GM fires CEO Henderson. The board wants an outsider.

Posted by: David Welch on December 1, 2009

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The new General Motors Board has struck. CEO Fritz Henderson is out after six months on the job. Now the commentariat will start questioning whether it’s a fair decision. And really, it wasn’t. He had just three months to prove to the new board, which is led by former AT&T Chairman Ed Whitacre and a group of directors appointed mostly by the U.S. Treasury, that he’s the guy. In his three months since the board took over, he did stabilize market share and reduced losses significantly.

But this is one of those cases where deserve has got nothing to do with it. Henderson had to post lightning quick results to show a new board of outsiders—most of whom have a low opinion of GM—that a 25-year veteran of the company could change it quickly. He also suffers from the fact that he’s a legacy executive. The new board inherited Henderson. He’s not their guy. If they interview and select a new CEO, then the board will want to make sure that person succeeds. If he or she does, they’d look smart for making the hire, points out Michael Robinet, a vice president of auto research firm CSM Worldwide.

So why was he ousted? As my new colleagues and I wrote on Bloomberg, he failed his 100-day test. One GM executive told me that the company beat every metric in its viability plan, which was approved by Treasury. But Whitacre has said in the past that the viability plan doesn’t go fast enough. He wanted more. Whitacre also wanted to see proof that Henderson could change the culture. You’d have to give him a year to see those results.

Other GM executives have told me that GM directors Daniel Akerson and David Bonderman—both from private equity—and former Wall Street analyst Steve Girsky have been very tough on Henderson and aggressive with their questioning, especially the former two. They were a vocal minority who helped move the board toward an outsider. They needed to broom Henderson to bring one in.

Then there was Opel. One long-time GM executive told me that Henderson wanted to sell GM’s long-suffering Opel unit in Europe. He thought Opel’s cash drain and problems will be too much of a distraction for GM at a time when it is trying to repair the U.S. business and mind its growing overseas operations. But the board, led by Girsky, Bonderman and Ackerman, wanted to keep it. They figured that selling it off would leave GM weak in a big market like Europe. Plus, the board was dismayed that Henderson didn’t get more than the $750 million that parts maker Magna was going to pay for a majority stake in Opel. The disagreement cost Henderson plenty of political capital.

It didn’t help that Henderson didn’t have a big juicy sound bite of good news, like say, Ford’s surprise $1 billion profit, to make him and the new board look smart. All he could say was that GM was making progress. Now-deposed GM CEO Rick Wagoner always talked about progress, but rarely victories. Henderson’s early results looked like a nicer version of the same old.

The bottom line: GM’s board decided that they simply wanted someone else, an outsider like Ford’s Alan Mulally to energize insiders and show America that there really is a new GM. They also want someone who will change the culture and set up a tougher system of accountability, says one GM executive briefed on the board’s thinking.

The board has defintely accomplished one thing that Henderson never could have done. By firing him, they are obliterating the old GM culture that was built by a succession of executives who came from the automaker’s New York Treasury Office. Jack Smith, Wagoner, Henderson and many other top executives were all groomed there. It built the company’s finance-driven culture. Sweeping it out needed to happen. But that’s only half the battle. Now the board has to find someone with leadership, vision, tactical smarts and a knack for reaching consumers.

The board will have two big challenges. First, the staff is demoralized now that the second CEO in six months has been canned. Sources say even Bob Lutz, the 77-year-old executive who has lived through countless auto company crises, is dejected over Henderson’s firing. Second, the board will have to find someone who wants the job and is qualified to do it. So you have a company that was just getting some stability get hit with more uncertainty. Then you’ll need to find a high-caliber executive who is willing to take on a turnaround job at a company that doesn’t yet have stock and options and can’t pay multi-million dollar salaries thanks to the government’s 60% ownership stake. Well, Chairman and interim CEO Ed Whitacre has the big job. Let’s see results. Is 100 days reasonable?

Reader Comments

Kris Kancler

December 2, 2009 12:21 AM

I bet, no I guarantee that no one will give me the time of day to help give them something that I know can rev up GM’s sales. And you know what? That’s too bad, because now I will have to march that same idea into another ad agency or corp hands and match it to them. What’s even a sadder is that fact that I would rather give it to GM……

Detroit…. I can help. Will you be smart enough to let me? Probably not…..

Iheartdetroit

December 2, 2009 12:22 AM

Somehow I missed that Steven Girsky was on the GM Board. This guy doesn't know the first thing about running a car company. He needs to go back to New York or whatever analyst hole he crawled out of in the first place and count some beans. Making market predictions is one thing; rebuilding a car company is a big boy game that takes people who know how to create wealth, and motivate people -- not talk about it. Mr. Henderson must be sick to know that a poser like Girsky has a greater hand in GMs future than he now does. Lutz should quit out of man rule principle for the same reason of not working for a talking head. Let Girsky stand up in front of the employees and the auto press and rally the troops. What a joke.

Bill Robinson

December 2, 2009 12:23 AM

I am available.

james

December 2, 2009 12:25 AM

What GM needs to do is to get some of the good dealers to stay open. Dealers are GM life blood. The new CEO should open back up the good dealers from the core brands and offer points to some of the best non core dealers. Why the hell is a great Saturn dealer not turned into a great Chevy dealer in a new location if need be. Dealers are free agents to, not just customers. GM needs to respect its dealers and support them, not tell stories that dealers cost them money. The drop in sales in November would not have been with 400 to 600 more dealers selling.

Louis Sanchez

December 2, 2009 12:26 AM

If he had anything to do with the pompous commercials that came out at the beginning of his reign the board is right on Target. The spots featured the new CEO talking about how GM mad the worlds finest cars and would continue to do so. What cloud are these GM'ers living on? I think the company should be operated by a young renegade who hasn't bought his first bottle of Dom yet. A person that will price cars like Walmart does, bring volume back to the dealerships service departments, and admit screwing up since the late 70's. GM got me good on selling inferior Cadillac's, Trans AM, and no way I am going back. When they truly back it with a bumper to bumper 75000 mile warranty then maybe. The world does need GM nor does the car buying public. GM is lucky as are the employees. Great products, great service insure longevity in any business. The public has chosen elsewhere.

Heather

December 2, 2009 12:35 AM

Goverment Motors, still a joke.

Ben

December 2, 2009 1:39 AM

Ed Whitacre, former chairman of AT&T, is familiar with the fate of the Lucent/Nortel pair, America's premier telecom equipment suppliers, after the telecom/internet bubble burst. I am sure he also knows about the rise of Huawei/ZTE pair from China in that industry. What should Whitacre do with GM? Bring in a Chinese CEO, perhaps, now that GM sells more cars in China than in U.S., to make sure the real profit center, GM China, do not get dragged down by the remaining rest of GM.

Ballbuster

December 2, 2009 2:29 AM

Indirectly praising Mullay's performance at Ford, Welch thinks the New GM is better off with a Mullay-clone. By a series of fortuitous event, Mullay was able to obtain $27Billion loan several years prior to the financial crisis while the unlucky old GM did not. Despite weathering the credit crunch, Ford's performance under Mullay is marginally better than the other domestic auto makers. Nevertheless, Welch thinks Ford is doing fabulous. Ford has nothing to be proud of when the New GM is still struggling from near death; Chrysler surrendered to the Italian flag; and Ford is the uncontested home team playing in town. How can Welch think a Mullay-clone will "energize insiders and show America that there really is a new GM" when the real-McCoy Mullay has barely kept Ford's nose above water? Because, without a doubt, Welch is an omnipotent BW writer. Jumping to conclusion, Welch claims GM's staff "is demoralized" because Henderson got "canned." Contrary to Welch's speculation, the New GM will be inspired under new leadership when the old goats such as Lutz, Wellburn, and Docherty(sic) from the past are also purged.

Ron Zhang

December 2, 2009 4:49 AM

Good article. At GM, not only the people are "legacy," but the whole GM country. Let's see whether it's "mission possible" to change the country in every aspect, simply by installing a new president, say, in 100 days.

m.r.

December 2, 2009 5:00 AM

GM needs a good top level house cleaning! new engineer types are needed much like Ford. not very impressed with GM lineup despite new models. try to ingress/ egress a Malibu vs. a Camry to see what I mean. Big 3 were hijacked by accountants/lawyers etc. its got to change if they are to survive! BS will not succeed these days. show me!

Hugo van Randwyck

December 2, 2009 5:52 AM

Maybe the new CEO can ballot GM employees on setting up a new union, separate from the UAW, maybe a GM Autoworkers Union, GM. The GM board seem to be making it easier for Honda, Toyota, Nissan etc. Any chance, when there are Bloomberg links on BW page, to convert to BW style?

rick price

December 2, 2009 8:56 AM

Girsky,are you kidding me and I thought Lutz was a bean counter.Get a car guy to build something somebody wants to spend the money the gov bails them out with.The "new" camaro lookes like a "new" charger and both are targeted to old guys (i bet both are loosers when the beans are counted).Henderson couldn't win If I were him I'd say "SEE YA WOULDN'T WANT TO BE YA!

Jeff B

December 2, 2009 9:11 AM

Here's a crazy idea. Maybe GM should actually get a guy who has an engineeering background and understands how to make good automobiles, instead of another beancounter.

ejinMI

December 2, 2009 9:30 AM

The United States has the car companies it deserves.

Schmeltz

December 2, 2009 9:41 AM

I have mixed feelings on this event. On one hand, I would strongly agree with the GM board and Whitacre that the Finance dept., the same entity from which Wagoner and Henderson both matriculated, needed to be completely re-vamped. Steve Rattner had absolutley nothing complimentary to say about the GM finance operations either. Fritz was change, but probably not enough change to suit the board.

On the other hand, I don't think Fritz had enough time to prove himself in this position, and turn around a company of this size and complexity.

Bottom line, Fritz's firing wasn't fair, and timing wasn't good, but maybe looking at the big picture, was the only way to fully cleanse this company in its process of re-invention.

Mike

December 2, 2009 6:45 PM

With the billions (that's right billions!!!) spent on rescuing this "private" company between bailouts and Cash4Clunkers, they still can't produce a vehicle that will outsell the Japanese. Maybe they should realize that Americans need jobs before they can buy cars. The last batch of overpriced cars they brought off the assembly line just got repossessed (see: http://www.repofinder.com) from unemployed Americans. I'd rather push a Toyota than drive a GM.

Automotive Freaks

December 9, 2009 3:54 AM

James said "What GM needs to do is to get some of the good dealers to stay open. Dealers are GM life blood."

I totally agree with James. Dealers mean exposure and distribution channels. It's the core of GM business.

http://www.automotive-freaks.com

Randolph

December 10, 2009 9:56 PM

Stop making and selling that expensive Corvette and bring back the Trans Am. Make the Corvette a hand crafted vehicle. As expensive as the Corvette is it would be prudent to make it a special order vehicle, and, mass produce the Camaro, the retro vehicle, and bring back the Trans Am as the more progressive muscle car.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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