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Toughest Job Yet For This Mr. Fixit


There are rocky starts in a new job, and then there's Frederick A. "Fritz" Henderson's debut as chairman of GM-Europe. On Oct. 14, a mere four months after taking his new position, Henderson announced a plan to slash 12,000 jobs from the auto maker's ailing European operations. German union workers walked out in wildcat strikes; in the Ruhr Valley town of Bochum, where General Motors Corp.'s (GM) Adam Opel has a big assembly plant, 25,000 workers marched through town in protest. Union leaders howled that GM didn't give them enough say in the restructuring. "We weren't prepared," says GM-Opel Works Council Chairman Klaus Franz.

Such a clash may have been inevitable when Motown's Mr. Fixit collided with European labor tradition. Henderson, 45, has spent much of his 20-year career parachuting into mostly troubled GM operations, spending just enough time to take decisive -- often painful -- action, then moving on to the next assignment. For a relatively young executive, he has left a surprising number of fingerprints on key operations. A master financial analyst, he redoubled GM's bet on the mortgage business by spearheading the 1990 purchase of Residential Funding Corp., now a huge moneymaker. In 2002 he fixed near-bankrupt Isuzu Motors Ltd. (ISUZF), which GM controlled. Most recently, Henderson played a critical role in a successful push into China.

Some GM insiders speculate that if Henderson pulls off this latest task -- easily his toughest yet -- he could eventually succeed Chairman and CEO G. Richard Wagoner Jr. "If you see a guy with talent, you give him a difficult assignment," says retired GM Chairman John F. Smith Jr. "If he does well, you reward him with another tough assignment."

Repairing the European operation will be plenty tough. GM has lost $3.5 billion in the region since 2000. Its market share has tumbled from 11.5% in 1999 to 10%, although that has stabilized a bit lately. Opel, which suffered from a reputation for poor quality in the '90s, still has severe excess capacity. Analysts say Henderson will have to cut jobs beyond those he announced. By 2008, GM is expected to shutter either an Opel car plant in Rüsselsheim, Germany, or the Saab plant in Trollhattan, Sweden. Both are underutilized, and GM will probably pick one to make new midsize Opel Vectras and Saab 9-3s. Says Henderson: "We have been losing money for five years. We have a sense of urgency."

Typically, Henderson arrived at GM's European headquarters in Zurich with a plan already in hand. He wants to build up the Chevrolet name as his entry-level brand, define Opel more clearly as a quality mid-market offering, and import more Cadillacs to challenge BMW and Mercedes-Benz on their home turf. The first part might be the easiest: GM already sells some Daewoo-made cars under the Chevy name, priced at under $18,000. It has made progress: In two years, Chevrolet-badged cars have grabbed nearly 1% of European sales, up from 0.6%. But Chevy still faces a steep climb.

Henderson hopes that will enable Opel's engineers, once charged with designing small cars for emerging markets all over the globe, to concentrate on higher quality, mid-market cars. Opel has already climbed back in quality, which J.D. Power & Associates Inc. says is now on par with key rivals. In fact, the new Opel Astra is widely seen as superior to the Volkswagen Golf. Henderson also has to push to get a real toehold for Cadillac. The SRX SUV has had some success, but GM is still opening dealerships around Europe. Soon they will begin pushing the new STS sedan.

"THAT WAS NO FUN"

Henderson isn't taking anything for granted -- he learned that the hard way in Latin America. Only 10 months after he took over there in 1997, Brazil's economy collapsed. GM had just completed two new plants in Argentina, but industrywide car sales fell from 3 million in 1998 to 1.6 million today. Henderson had to cut payrolls and close a plant in Argentina during an election, ignoring an outcry from local politicians. With typical understatement, Henderson recalls: "That was no fun."

His response was to pile GM's resources into a new lineup of small, inexpensive cars. Henderson pushed to develop the Celta subcompact and the Meriva microvan, which was GM's first Brazilian-engineered vehicle. Today they are best-sellers, and after losing $600 million in Latin America since 2000, GM is in the black, with a tidy $38 million profit. "Fritz is boom, boom, and on to the next," says Richard C. Nerod, retired president of GM-Latin America, Africa, Middle East. "He is very much the young man in a hurry."

Notwithstanding his stiff-arm of the Opel unions, Henderson can be a canny negotiator. In early 2002, GM was bleeding profusely from its 49% stake in Isuzu. The truckmaker lost $1 billion that year and was $10 billion in debt. GM looked clueless, having poured $450 million into the company. Henderson swiftly closed one plant in Japan, sold a 50% stake in a U.S. factory, and offloaded other businesses. But he still needed to get bankers to forgive $1 billion in debt, with GM injecting $650 million into Isuzu. When Daichi Kangyo Bank executives gathered in a smoke-filled conference room in Tokyo one Sunday afternoon, they told Henderson that GM's cash commitment looked weak -- the financial equivalent of a balk.

Brian MacDonald, formerly a GM executive working with Isuzu and now treasurer of Dell Inc. (DELL), recalls Henderson's response: "I was a pitcher in college. I balked before. I don't think I'm balking here." The Daichi bankers, big baseball fans, had to laugh at Henderson's self-deprecation. Negotiations turned more casual, and he got the deal done without having to fork over more cash, MacDonald says. Isuzu dropped its debt to $3 billion and today is profitable.

Henderson, in fact, wasn't exaggerating about his pitching career at the University of Michigan. It was more gritty than glorious; the 5-ft.-8-in. righty could not throw hard. "He didn't have a lot of talent, but he would give you all that he had," says retired coach Moby Benedict. Even then, though, he knew when it was time to move on. A new coach came on before his senior year and offered a spot on the team -- not to pitch, but to mentor freshman fireballers. "I quit," he recalls. "I just wanted to play."

Today the role of roving repairman keeps Henderson from seeing his wife, Karen, and daughters, aged 15 and 11, for long stretches. They live in Florida, while he jockeys his schedule to get home once a month. "That's the hardest part of the job," he says. "I miss my family a lot." But Wagoner isn't promising an early return from Europe. "He is going to be there for a while," the CEO says. "We need to get this business turned around." Given his frosty reception so far, Mr. Fixit may have to settle in for a long, cold winter.

By David Welch in Nice, France, with Gail Edmondson in Frankfurt and William Boston in Bochum, Germany


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