Inside GM's Exec-Go-Round

Edward Niedermeyer
by Edward Niedermeyer
inside gm s exec go round

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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