GM's Whitacre Stays on as CEO To Create StabilityBy Michelle Krebs January 25, 2010
General Motors Chairman Ed Whitacre announced Monday morning that he will stay on as permanent CEO at the request of the automaker's board of directors. Whitacre said the board called off a search as it looked to create a stable situation at the company that went into and out of bankruptcy and has had a series of CEOs in the past year.
"The board asked me at a special meeting last week if I would be willing to stay on," Whitacre said at a press conference Monday. "I'm honored and pleased to accept this role. It's a great company with a terrific future, and I'd like to be part of it."
GM had hired an executive recruiter to search for a CEO candidate, but many thought all along that Whitacre would stay on the job he took over when then-CEO Fritz Henderson was ousted in December.
Since then, the 68-year-old Whitacre has been working every day at GM's downtown Detroit headquarters. He recently moved from the hotel inside the headquarters building to an apartment in downtown Detroit, while maintaining his home in San Antonio. His permanent appointment as CEO will mean he'll spend even more time in Detroit, Whitacre told reporters.
The Plus Side
There are many pluses for Whitacre remaining as GM's CEO as well as some downsides.
First, the last thing GM needs is its fourth CEO in less than a year. Rick Wagoner got the boot at the end of July. Henderson was ousted in December after only eight months. Whitacre took the reins, and, had the search continued, a new CEO could have been onboard shortly.
What GM needs more than anything now is stability in leadership and consistency in direction -- the right direction.
Ford illustrates what GM needs. The automaker brought in from Boeing Alan Mulally, who right away established his management team -- all but Toyota's Jim Farley already were top execs. He set a direction and the automaker has stuck with it ever since. As a result, Ford is spewing out products that people want and are buying. The automaker reported an unexpected profit in the last quarter and, according to some analysts, could report a profit for all of 2009 on Thursday.
Further, Whitacre has strong support from GM's biggest shareholder -- the U.S. government. The retired AT&T CEO was the U.S. government's choice as chairman of GM's board when the automaker emerged from bankruptcy last summer. With the announcement of his permanent appointment as CEO, he clearly continues to have the support of GM's mostly new board of directors, many of them put in place by the government.
On the Downside
On the downside, Whitacre's permanent CEO title undoubtedly will fuel talk that he wanted the job all along, rendering the executive search a waste of time and money, and that he is potentially mad with power.
Quite the contrary, Whitacre insisted Monday. He reluctantly took the job as chairman and didn't intend to become CEO, on an interim or permanent basis. "I planned for that not to happen," he said. "But I'm comfortable with the company and the leadership team."
Whitacre, who doesn't need the money since he received a huge payout from AT&T, said he views his job at GM as public service. "This company is good for America," said the Texan.
Still, his stay also fails to give GM a youthful, contemporary image that it needs with Whitacre being 68 and one of his top, high-profile lieutenants, Bob Lutz, even a decade older. That fact was accentuated in ads Whitacre appeared in last fall to kick off GM's 60-day money-back guarantee.
And he doesn't know the auto industry. But then neither did Mulally. And like Mulally, Whitacre is a fast learner. Plus he's got a headstart on anyone new coming from the outside who most likely doesn't know the business either.
"In the last few weeks and months, I've been meeting with employees, customers and dealers and I'm sort of learning this business," responded Whitacre.
Like Mulally did in his early days, Whitacre has been asking a lot of questions about why GM does what it does and how it does it. Fresh eyes in a hide-bound culture like GM's can be useful. For instance, it was Whitacre who suggested GM executives, led by North American President Mark Reuss, call people who returned their cars under GM's guarantee program, to find out why.
Permanent Isn't Forever
While Whitacre is expected to announce he's taking the job on a "permanent" basis, that doesn't mean it's forever.
Whitacre said he didn't know how long his assignment would be. "I'm going to do it for awhile," he told reporters. "It'll be an adequate amount of time -- three years, two years or whatever might be long enough to get to where we need to go."
He did not say how much he would be paid but that his pay likely would be revealed in coming days.
Often mentioned as a CEO candidate by outsiders and Whitacre himself is Chris Liddell, who was brought in from Microsoft to be GM's CFO. However, he isn't even on the job yet. He needs time to learn the industry.
Whitacre said the board looked at outside candidates but ultimately decided to ask him to stay.
Indeed, as Whitacre said, much needs to get done quickly at GM. He claims GM is ahead of all metrics detailed in its government viability plan. He said GM will pay by June some of the initial pre-bankruptcy loans to the U.S. and Canadian governments.
"That's a significant milestone in our journey back to being profitable and viable," he said.
Still, GM has its plate full of challenges. GM must move the metal. It must sell cars, boost market share and make money. Once its financial house is in order, it needs to issue an initial public offering so it can be a public company again -- and get the government out of its business.
"The next milestone is the IPO so we can be traded as a public company again and allow the government to divest in an orderly and timely manner," said Whitacre, who previously has said that will happen no earlier than the end of 2010. "The timing is contingent on factors that need to be aligned but we will initiate as soon as possible when market and internal conditions are right."
-- Michelle Krebs, Senior Analyst and Editor at Large