar
    Daanii2

    Interesting news. That explanation of Whitacre’s departure rings true. And it may very well toll the end of GM.

    This strategy pumps up the GM IPO as a financial move for Wall Street. It does nothing — repeat nothing — to make GM more competitive in Detroit.

    So we’re down to a sophisticated version of “pump and dump.” That’s a shame.

  • avatar
    forraymond

    Whitacre will be COB til the end of the year. That is when the Carlyle Group (aka the Saudi Royal Family and the Bush “royal” family) (of the Saving and Loan debacle) will strip and flip GM, ultimately screwing the retirees out of their pensions.

    It disgusts me that Obama is involved in it, too.

    • 0 avatar
      tced2

      (place tin-foil hat on)
      Maybe the Saudis will be more interested in selling more of (their only) product -OIL- by keeping the big petro-mobiles in production.
      (remove tin-foil hat).

    • 0 avatar
      Monty

      @forraymond:

      Can you elaborate on the following claim? Citing some legitimate sources would certainly help remove the stigma of “tin foil hat” from your assertions.

      “That is when the Carlyle Group (aka the Saudi Royal Family and the Bush “royal” family) (of the Saving and Loan debacle) will strip and flip GM, ultimately screwing the retirees out of their pensions.”

      I don’t understand how a strip and flip of GM would work, exactly. What would the Saudi Royal Family strip from GM? Who would they then flip it to?

      Also, if the Saudis buy the majority of GM stock, wouldn’t that put upward pressure on the share price, thereby allowing the Treasury to recoup most of the bailout moneys? Would that not be a positive development?

      “It disgusts me that Obama is involved in it, too.”

      How is Barack Obama involved in a strip and flip of GM? Is it as POTUS? Or as an individual out to make some money from investments? Is he a secret member of the Saudi Royal family? Did he join the Republican Party when no one was looking?

      Seriously, weren’t you one of the commenters in an earlier post railing on about the Obama Democrats promoting the worst kind of socialism? How is he suddenly involved with the uber Republican Bush family, and the ultra conservative Saudi Royal family?

  • avatar
    Mike Kelley

    Lefties are spinning Government Motors as some kind of great success. Here is another take: http://www.nypost.com/p/news/opinion/opedcolumnists/model_corruption_ttyHIpNuoQRwVTkBZuhHeM

  • avatar
    jkross22

    What do you do when you have equally bad choices – have the gov’t make these decisions, or trust GM to look out for GM?

    Ugh. As feared, we may all lose big time.

  • avatar
    jpcavanaugh

    This is starting to make some sense now. It did not seem that Whitacre had been there to really make the kind of cultural change that needed to be made, although he had certainly gotten a start. This change seems to be all about appearance and expectation. GM’s problems have been largely operational, but the new guy seems more of a finance type than an operations guy. I never thought I would be wistful for the Whitacre era, but that is my knee-jerk reaction.

  • avatar
    Amendment X

    This begs the question, who the hell is going to buy GM stock NOW? Seriously, who?

    • 0 avatar
      tced2

      The market for the stock will tell us. If the price goes up. more people want the stock than supply- if the price goes down, then fewer buyers of stock will be around. It’s called the stock market.

  • avatar

    it’s bigger than the Saudis or Chinese, Morgan or GS. you can see things but not understand.

  • avatar
    rnc

    Basically the IBs who will underwrite the IPO wanted a long term committment and whitaker wasn’t willing to give it, seems to me that the board did it’s job properly (it’s been a long time since you could say that about GM). Who is going to buy the stock, lots and lots of mutual funds, a huge conglomerate with no debt and a super-strong presence in china (kind of how yomamoto described the US in the 1930’s a giant waiting to wake up, the war pulled the US out of the depression, just as bk pulled GM out of it’s own). The talk about underfunded pensions assumes the market will be were it’s at today (as it goes up, the unfunded portion goes down).

  • avatar
    Stingray

    Another theory is that Chinese firms or private equity might want to make a play for GM, and Akerson’s corporate buyout experience will help ease such a a deal along.

    THIS

    I vote for the Chinese.

  • avatar
    gslippy

    In the span of 22 months, GM will have had 4 different CEOs:

    Wagoner until 3/30/09
    Henderson until 12/1/09
    Whitacre until 12/31/10
    Akerson after 1/1/11

    How many companies – big or small – can you think of with this kind of turnover? My local pizza shop is more stable.

    Investors want stability, and ultimately, so do car buyers. When will the revolving door stop? Not soon; Akerson will do his own house-cleaning. If/when the shakeups reach Product Development, it will affect GM’s credibility with suppliers and consumers alike. Insiders will get scared, and start jumping ship. You can be sure that plenty of insiders are wondering about their futures today.

    The installation of Akerson means this: The Board recognizes that GM still has serious money problems, and his financial background indicates that he can clean it up. His ‘outsider’ status is just what GM may need.

    The critics would be screaming if the new CEO was a GM lifer. My concern is that Akerson’s appointment indicates that GM’s viability will not hinge on product alone, but on a myriad of intangibles that only a hatchetman can solve – maybe. A “car guy” is not what GM needs right now.

    It is no coincidence that this event occurs just before the rumored IPO. RF may be right – the IPO may never happen. If GM’s financial situation is so tenuous, the Board may not want to risk jumping into the stock market only to get creamed. The Board must not think GM’s stock prospects are safe and sound. If they did, they would have appointed a car guy.

    I still think they could go bankrupt again by 2014.

  • avatar
    Patrickj

    RE: Whitacre or Akerson, I’m not sure anyone really sees career-long experience in the domestic auto industry as an asset for a CEO right now.

  • avatar

    things are going to be just fine at General Motors, believe me.

  • avatar

    ‎”There has to be this pioneer, the individual who has the courage, the ambition to overcome the obstacles that always develop when one tries to do something worthwhile, especially when it is new and different.” Alfred P. Sloan


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