Ed Whitacre's Odd Moves

Posted by: David Welch on February 23, 2010

whitacre.jpg Is GM Chairman and CEO Ed Whitacre crazy? Or crazy like a fox? His moves this week have raised some eyebrows. First, he names Fritz Henderson, the CEO he fired in December, as an advisor for the auto maker’s international operations. The same day, he names board member and advisor Steve Girsky to the position of vice chairman of the company.

Girsky’s promotion is the most problematic, but bringing Henderson back was the most surprising move. The former CEO was ushered out of GM by Whitacre (pictured above) and a board that wanted new blood and a change of direction. It is bizarre, to say the least, that Whitacre would can Henderson less than three months ago and bring him back to help run GM’s businesses in Asia and South America, which are vital to the company’s success.

In a way, it also makes sense. Henderson ran both businesses very successfully as he was soaring up through the ranks of GM management. The newly-promoted President of GM-International Operations, Tim Lee, is a manufacturing guy by trade. He could probably use Henderson’s knowledge of the markets in South America, China and South Korea. In fact, one source close to the situation said that Lee actually brought up the idea.

Girsky’s expanded role is also a curious decision. He was a Wall Street analyst for years, then an advisor to GM and, at various points, has been tapped by the UAW to give them his read on the industry. Girsky was appointed to the board at the behest of the UAW’s retiree healthcare trust, which owns 17.5% of the company. Girsky also worked in private equity for Centerbridge Partners recently.

While Girsky was a very good stock analyst and obviously was respected enough to be tapped for advice by GM and the union, there is a bigger question. What does he know about actually running a car company? He hasn’t managed an industrial business, let alone one the size and complexity of GM. Girsky did not return a phone call or an email seeking comment. The company says he is qualified to do the job Whitacre has given him.

To be fair to Girsky, his job as Vice Chairman-Corporate Strategy and Business Development will have him looking at partnerships and joint venture deals. Whitacre also wants him to oversee GM’s market analysis group. His background as an analyst and in private equity should make him a good candidate for both assignments. He did build a first-class board and management team that has turned parts maker Dana Corp. out of bankruptcy and onto firm footing. On paper, it’s not daft. But as we have seen with private equity, those firms are often good at putting deals together but they don’t know enough about how those businesses work to make them successful. Girsky will have to prove that he can do it. With GM, the stakes are very high.

There is one bigger problem with Girsky’s new role. He is a board member appointed by the union’s healthcare trust and by the government to oversee the investment from taxpayers and other shareholders. One of his most important jobs is to measure the performance of the CEO, in this case Whitacre. Well, Whitacre put him in place as an executive with a $1.1 million a year salary, paid mostly in future stock. That makes him a member of Whitacre’s management team who also has a role in appraising whether or not the CEO is doing the job. As such, Girsky is no longer an independent director. He won’t measure Whitacre’s performance, nor can he sit on GM’s governance, compensation or audit committees.

That establishes a fire wall between Girsky’s two roles. It also takes away from the board the one independent director who knows something about the car business. The board needs someone who is independent and has industry knowledge to mind Whitacre’s performance. Perhaps it’s time to make Girsky an executive, and only an executive, and get another independent director with auto experience on the board. In other words, Girsky should be a board member or an executive, but not both.

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Reader Comments

Doug Terry@terryreport.com

February 23, 2010 10:14 PM

One could make an argument that everyone at the top of GM should be fired and sent far away, maybe to a re-education camp (just kidding on the last point). They failed, spectacularly. Yet, if we look at history, some of the most successful people have been those who have failed and learned from the experience. We tend to believe that there are a few people in the world who are somehow "golden", that everything they do works. In many cases, it is mainly just because they happened to be at the right place at the right time that success came calling. If I were running a company like GM, I think I would want a mixture of old and new, some with great depth of experience, some with the middle range and some all but completely fresh. The job of the oldest hands and brains would be to impart as much knowledge as possible over a year or two and then get out of the way.

RC

February 23, 2010 10:55 PM

So you fire a guy who is incompetent to be CEO, Fritz Henderson, and hire someone not qualified to be President of GM-International Operations, Tim Lee, and then top it off by hiring Fritz to mentor Lee?

Where do I apply for a high salary job I'm not qualified for, which my company than hires someone else to make my decisions?

Ballbuster

February 23, 2010 11:59 PM

Welcome to the People's Republic of Government Motors. Your newly minted comrade Chairman Girsky will now assume the dual duties as Assistant Party Propaganda Chief and Vice Chairman of the Party. Through his glorious ascension up the ranks of the Party, Government Motors will be able to extoll our mantra: to each worker according to his ability to extort taxpayer money; to each worker according to his need to steal from the taxpayer. Welcome to the People's Repubic of Government Motors where our dream becomes your nightmare.

Mike

February 24, 2010 10:06 AM

Change you can believe in.

FOURFABS

February 24, 2010 11:26 AM

THE MOST TELLING EXAMPLE OF ED WHITACRE'S DIRECTION FOR GM HAS BEEN THE USE OF "CONSUMER'S DIGEST" "RECOMMENDATIONS" IN GM ADVERTISING. CONSUMER'S DIGEST IS NOT A LEGITIMATE PUBLICATION AND ADVERTISERS PAY TO BE IN IT. IT IS USED TO DELIBERATELY CONFUSE CONSUMERS INTO BELIEVING A PRODUCT HAS BEEN RECOMMENDED BY CONSUMERS UNION CONSUMERS REPORT MAGAZINE WHICH DOES NOT ALLOW THEIR ENDORSEMENTS TO BE USED IN ADVERTISING. ALTHOUGH CONSUMERS REPORT HAS REPORTED IMPROVEMENT IN THE OVERALL QUALITY OF GM VEHICLES LATELY IT STILL DOES NOT RECOMMEND THEM.

ED WHITACRE IS ALLOWING THE NEW GM TO BE DECEPTIVE AND DISHONEST WITH THE AMERICAN PUBLIC. THIS IS EXACTLY WHY GM WENT BANKRUPT IN THE FIRST PLACE. THEY LOST THE TRUST OF THE AMERICAN PEOPLE.
THE FACT REMAINS THAT WITHOUT 0% DEALS AND CASH BACK GM CANNOT SELL CARS ON THEIR OWN MERIT.

Dude

February 28, 2010 10:40 PM

Dude your caps button is locked. Stop shouting.

Julian Baker

March 3, 2010 02:33 AM

I beg to differ with FourFabs. I have
bought two Cadillacs on their own merit
for cash. Great cars both (CTS-V's). Can
run any Jap sedans and almost all coupes off the road.
GM sales of continuing lines are up 32%
in February. So chill dude! And check
your facts and spare us your prejudicies.
Toyota's problem is not only serious
safety defects (possibly 59 related
deaths to date), but documented efforts
to conceal these defects. And that, my
friend, is criminal behaviour, for which
a former head of Mitsubishi was sent to
prison for in Japan.

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Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

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