General Motors' Shocking Choice for CEO

To borrow a phrase, I was shocked, shocked to hear on Monday morning that General Motors' interim CEO Ed Whitacre has decided that the best possible candidate for the company's permanent CEO spot is ... Ed Whitacre.

What is this, the Dick Cheney school of candidate selection?

To be fair, GM could have done worse. Selecting another company lifer like Fritz Henderson would have been a lot worse, for instance. But it wasn't all that long ago that Whitacre and GM promised us a global search for the best possible candidate, the one person who could be to GM's hidebound culture what Alan Mulally has been to Ford's (NYSE: F  ) .

And Ed Whitacre is the guy they came up with?

Why I'm not actually surprised
It may actually be true that Whitacre, the former AT&T (NYSE: T  ) CEO who was installed as GM's chairman by the Obama administration after the company's government-backed trip through bankruptcy court last year, is the best candidate for the job.

Or more to the point, the best candidate who would actually take the job.

See, this wasn't exactly a routine executive search. First, the job itself -- turning around an enormous, iconic, but badly wounded industrial behemoth -- is going to be incredibly difficult. It's one thing to relish a challenge, it's another entirely to take on an extremely visible job with a real probability of failure.

Second, as we all know, GM's largest shareholder at the moment is the U.S. government, thanks to the debt-to-equity provisions of the $50 billion or so in loans that kept the company afloat last year. Those loans came with some awkward strings, including limits on executive compensation that were widely expected to complicate GM's search.

Long story short, we're talking about an enormous, grueling job with a high risk of epic public failure -- and lousy pay.

Looked at through that lens, this might actually be a pretty good choice.

Why it might be a good choice
The transformation set in motion by Alan Mulally and his team at Ford has to be the model for GM's next few years, and I'm sure it's in the forefront of the minds of everyone on GM's board, including Whitacre.

Like Mulally, Whitacre comes with an outsider's perspective, experience in transforming huge organizations, and the personality and confidence to drive dramatic change. But unlike Mulally, who came to Ford from Boeing (NYSE: BA  ) , Whitacre's experience isn't in autos or an arguably similar industry, and the lack of automotive experience on GM's government-created board has been a question mark.

Still, Whitacre's moves so far have been promising. Consider:

  • Keeping Opel. Henderson had put Opel, GM's European division, on the block as part of a brand-shedding effort. Whitacre reversed that -- a good move, since Opel is the center of GM's small-car expertise. Just as Ford has integrated its European division more tightly with North America, bringing excellent Euro-designed cars to our shores, Opel will do the same for GM.
  • Moving to shed or close Saab. Saabs have historically had many virtues, but the brand was nearing invisibility in the U.S., and closing it or dumping it is the right thing to do.
  • Moving to repay debt. Much of the government's loan to GM was converted to equity, but $6.7 billion of debt remains on the automaker's balance sheets and is set to mature in 2015. Whitacre recently said that he expects to pay all of that back by June of this year. I've knocked GM's rush to pay that debt in the past, but as the economy and the company's condition improve, I'm more inclined to see it as a good move. With Whitacre now saying that GM may be profitable by the end of this year, paying back the taxpayers might turn out to be a great and affordable PR move.

Still interim, just a longer interim
Whitacre is 68, and is obviously not going to hold this job indefinitely. GM recently hired 51-year-old Chris Liddell away from Microsoft (Nasdaq: MSFT  ) to be GM's CFO, and he is widely seen as Whitacre's likely successor. Liddell, an intense amateur athlete from New Zealand who originally trained as an engineer, may well be the real best candidate for the job of running a transformed GM -- eventually.

I suspect that the board's thinking is that installing Whitacre as non-interim CEO is a way to get Liddell a couple of years of seasoning under a veteran executive who won't resist leaving when the time comes. That's all well and good, but Ford, Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) are all moving forward very rapidly right now. Will a still-restructuring Whitacre-led GM be able to keep up?

Once again, we'll just have to wait and see.

Fool contributor John Rosevear owns shares of Ford. Microsoft is a Motley Fool Inside Value pick. Ford Motor is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. You can try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2010, at 6:51 PM, Varchild2008 wrote:

    It's not the C.E.O. it's the business model...so who cares?

  • Report this Comment On January 25, 2010, at 8:17 PM, TMFMarlowe wrote:

    The business model? What, manufacturing cars and trucks for a retail market? Care to expound?

    John Rosevear

  • Report this Comment On January 26, 2010, at 12:40 AM, gary923 wrote:

    CEO Ed Whitacre may be well spoken, but for GM to be sucsessful they must provide transporation that people are willing to buy.

  • Report this Comment On January 26, 2010, at 7:05 AM, TMFMarlowe wrote:

    The story, stripped to its essence, is pretty simple: GM's costs got too high and their product quality slipped, and competitors stepped in and ate their lunch. Arguing over whose "fault" it was isn't relevant because none of the prime suspects work for the company (or the union) anymore, and the truth is that a whole lot of people over several decades took their eyes off the ball.

    The net effect of bankruptcy was to lower a lot of their costs. That's helpful. The question is, where do they go from here? That's what I'm interested in.

    Thanks for reading.

    John Rosevear

  • Report this Comment On January 26, 2010, at 9:24 AM, BobMichigan wrote:

    The fact is, there is no risk to this job at all. All the heavy lifting, breaking the union (update for all you no-nothings out there, new workers get $15 an hour, don't get me started on that whole ficticious $73 an hour thing), shutting down excess brands and cutting dealerships, is done.

    If the economy improves, Whoever is in the job is a hero. If it does not and the company fails, who can blame the poor guy who was stuck with an impossible job? Besides, at his age what is he looking for in his "next" job?

    No, this is all an excercise in Whitacre's ego inflation program. I can't wait until he has the REncen named after him, our saviour!

  • Report this Comment On January 26, 2010, at 10:00 AM, wyrfox wrote:

    I agree this was not the time to change the coach, but perhaps it is time to look deep into player personnel and cut all non-performers. I have worked in union and non-union shops and both systems can be very productive - it all depends on middle management. GM's corporate style is the problem -visit Flint, Michigan to see what 60 years of management excess builds and leaves behind. If Whitacre's job is to coach the transitions he will need to convince the workforce that they can't just wait till he's gone. If he can flatten the organization, bring lasting change, and keep congress at bay he will retire to the big pay lecture circuit.

  • Report this Comment On January 26, 2010, at 10:58 AM, TMFMarlowe wrote:

    wyrfox, I think that transformation is already well underway -- getting rid of Henderson was a pretty clear sign. Can they follow it through, and can they get it done without being left way behind by the competition?

    Thanks for reading.

    John Rosevear

  • Report this Comment On January 27, 2010, at 12:07 AM, jim244a wrote:

    GM seems to be moving in the right direction. They have driven down their labor costs and hopefully eliminated some of the outrageous union work rules and are starting to show some decent cars. They may still have some dead wood internally which needs to be shed, the sooner the better. I for one am rooting for them as I would like to see another American company regain their footing in this industry.

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