Posted by: David Welch on December 21
Maybe it’s not so hard to get talent to move to Detroit and work for General Motors. The auto giant hired erstwhile Microsoft CFO Christopher Liddell, 51, as its CFO today, as Bloomberg first reported in this story. It was the latest move by Chairman and CEO Ed Whitacre, who has been running the company since GM’s board ousted CEO Fritz Henderson on Dec. 2. Liddell may have been on his way out at Microsoft, but his resume is pretty stacked, which hints that GM may be able to get some good talent in to the C-suite.
Want to know the best thing about his resume? It doesn’t say General Motors New York Treasury Office on it. GM is supposed to have the best finance department in the land. The company has plucked top graduates from Harvard Business School for years. The people managing GM’s pension funds have shown a great knack for beating the market, even in the worst of times.
But as business strategists, GM’s money men have been bunglers, says longtime GM watcher Maryann Keller. Roger Smith launched Saturn and bought the first 50% of Saab, she noted. Both plays overextended GM’s limited cash flow, hurt the other brands and ended disastrously. The late Roger Smith also takes a lot of blame for poor product decisions and bad quality. His tenure atop GM is regarded as disastrous. Jack Smith, who ran GM though the ‘90s, spent billions paying dividends to Wall Street and buying shares back even as the company was spending too little on products and marketing. Rick Wagoner, who was ousted earlier this year by the Treasury Department, continued that tactic by paying more than $1 billion a year in dividends while borrowing money to shore up the pension fund and cutting expenditures on new models. He also blew about $4.5 billion to get into and then out of a failed investment in Italy’s Fiat Auto. And let’s not forget that under Wagoner, GM used its GMAC lending business to go headlong into subprime mortgages, which has cost the financier billions in losses. Anyone remember Ditech? That came from GMAC’s mortgage unit.
If that’s not enough, Wagoner also went on a discounting binge to keep the factories running when car sales were going soft. Rather than take on the union and try to manage the paid-layoff clause that just-about guaranteed employment, he turned to rebates, 0% financing and cheap leases. That kept cash flowing in, but it burned up profits and turned GM’s brands into bargain houses. It’s no wonder Steve Rattner, the former chief of the Treasury Department’s Auto Task Force, said GM had the worst management he had ever seen.
It’s also no wonder that Whitacre wants new blood and new thinking. Sure there are many talented people at GM. Car guys like Bob Lutz and Mark Reuss know what car enthusiasts want and how to make those cars. But when it comes to managing the finance department, Whitacre may be smart to get a fresh start.
Posted by: David Welch on December 18
Not far from my childhood home in Syracuse, N.Y. lives a family I have always called the “Saab people.” I never knew them but for as long as I can remember, they had nothing but Saabs in the driveway. The last time I drove by, they still had an old Saab 9000 alongside a 9-3 and a 9-5. I’m sure those Swedish-engineering die-hards are lamenting the news from General Motors today that Saab will follow Pontiac, Saturn and Oldsmobile to the auto industry’s scrap heap.
The problem for Saab was that there were too few Saab people with that kind of loyalty. In the past month, GM had two bidders pull out of talks to buy the 72-year-old company, the latest being Spyker Cars NV of Holland, Bloomberg first reported today. Officially, GM and Spyker said that there were too many issues that couldn’t be resolved. But let’s face it, there wasn’t much of a business case for Saab.
The company’s sales fell 61% this year. Saab wouldn’t have sold 100,000 cars around the globe. In Europe, the competition for sporty premium cars from BMW, Mercedes, and a slew of others was too tough. Combine Swedish labor rates with the weak dollar, and Saab's prices were higher than the brand could command from consumers. Selling cars to Americans was just a tough proposition. Saab sold just over 7,000 cars in the U.S. through November.
Another big problem, of course, is that GM didn’t feed the brand with enough products nor did it make an earnest attempt to market its cars. Saab was a niche brand for Northeastern college professors and other educated affluent types. Without a bigger lineup and a real advertising budget, growing beyond its core fans was never going to happen. One has to wonder what Saab could have been had GM not bought it. Maybe another parent could have given it a few more cars to sell.
It would have been tough for anyone. But the GM that owned Saab from 1990—when the auto giant bought its first 50% of of the company—until now didn’t have the means to support. GM probably didn’t have the product and brand smarts for most of that period to guide it either. So long, Saab. I know one family that will really miss you.
Posted by: David Welch on December 16
In less than two years, Toyota plans to sell a plug-in version of its popular Prius hybrid to consumers. The company will want to fend off challenges to its green crown, which will be aplenty by 2011. Nissan will be selling its Leaf electric car. General Motors will have the Volt, to name a couple of them.
But will there be enough buyers for all of these high-tech rides? Toyota will start selling the Prius in test batches next year but will offer the car to consumers in 2011. The company expects to sell tens of thousands of the car. GM has similar ambitions for the Volt and Nissan expects the Leaf to garner a lot of interest. On one hand, Prius buyers have a lot more cash than people who typically buy $25,000 cars. The average Prius owner makes $84,000 a year and half of them earn more than $100,000 annually.
On the other, advanced cars like plug-in hybrids and pure electric vehicles will be expensive. The National Research Council put out a report on Dec. 14 saying that plug-ins could be as much as $18,000 more than conventional car. If fuel stays under $4 a gallon in the U.S., car buyers won’t get a payback on the added cost, not even close.
Of course, there will be plenty of buyers who want to be green, make a political statement or test out the latest technology. But it probably won’t be enough for every carmaker to hit their targets on sales of these advanced cars. What they really want to do is make their own statement. When these cars hit the market, every carmaker will be flogging their technology to make a case that they have the killer app. While all of them may be impressive, each will have short comings.
The Volt may get the most pure electric range without needing to recharge, but it could cost more than a Prius plug-in. The Prius may have a price advantage, but won’t be as purely green as a Leaf. The Leaf won’t go farther than 100 miles without needing to recharge. The upshot: It will be a nasty sales battle and profits will be tough to come by.
Posted by: David Welch on December 11
Before General Motors Chairman and CEO Ed Whitacre announced the shakeup in the company’s executive ranks on Dec. 4, the rumor mill was cranking out all kinds of possibilities about the future of Vice Chairman Bob Lutz. Some said he would quit. Others said that he would become CEO.
The latter was never going to happen, not with a board of directors that wants a change of pace and a new look at the company. At the same time, the board would have created even more problems if the company ousted Lutz. GM’s cars have gotten much better under Lutz. Styling is more aggressive. Inside, they have much nicer cabins than GM has ever put out. Without Lutz to barrel through the bureaucracy or do an end run around it, much of that would never happened.
Will he have much impact in his new role as vice chairman and advisor? Lutz says he believes he will even though he has no budget and no direct reports. His powers of persuasion and ability to get Whitacre to listen to him on key product decisions will dictate how much influence Lutz will have. If Whitacre is wise, he will listen to Lutz. Whitacre is a very successful CEO in his own right, but he confesses that he doesn’t know much about cars. Lutz does.
If Lutz doesn’t have much of an impact, he will leave pretty soon. That would be a shame. Whoever Whitacre and the board hire as a new CEO—and even if “Big Ed” keeps the job himself—GM will need a car guy to shepherd the good designs from the sketch pads to dealer showrooms. Even at 77, Lutz can make a difference.
Posted by: David Welch on December 09
Here goes the merry-go-round. Two more executives are heading out at General Motors. Chevrolet General Manager W.W. Brent Dewar is quitting his job, the company said. He will be replaced by longtime Chevy hand James Campbell. Separately, a management source said that Buick-GMC general manager Michael Richards is out. What does it all mean? For starters, GM better start doing some hiring, and fast. With the CEO out, the CFO soon to be replaced and one brand manager job open, GM needs to start stabilizing its management ranks. This is a pivotal point for a company that is launching new models and trying to patch up tattered brands.
With Dewar, GM loses a controversial figure within the company. Some GM managers thought he was intimidating and arrogant. Others thought he was brilliant. But he always exceeded objectives, according to one executive who oversaw Dewar’s work. To his credit, Dewar was giving other advertising agencies a crack at Chevy ad work. GM’s vitally important brand has relied on Campbell Ewald for decades. Vice Chairman Bob Lutz started bidding out the ad work, but Dewar played a key role in picking agencies for Chevy. That will fall in part on Campbell.
A source close to Dewar says that he was tight with Henderson and was dismayed at his firing. The two worked together in Brazil. Dewar did not return a phone call and an email.
In any case, Chairman and CEO Ed Whitacre has already shifted executives around and more moves are coming. Even if Whitacre finds a CEO to replace Fritz Henderson--who was ousted as CEO last week, within the next six months--there are still a few key jobs to fill. His selections will be important, and closely watched.
