GM's Latest Savior
So unknown is new General Motors CEO Daniel Akerson in the auto industry that his name was repeatedly mispronounced in television segments Thursday—for the record, it’s “Ak-er-son,” not “Acre-son.” But Akerson’s status as a Detroit outsider is precisely the reason he was tapped to succeed Ed Whitacre, who led the carmaker from bankruptcy to a $1.3 billion second-quarter profit.
Whitacre made the surprising announcement that Akerson would take over as CEO, effective September 1, in conjunction with GM’s earnings report Thursday, which was no less shocking than the change at the top: The automaker recorded revenue of $33.2 billion, cash flow of $2.8 billion, and cash and cash equivalents totaling $32.5 billion. It was only last year, after all, that GM received a $50 billion government bailout. (In April, GM repaid $6.7 billion of the loan, and the rest was converted into an equity stake of just less than 61 percent that is owned by U.S. taxpayers.)
His ascension appears to be a way of saying that the carmaker isn’t just looking to survive, but to thrive.
But while Akerson may be an unknown quantity in Detroit, he is well-known to Whitacre. As the former CEO of AT&T, Whitacre saw first-hand how Akerson built Nextel Communications from a company with less than $200 million in revenue before his arrival in 1996 to more than $3 billion by the time of his departure three years later, primarily through innovations in the then-nascent area of wireless communications. (In 2005, Nextel agreed to merge with Sprint in a $35 billion deal.) The parallels between where Nextel was when Akerson took over and where GM is now are clear, and when looked at through that lens his ascension appears to be Whitacre’s way of saying that the carmaker isn’t just looking to survive, but to thrive.
“Nextel was something of an undervalued asset that wasn’t terribly well-regarded when Akerson got involved,” says Tim Farrar, president of Telecom, Media & Finance Associates. “To some extent, the same rehabilitation job needs to be done on GM.”
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• Peter Beinart: Obama Saved DetroitGM has made significant strides since emerging from bankruptcy, and not just on the financial side, where the $1.3 billion in second-quarter profit marked its second consecutive quarterly profit, and its largest in six years. (The carmaker is expected to file for an initial public offering as early as today.) According to Rebecca Lindland, a director at IHS Automotive, morale is also up at the company as Whitacre’s narrowing of the vehicle fleet has got employees—and consumers—excited about its cars again. Led by strong sales of such models as the Chevy Equinox, GM has increased its U.S. market share by 13 percent so far this year.
“GM products have certainly gotten better,” Lindland says. “There are multiple products from the lineup that I would purchase now, and I never would have said that a few years ago.”
Not unlike the economy in general, however, there’s a danger that GM’s recovery could be a false one, with its recent success leading to a temptation to fall back on old ways of thinking. (Whitacre, 68, only served as GM’s CEO for 10 months following the leadership of Rick Wagoner and Fritz Henderson, two GM lifers.) In many ways, elevating Akerson, who is a managing director at private equity firm The Carlyle Group and a GM board member, is a hedge against that.
“Nextel was by definition an outside-the-box, innovative company,” says Scott Cleland, president of telecommunications firm Precursor Group LLC. “It was built in a completely nontraditional way. The takeaway from [Akerson’s promotion] is that GM still needs fresh thinking and a leader who isn’t afraid to tackle past sacred cows.”
Already the butt of jokes for being an American automaker, GM’s brand was further tainted by its need for a government rescue, with Whitacre himself noting that the company had become mockingly known as “Government Motors.” One of Akerson’s first mandates will be to reestablish GM’s image as a brand worth consumers’ money. To do that, he just might revisit his Nextel playbook.
“Nextel defined itself as a blue-collar company for the everyday worker,” Farrar says. “It wasn’t a top brand, but he positioned it as a solution for the average guy. That’s similar to what GM’s position is.”
Only time will tell if Akerson proves to be the right choice to complete GM’s turnaround. But wouldn’t it be great if GM jokes had nothing to do with its cars or bankruptcy and instead began with something along the lines of, “How many telecommunications executives does it take to turn around a carmaker?” Now that’s one we’d all like to hear.
Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.