GM’s New Chairman Knows Nothing About Cars – Should We Worry?
By Chris Haak
General Motors will have a new Chairman of the Board when it exits Chapter 11 bankruptcy protection, which will likely occur sometime after August 31. Former Chairman and CEO Rick Wagoner held both roles during the last several years of his tenure with the automaker, but with Wagoner’s exit from the executive suite, his job was split into two – Fritz Henderson took over as President and CEO, and Kent Kresa (already a board member) took over as Interim Chairman. The new Chairman will be former AT&T Chairman and CEO Edward E. Whitacre, Jr.
The 67-year old Whitacre, who retired from AT&T in 2007 after a 43-year career and with a huge retirement package (Bloomberg reports that it was worth $158.5 million), is coming out of retirement “as a public service,” in his own words. Many business analysts have lauded Whitacre’s selection because he will bring a fresh outsider’s perspective on GM’s myriad problems – and in particularits insular corporate culture, which frowns upon dissent and loves the status quo, even if that status quo has led us to where we are today, where the government owns 60% of a once-proud American institution.
Still other auto industry analysts – the “car guys,” mostly – are more than a little alarmed by Whitacre’s confession earlier this week that he didn’t “know anything about cars.” He went on to say, “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”
He’s right. Although GM dropped the ball on the product side more than its share of times (I couldn’t believe what I was reading when I saw Ed Welburn call the Aztek a “misstep” on the GM-run FastLane blog; quite a remarkable, yet accurate, bit of truth from an executive), in the last several years, the product has been far less of a problem than the actual business. Yes, there were certainly external factors that affected GM’s health, but the economy’s self-destruction over the previous two years has paled in comparison to GM’s self-destruction of the past three decades. In the interest of saving money, GM has time and again cut corners that came back years later (sometimes only months later) to bite the company on the ass and cost it more money than it would have had the vehicle/part been properly engineered in the first place.
An obvious parallel to the situation that Ed Whitacre finds himself in is what Ford CEO Alan Mulally saw when Ford recruited him away from a long and successful career at Boeing, where he was CEO of Boeing Commercial Airplanes. Aside from both being outsiders to the auto industry, both men were trained as engineers who worked their way to top jobs at their previous organizations. Mulally freely admitted at the time of his hire that he was not a “car guy” and that he knew very little about automobiles. He drove a Lexus LS and was impressed by Toyota’s production methods and the quality of the automobile that he purchased from them. However, he was also a very good manager. Mulally has proven over the past two years that he understands what it takes to fix a sick company: a focus on product, a focus on accountability, and a focus on reinventing Ford’s culture. Mulallywasn’t afraid to tear apart the fiefdoms that were consuming Ford from the inside and wasting billions of dollars; “One Ford” sounds like a simple idea, but it’s not an easy one to execute, and for Ford, it seems to be so far, so good.
The difference between Mulally’s experience and Whitacre’s experience is that Alan Mulallyhad years of experience in a manufacturing-based company, while AT&T is, of course, more of a service provider. Airplanes are obviously considerably more expensive and more complex than automobiles, but managing the enterprises requires similar skill sets. Both Mulally and Whitacre would have had to manage union-represented workforces, so that aspect of comparison is probably as wash. And yet, AT&T – as a company that is selling services rather than goods – had to maintain a focus on marketing, to keep the company’s name in the forefront of consumers’ minds.
GM – a company that has gradually fallen off more and more buyers’ shopping lists over the past few decades – does need to have a focus on marketing. And by ‘marketing,’ I don’t mean concocting the latest incentive scheme to entice buyers into the showroom. Let GM’s products speak for themselves, don’t let their prices do the talking. For too long, GM buyers have been conditioned to wait for the best deal. Changes like that aren’t going to happen overnight, but they need to happen. When I bought my Cadillac CTS last summer, although I really liked the car, I have to be honest that if a similarly-equipped BMW 535i was the same price, I would have jumped on the BMW in a second. Even the MSRPs are tens of thousands of dollars apart, but the fact that I got employee pricing, a rebate, and could use $3,500 in GM Card earnings made the Cadillac to me (who can’t afford a new 5-series) a no-brainer. But I also wouldn’t have considered the Cadillac at MSRP, and certainly not at 5-series prices.
I believe that Mr. Whitacre was correct in that he said that management is management, no matter what company he’s talking about. Building, marketing, and selling automobiles is quite a bit different from marketing and selling telecommunication services, but an intelligent businessperson who understands fundamental business concepts- like the fact that you need to take more money in than you are spending, and that you need to look ahead to where the future is heading rather than building for the present (or worse, the past), should do fine. If he’s also able to reinvent GM’s culture the way Alan Mulally appears to have done at Ford, then he might just be the right guy for the job.
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