GM Chairman Kent Kresa Is No Stranger to ‘Brink of Disaster’
By Edmond Lococo
March 31 (Bloomberg) -- Kent Kresa is stepping in as General Motors Corp.’s interim chairman as the company’s stock price slumps, demand for its products withers, and its survival is in doubt. He’s been there before.
Kresa retrieved Northrop Grumman Corp. from “the brink of disaster” as chief executive officer in the 1990s, Northrop director Victor Fazio said in an interview. Kresa invested in technology that saved the defense contractor after the B-2 bomber program was cut by more than 80 percent and regulators derailed a sale to Lockheed Martin Corp. in 1998, Fazio said.
“Kent came to his position as head of Northrop at a time of crisis,” Ronald Sugar, who succeeded Kresa as CEO of the Los Angeles-based contractor, said in an interview. “It was just about the time the Berlin Wall came down and the defense industry was facing enormous decline and consolidation. His leadership during that timeframe allowed Northrop to emerge as a very strong company.”
U.S. President Barack Obama’s auto taskforce named Kresa as GM’s interim non-executive chairman two days ago as it forced out Rick Wagoner as chairman and CEO. Kresa, 71, was already a member of GM’s board. Obama, in a speech yesterday, said Wagoner’s departure is “a recognition that it will take a new vision and new direction to create the GM of the future.”
GM fell 92 cents, or 25 percent, to $2.70 yesterday in New York Stock Exchange composite trading. The shares declined 86 percent in the past year.
Northrop’s B-2
Kresa, who according to Bloomberg data holds bachelor’s and master’s degrees from the Massachusetts Institute of Technology, joined Northrop in 1975 as a vice president and served as CEO from January 1990 through March 2003. Kresa joined GM’s board in October 2003 and wasn’t available for an interview yesterday, GM spokesman Steven Harris said in an e-mail.
Northrop got more than half of annual revenue from the B-2 Spirit stealth bomber when Kresa took charge in 1990. After the collapse of the Soviet Union, B-2 purchases were cut to just 20 planes from the 132 originally planned. He still more than quadrupled Northrop’s sales through $26 billion in acquisitions, buying 16 companies from 1994 to 2003.
“Kresa reinvented Northrop Grumman,” said Loren Thompson, an analyst at Lexington Institute, an Arlington, Virginia-based public policy research group. “It was an also-ran aircraft company in southern California. He turned it into a global leader in networks, sensors and information technology. It was a complete remake of the company’s product lines and culture.”
The experience showed Kresa is capable of completely redirecting a major corporation, Thompson said.
Speed Is Critical
Kresa will likely help steer GM toward alternative-energy fuels and technology investments, based on his record and interests at Northrop, said Jim McAleese, a defense industry consultant with McAleese & Associates in McLean, Virginia. “Speed will be of the essence” as he focuses on cost cuts, McAleese said.
“His whole track record is restructuring a damaged company to save it from bankruptcy,” said McAleese. “He was able to turn Northrop around and create shareholder value where the company could have gone into bankruptcy and the shareholders would have been slaughtered.”
GM probably turned to Kresa both because of his turnaround experience and his experience as a government contractor, said McAleese and Fazio, the Northrop director who represented California as a Democrat in Congress from 1978 to 1999.
Kresa “knows how Washington works” and how to deal with Congress, Fazio said. With GM seeking additional U.S. government assistance after an initial installment of $13.4 billion, Kresa can “clearly make a contribution” in Washington.
“Kent was very good at it and he feels very confident working in Washington,” said Fazio, who is also a senior adviser at law firm Akin Gump Strauss Hauer & Feld LLP. “He doesn’t have a lot of strong ideological predilections, so he can talk to anyone on either side of the aisle. He is exactly what you’d want when it comes to Washington.”
To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.
Last Updated: March 31, 2009 00:29 EDT |
