With Bankruptcy Behind It, GM Focuses on a Culture Change
By Peter Whoriskey
Washington Post Staff Writer
Saturday, July 11, 2009
General Motors emerged from bankruptcy yesterday, with chief executive Fritz Henderson promising that the fallen corporate giant will be revived and that "business as usual is over."
The announcement signaled the substantial completion of one of the largest bankruptcies in U.S. history and the next step in what has become a landmark government bailout.
The new GM will have fewer brands, fewer plants and fewer workers. The number of U.S. executives will be cut by 35 percent. But as important as this shrinking, Henderson said, is the need to transform the automaker's culture, long criticized as insular and sluggish. Once the world's largest automaker, GM has been losing market share for decades.
"It is a new era, and everyone associated with the company must realize this and be prepared to change, and fast," Henderson said.
Formed by the sale of most of the old company's assets, the new GM is an anomaly among American businesses because most of it is owned by the U.S. and Canadian governments. The U.S. Treasury owns 60.8 percent of the new company's common stock, the UAW retiree health trust has 17.5 percent and the governments of Canada and Ontario own 11.7 percent.
Henderson said the company would seek to repay the U.S. investment, but he stopped short of promising that taxpayers would recover all of the $50 billion they put into the company. The company's stock value would have to rise to unprecedented levels for the United States to break even on its investment.
Company officials yesterday seized on the company's emergence from 40 days in bankruptcy to advertise efforts to restart the failed automaker.
GM will limit its key executive committee to eight people to speed decision-making. It has lured former executive Bob Lutz, a well-regarded industry veteran, out of retirement to lead design, brands and advertising. It hopes to experiment with auctioning cars on eBay. And it is launching a Web site, "Tell Fritz," that will allow consumers to send their comments to company executives.
Moreover, Henderson said he would seek to shake the company free of its complacency, vowing to aim for being more than just competitive with rivals.
"Going forward, our objective . . . is to create products that consumers can judge as best in class," he said.
Even so, the business challenges facing GM are vast. To turn the company around, Henderson and his team must reverse the momentum of a decades-long slide.
GM once had a dominant share in the U.S. auto market of more than 50 percent, but that eroded over the years to below 20 percent as the company's reputation for quality declined. Today, many people, particularly on the nation's coasts, are reluctant to buy a GM or any American car.
For the most part, the executives creating the "new" GM were also at helm of its failed predecessor, and skeptics have argued that, as a result, the company is unlikely to undergo the radical reform it needs.
President Obama's autos team forced former chief executive G. Richard Wagoner Jr. to resign, but he was replaced by Henderson, who is steeped in GM culture. Henderson's father was a GM sales executive, his first car was a 1969 Buick Skylark, and like many GM executives, he has spent nearly his entire career at the company.
In response to concerns about the makeup of the executive roster, Henderson said he's pointed out to his leadership team that one definition of insanity is doing the same things over and over again and expecting different results.
"In the end, we simply have to prove ourselves," he said.
He said the company is open to hiring outsiders into its senior ranks. To do so, however, it must wait until the Obama administration's "compensation czar" sets standards for their pay packages.
After the government chose Henderson as the company's chief executive this spring, it was not clear how long he would remain at the helm. But yesterday Edward E. Whitacre Jr., the former AT&T executive who was chosen by the government's auto task force to be the company's new chairman, showed his support.
"I'm a big believer in strong leadership," Whitacre said. "We have that in Fritz and in this top management team."
The new GM will have only four core brands: Chevrolet, Cadillac, Buick and GMC. By the end of 2011, the company plans to operate 34 plants, down from 47 in 2008. Its U.S. employment is slated to shrink from about 91,000 to about 64,000 by the end of this year. The number of dealers will shrink from 6,000 to 3,600 by the end of the year as well.
"I know most Americans want this company to succeed," Whitacre said.
Critics of the bailout and some of GM's creditors have said that the company should have been allowed to fail.
Rep. Jeb Hensarling (R-Tex.) dismissed the company's boasts that it had completed the bankruptcy sale in far less time than many experts had predicted.
It is "amazing how fast a company can emerge from Chapter 11 when you inject $40 billion of involuntary taxpayer capital into the process," Hensarling said in a statement yesterday.
But U.S. Bankruptcy Judge Robert E. Gerber, who approved the sale, wrote in a July 7 ruling that a liquidation would be "staggering."
The case "raises the specter of systemic failure throughout the North American auto industry," the judge wrote. "I find it hardly surprising that the U.S., Canadian and Ontario governments would not stand idly by and allow those consequences to happen." |
