Do GM's Problems Start at the Top?

Does GM have a leadership problem?

The abrupt departure of General Motors' (NYSE: GM  ) global marketing chief, Joel Ewanick, on Sunday -- and the not-so-subtle suggestions, courtesy of the GM rumor mill, of gross misconduct that followed -- is a puzzling and unnerving development for GM shareholders.

Why? In part because there have been a lot of unexpected departures from GM lately. A few weeks back, GM Europe chief Karl-Friedrich Strasse -- long seen as a rising executive star -- was relieved of duty in a move that took the world by surprise. GM Europe's incoming design chief, the well-regarded David Lyon, left the company suddenly last week, with no explanation forthcoming. But again, the GM rumor mill hinted at some unspecified misconduct.

It's easy to write off Strasse as a victim of GM's ongoing troubles in Europe. As for the others, sudden exits by executives who screw up aren't exactly unheard-of in corporate America. But a streak of three raises questions, starting with this one:

Would you take a senior-level job at General Motors right now?

Frustration with the slow pace of change takes its toll
There are plenty of details that haven't yet surfaced, but some things have become clear. First and foremost, GM CEO Dan Akerson and his right-hand man, vice chairman Steve Girsky, are obviously unhappy with the pace of change at the General. And they're not afraid to express that impatience by making big, fast moves -- moves that must be sobering for those who remain.

GM does have much more work to do. It's true that many of Old GM's worst problems were addressed by its government-assisted bankruptcy, and good work has been done on many more since. GM is solidly profitable, it has plenty of cash, its latest products are excellent, and it has a slew of promising new products headed to market over the next couple of years. Its operation in China continues to be exemplary, and although market share at home has slipped lately, it continues to be the undisputed leader of the U.S. auto market.

Yet problems persist. GM Europe has lost billions in recent years, and much-needed changes have proven hard to make. Its U.S. dealers and sales organization still relies too heavily on "incentives" -- those cash-back and low-cost-financing deals -- to make sales. As a result, GM's margins are lower than most profitable automakers', a situation Akerson would urgently like to change.

But to change that, GM will need to improve its perception among consumers. That was supposed to be Ewanick's job, but now GM has no permanent marketing chief -- only an interim executive who will not be holding the job for the long term.

Likewise, Europe is bleeding money, but again, following Stracke's departure, interim leaders are steering the ship. Put simply, two of the roles most important to GM's near-term success are presently unfilled.

Does this suggest a leadership problem to you?

Is Akerson the solution to GM's woes -- or the problem?
I was hard on Akerson when he first took over as GM's CEO. An industry outsider, he didn't seem to have the "Detroit clue"; the nuances of the auto business seemed to escape him. Unlike Ford (NYSE: F  ) CEO Alan Mulally, another Detroit outsider, he didn't seem to be a quick study, and he seemed to lack Mulally's ability to rally the troops and drive consensus. Instead, hints emerged that he was short-tempered, too quick to make a decision, and hard-edged -- too much the Wall Street boss and not enough of a consensus-builder.

But Akerson impressed me recently: He shuffled GM's executive deck, promoting the people who had performed best to key roles. I was skeptical of some of these moves, but they look good now: CFO Dan Ammann has continued the good work done by his predecessor, Chris Liddell, in getting GM's long-messy finances under tight control; product chief Mary Barra has transformed the processes GM uses to develop new vehicles, saving billions and improving time to market; and North America chief Mark Reuss has delivered the bulk of GM's profits, even as it awaits much-needed new products.

Ewanick, the marketing whiz who put Hyundai (NASDAQOTH: HYMTF.PK) on U.S. consumers' radar last decade, was thought to be another success. While his style rubbed some the wrong way and a few of his decisions were jarring, he worked hard to consolidate far-flung marketing programs and disparate messaging initiatives into a cohesive global whole. Those changes are expected to save GM some $2 billion over the next five years, and should -- theoretically, at least -- make for better marketing.

But now Ewanick is gone, with GM's slipping U.S. market share likely part of the reason. And so is Strasse, a onetime rising star who was charged with fixing Opel -- and then pushed aside before the job was done. Both were doomed in surprise moves that arguably came before either had a chance to finish the job he had started.

Would you work for this guy?
As a GM shareholder, here's my biggest concern right now: GM already suffers from limits on executive compensation imposed as a lingering condition of its bailout. That hasn't helped its efforts to recruit top executive talent. These latest abrupt moves are likely to make things much worse. (In fact, if I were a GM executive, I might be thinking about polishing up my resume; a job at Ford or Toyota may look pretty appealing right about now.)

More than anything else, GM needs great leadership that can reach and motivate all corners of this giant global organization. This company has everything it needs to be the global leader -- if only it could get out of its own way for more than a few months at a time. An approach like Ford's, combined with GM's global scale and talent, would be unbeatable.

I know Akerson recognizes this, and I know he understands the obstacles in GM's path as few of his predecessors have. But is he too impatient and heavy-handed to deliver? I'm starting to have my doubts.

GM's stock is currently hovering near its post-bankruptcy low. But if Akerson can harness GM's potential, it could have significant upside in coming months as new products hit showrooms and improvements continue around the world. However, investors need to stay attuned to fluctuating demand and the ability of automakers like GM and Ford to respond in unison. For starters, one of our top equity analysts has compiled a premium research report with in-depth analysis on Ford's competitive edge. To find out what could propel Ford down the road, get instant access to this premium report now.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (5)

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  • Report this Comment On August 01, 2012, at 8:54 AM, StopPrintinMoney wrote:

    GM can waste all the money they want, they will be bailed out again if necessarily. Ahhhh ... Private profits, socialized losses - ain't that beautiful?

  • Report this Comment On August 01, 2012, at 1:12 PM, ExGMEx wrote:

    As someone involved in the auto industry,as well as other industries , I might suggest that in the auto industry your financials reflect mostly decisions made 4 years previously in terms of product choices.

    In picking now two CEO's that are from short turn industries, GM is saddled with people trying to learn the industry and who's instincts will create more backwash than results. This should be contrasted with Ford's choice of CEO from Boeing who has

    experience in long lead planning development...

    see the difference!! This difference can be traced back to the choice of Mr Rattner by the administration who had no perspective on the problems that needed to be addressed, beyond lowering structural costs which was done unevenly with a UAW bias.... Hopefully GM's current CEO will listen and learn for the sake of the company and country...

  • Report this Comment On August 01, 2012, at 3:46 PM, TMFMarlowe wrote:

    @ExGMEx: That's a *very* good point. I often remind readers that new vehicle programs take 28-36 months even when everything goes right, which it doesn't always as we both know, but it's useful to remember that a CEO coming in without that perspective will need to adjust expectations.

    One of the things I say over and over lately is that GM is treading water, to some extent, waiting for new product -- because product development got cut down to almost nothing during the company's tailspin and bankruptcy. Meanwhile, Ford was able to invest, and has a great showroom to show for it now.

    But that means GM isn't going to be competing with Ford or Toyota or etc on a really fair footing for at least another year yet, maybe two. There's a reason GM pickup sales have fallen while Ford's have held their ground, to take just one example... Ford's products were refreshed more recently, and feel more up-to-date. Holding the marketing guys responsible when that competitive deficiency shows up in sales numbers... isn't really fair.

    Thanks for reading.

    John Rosevear

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