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12.01.09

Behind GM's Shock Shakeup

GM Chief Fritz Henderson's ouster at the hands of the auto giant’s government-installed board was long overdue, says Paul Ingrassia. Now the board needs to bring in an outsider to bring real change to the company.

It’s a shock but no surprise. That’s the best initial reaction to Tuesday’s ouster of General Motors CEO Frederick “Fritz” Henderson, which comes just 10 months after his predecessor, Rick Wagoner, got the boot.

Wagoner had been defended by GM’s board of directors, dubbed the “board of bystanders” by some former company executives, until the company was on the brink of collapse. Henderson’s departure, by contrast, comes at the hands of the new board installed by the company’s major shareholder, the United States government. Although several GM directors are holdovers from the old board, the new guys are calling the shots.

Perhaps most important, Henderson missed his chance to show clearly that he was shaking up GM’s famously hidebound culture.

Tops among them is Ed Whitacre Jr., former chairman of AT&T, who takes over as interim CEO. One of his more quotable remarks since becoming chairman this year was “I don’t know anything about cars.” He’d better learn fast, or find somebody who does know.

Despite the shock of the timing, the signs that Henderson was on thin ice had been building for several months. Recently the board overruled his effort to sell the company’s European operations, including the Opel division in Germany, to a Canadian company backed by Russian financing. Whitacre’s public statements increasingly seemed at odds with Henderson’s on several critical issues.

One was the possibility that GM might float an initial stock offering next year, which would have been a political victory for the Obama administration before next year’s midterm elections. Henderson was dangling that possibility, but three weeks ago Whitacre threw cold water on the idea. He also suggested in media interviews that the board believed management’s sales forecasts next year were too optimistic. Over-optimistic forecasts, coupled with underperformance, have long been a GM bugaboo.

Perhaps most important, Henderson missed his chance to show clearly that he was shaking up GM’s famously hidebound culture. Not one senior executive in his management team comes from outside General Motors. All are GM lifers, some of them Wagoner’s people whose responsibilities were shifted, others underlings promoted to fill the shoes of their bosses.

Finding a new CEO won’t be easy. It evokes the old Groucho Marx joke about not wanting to join any club that would be willing to have him as a member. At least Whitacre and his board have the cross-town example of Ford, whose hiring of Alan Mulally from Boeing three years ago has been an unqualified success. The new chief executive of General Motors, it is clear, will be somebody from outside the company, and perhaps, like Mulally, from outside the auto industry entirely. The move will be way overdue.

Veteran automotive writer Paul Ingrassia won a Pulitzer Prize for his General Motors coverage for The Wall Street Journal in 1993. His book Crash Course: The American Automobile Industry's Road From Glory to Disaster will be published by Random House next month.