GM CEO Henderson Says That GM Will Shake Up Management

GM CEO Fritz Henderson said yesterday that the company would have “changes ahead” in senior management ranks, though said that he needed more time to finalize the changes.

Many analysts have noted that it seemed somewhat pointless for the company to keep its management ranks intact, considering that nearly all of the company’s current upper management has been with the company for the past few decades.  In other words, how can the same leadership team that got GM into its current mess have the knowledge, skills, and abilities to pull it out of it?

The company’s problems are cultural and deep-rooted, and while the company has still made some boneheaded moves even to the end, the sense of urgency from 2005 forward as it fought for its survival at least improved quality, fuel economy, appearance, and performance of the products launched after that point.  (For example, refer to the Lambda crossovers, the Malibu, CTS, full-size pickups and SUVs).  TrueDelta.com’s Michael Karesh, in doing his Ph.D. research, witnessed more than 400 meetings within GM and interviewed more than three dozen people, and found a dysfunctional culture (executive summary available here).  While his research occurred more than a decade ago, many of Mr. Karesh’s observations likely still hold true, and won’t be fixed by just lifting some of GM’s enormous debt burden through Chapter 11.

GM has released some financial projections, and they aren’t pretty in the near term, but if the US auto market recovers in the coming years, and the company can maintain market share similar to its current levels (which may be a stretch, considering the stigma of bankruptcy and the closure of four brands, one of which (Pontiac) still sold cars in large quantities), GM may be reporting large profits in the middle of the next decade.  The projections:

• 2009:  $17.5 billion loss
• 2010:  $1.3 billion loss
• 2011:  $3.0 billion profit
• 2014:  $7.8 billion

Since GM already reported a $9.6 billion loss in the first quarter of 2009, perhaps results are already turning around, with “only” another $8.0 billion left to lose for the rest of 2009.  After a certain point, the billions in losses just look like numbers, but to echo the quote attributed to Everett Dirksen, “a billion here, a billion there, and pretty soon you’re talking about real money.”

In a final piece of GM news, the company has taken a different approach to its dealer closures.  Chrysler provided less than 30 days’ notice to the 789 dealers on the closure list and no compensation or appeal process – and made the list of closing dealers public.  GM provided about 18 months’ notice to closing dealers, is including an appeal process, is providing limited compensation and inventory buy-backs, and has not published the list of closing dealers.  However, in Senate testimony earlier this week, Henderson was pressured to release the list of more than 1,500 GM dealers whose franchise agreements will not be renewed; he grudgingly agreed to provide the information.

Today, GM is negotiating with Congress as to whether it should do so, because ostensibly it is protecting the dealers who are closing by not revealing their identities.  (Remember, the closing GM dealers have to stay in business for a year and a half, not just a few weeks like the closing Chrysler dealers).  While as a nosy journalist I’d love to see as much disclosure as possible and would love to see the list, it’s hard to see how naming names will be beneficial to the terminating dealers.  It seems to me that if dealers wanted Congress (or the public) to be aware of their individual plights, they’d announce the news on their own.  The downside to the veil of secrecy is that unscrupulous dealers (shocking, I know, and I say that from the perspective of being the son of a used car dealer) could spread rumors of the demise of their competitors on the Internet and elsewhere, harming those competitors.

Nobody said that bankruptcy would be pretty, and it’s obviously not the bed of roses that some were hoping it would turn out to be.