Whitacre Tapped for GM Chairman


Naming of former AT&T chairman and CEO signals efforts to bring in top leadership from outside the auto industry

The sweeping overhaul of General Motors continued Tuesday, June 9, as the automaker named a new chairman, former AT&T (T) Chairman and CEO Edward E. Whitacre Jr.. The company also announced which of its few current directors would stay on.

By bringing in Whitacre to run the new GM that emerges from Chapter 11 bankruptcy, GM and the U.S. Treasury Dept.'s task force are showing that they want big-name executives who come from outside the auto business. They have also swept out anyone who has been on GM's board since before 2003, signaling a fresh start for the company. Interim Chairman Kent Kresa said in a statement: "We look forward to working with him to complete the reinvention of GM and maximize the enormous potential of this new enterprise."

Wagoner Acolytes Are Out

GM is pushing out the board members who stood so resolutely behind former Chairman and CEO G. Richard Wagoner Jr., who was fired by the Treasury Dept.'s auto task force in March. Gone will be former lead director George M.C. Fisher, Erskine Bowles, John Bryan, Armando Codina, Eckhard Pfeiffer, and Karen Katen.

GM said in a statement that Kresa, who is leading the search for new board members, along with GM CEO Frederick A. "Fritz" Henderson, retired Ernst & Young Chairman Philip Laskaway, and newer directors Neville Isdell, Erroll Davis Jr., Kathryn Marinello, and Whitacre will form the core of the new 13-member board. GM needs six more members; under the terms of the reorganization agreement the Canadian government and the United Auto Workers health-care trust will each nominate one member.

Whitacre's Bona Fides

In Whitacre, GM gets a chairman who built and ran a massive telecom conglomerate. He started with SBC Communications and built it into a giant by acquiring AT&T, and then taking that company's name. He also led acquisitions of BellSouth and Ameritech, in the belief that acquiring massive scale in phone and wireless would help him compete with cable and Internet players such as Comcast (CMCSA) and Google (GOOG) who have pushed into the telecom industry.

Running AT&T, the lanky Texan was revered and sometimes feared not only by employees but also by Washington regulators, who faced his wrath as Whitacre sought to protect the phone company he built from competitors. Though the company was stepping into new areas such as TV and Internet service, Whitacre was a traditionalist who fought the rise of new telecom rivals such as Google. Despite his aggressive dealmaking, he is known to be somewhat conservative when it comes to operations.

Whitacre also has a reputation as a hands-on operator with a decisive management style, even cutting some of his big deals in one-on-one discussions in airport hangars. He also stockpiled cash at AT&T. "He knows how to grow a company and he is accustomed to an industry that is heavily regulated," says Stephen Spivey, auto analyst with San Antonio consulting firm Frost & Sullivan. "He reassembled the old AT&T. Now he will have to rebuild GM back into a powerhouse."

As for GM's board, the selections show that the company is ditching anyone who might favor business as usual. Only the newest directors stayed, with the exception of Laskaway and Kresa.

Sources close to GM's board say that Kresa always asked Wagoner tough questions and wasn't afraid to be critical. Laskaway was even part of a minority of GM board members who in the summer of 2006 questioned whether Wagoner should keep his job, according to sources with knowledge of the discussions.

Board Selection Criteria

The Treasury Dept. has left the board search to Kresa, but the former Northrop Grumman (NOC) executive said in an interview earlier this year that the task force officials had to be comfortable with his choices.

With six new members to pick, analysts say the board would be well-served to find directors who know the ins and outs of industrial companies. "They have to know what management is saying and what the industrial implications are," says Maryann N. Keller, an independent auto consultant. "They still need someone with manufacturing experience."

Meanwhile, keeping Henderson as a core member of the new board signals that Treasury is comfortable with him. "Fritz has everyone's trust," says one task force adviser.

Henderson will have time past the restructuring to manage the new GM. But senior Obama Administration officials have been quick to point out that it's a meritocracy and that Henderson serves at the pleasure of the new board. One source close to the board says that new management talent may be brought in to surround Henderson in any key area, like product development and marketing. Says one adviser: "If we trust Fritz to manage the 50% of the company that will manage cost efficiency, who will manage the revenue side?"

That will be up to the new board, which will come together in the coming weeks as GM works its way through bankruptcy. What is clear is that GM will be a new company, and not just because it will have chopped away costs and weak car brands.

Chicago deputy bureau manager Roger O. Crockett contributed to this report.

Welch is BusinessWeek's Detroit bureau chief.

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