GM Zombie Watch 21: Headshot!

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • Guyincognito Guyincognito on Dec 02, 2009

    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.

  • Porschespeed Porschespeed on Dec 02, 2009
    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.
  • Jonathan IMO the hatchback sedans like the Audi A5 Sportback, the Kia Stinger, and the already gone Buick Sportback are the answer to SUVs. The A5 and the AWD version of the Stinger being the better overall option IMO. I drive the A5, and love the depth and size of the trunk space as well as the low lift over. I've yet to find anything I need to carry that I can't, although I admit I don't carry things like drywall, building materials, etc. However, add in the fun to drive handling characteristics, there's almost no SUV that compares.
  • C-b65792653 I'm starting to wonder about Elon....again!!I see a parallel with Henry Ford who was the wealthiest industrialist at one time. Henry went off on a tangent with the peace ship for WWI, Ford TriMotor, invasive social engineering, etc. Once the economy went bad, the focus fell back to cars. Elon became one of the wealthiest industrialist in the 21st century. Then he went off with the space venture, boring holes in the ground venture, "X" (formerly Twitter), etc, etc, etc. Once Tesla hit a plateau and he realized his EVs were a commodity, he too is focused on his primary money making machine. Yet, I feel Elon is over reacting. Down sizing is the nature of the beast in the auto industry; you can't get around that. But hacking the Super Charger division is like cutting off your own leg. IIRC, GM and Ford were scheduled to sign on to the exclusive Tesla charging format. That would have doubled or tripled his charging opportunity. I wonder what those at the Renaissance Center and the Glass House are thinking now. As alluded to, there's blood in the water and other charging companies will fill the void. I believe other nations have standardized EV charging (EU & China). Elon had the chance to have his charging system as the default in North America. Now, he's dropped the ball. He's lost considerable influence on what the standardized format will eventually be. Tremendous opportunity lost. 🚗🚗🚗
  • Tassos I never used winter tires, and the last two decades I am driving almost only rear wheel drive cars, half of them in MI. I always bought all season tires for them, but the diff between touring and non touring flavors never came up. Does it make even the smallest bit of difference? (I will not read the lengthy article because I believe it does not).
  • Lou_BC ???
  • Lou_BC Mustang sedan? 4 doors? A quarterhorse?Ford nomenclature will become:F Series - Pickups Raptor - performance division Bronco - 4x4 SUV/CUVExplorer - police fleetsMustang- cars