New GM Vows an End to Business as Usual

[Z-06]

[source: Wall Street Journal]

New GM Vows an End to Business as Usual

Spotlight on New Board After Speedy Workout; Product Czar Lutz Decides to Stay

By JOHN D. STOLL and NEIL KING JR.

The new General Motors Co. exited Chapter 11 protection Friday morning, with the auto maker emerging as a leaner, more-focused company after only 40 days in bankruptcy court.

What will the new General Motors look like? Sharon Terlep and John Stoll discuss the new streamlined automaker, which will emerge significantly lighter in debts, stock, brands, and employees.

In a Detroit press conference, GM Chief Executive Frederick "Fritz" Henderson announced the birth of a "new GM," committed to quick action and a renewed focus on consumers.

"Today marks a new beginning for General Motors, one that will allow every employee, including me, to get back to the business of designing, building and selling great cars and trucks and serving the needs of our customers," he said in a press statement issued Friday. (GM press release)

"Business as usual is over at GM," he said.

The quicker-than-expected reorganization could represent a major accomplishment for the Obama administration, which committed $50 billion to GM as part of its bailout of the U.S. auto industry.

The chances of a sustained turnaround hinge on a revamped board of directors the government has installed, in particular the new chairman, Edward E. Whitacre Jr. The former AT&T executive, who spoke briefly at the press conference, was hand-picked by the government's auto task force. He was charged with keeping a tight watch over GM management and its performance, something the administration believed the previous board didn't do enough of.

Mr. Whitacre was in Detroit on Thursday meeting with Mr. Henderson and other top executives to "give them a pep talk and set the tone," one person who attended the meeting said. "His message was that there are big expectations across the board."

The first official board meeting is slated for the first week of August, when all the directors are expected to drive GM products and spend several days talking about the company.

Mr. Whitacre and the directors of the new GM will be overseeing a dramatically slimmed-down company. The auto maker is exiting bankruptcy with $48 billion in debt, down from $176 billion when it sought Chapter 11 protection on June 1. It is going forward with just four brands -- Chevrolet, Cadillac, Buick and GMC -- and will sell or close Hummer, Saturn, Saab and Pontiac. By the end of the year GM expects to have 68,500 employees, down from 91,000 at the end of 2008.

The transformation was the result of a bankruptcy stay whose brevity caught nearly all observers by surprise. The Obama administration had said GM's trip through court could take as long as 90 days.

"Unprecedented, unbelievable, breathtaking -- all the adjectives apply to this case," said Donald Workman, head of restructuring for the law firm Baker Hostetler, which was not involved in the GM bankruptcy. "There's simply no precedent for the speed with which the government got this through court."

Many of GM's toughest restructuring measures, including the ousting of former Chief Executive Rick Wagoner and the bankruptcy filing itself, came at the behest of the auto task force. The task force head, former Wall Street financier Steven Rattner, appointed Mr. Whitacre with an eye on pressuring management to follow through with the remaking of the company.

That would be a significant change from how the company was run in the past. Under Mr. Wagoner, who served as chairman as well as CEO, directors mainly communicated with him, and rarely interacted with his inner circle.

In an early sign the new board plans to take a more activist approach, top executives have been told to expect directors to interact regularly with top managers, much the same the way private-equity firms take hands-on roles when they restructure ailing companies, a person familiar with the matter said.

The board is expected to weigh in on a management shake up Mr. Henderson has begun preparing. One management move the board is expected to approve is keeping longtime product-development czar Robert Lutz at GM to head the company's communications and marketing.

Mr. Lutz, 77, will continue to consult on vehicle design issues. He announced his retirement early in 2009, but recently came to an agreement with Mr. Henderson allowing him to stick around indefinitely

In an email Friday, Mr. Lutz said the move will allow him to focus more intently on his roots in the auto business. Although educated with a focus on marketing, he had been overseeing GM's efforts in product development since 2001.

"It's the other half of the business that I didn't have before, and I found that somewhat frustrating," Mr. Lutz said. "My entire academic and professional background is in marketing; I was practicing without a license in product development."

Later this month, the U.S. government, which is taking a 60% stake in GM in exchange for the money it has given GM, is expected to name four more directors to serve on the 13-person board. Canada, which has given GM $9 billion in aid and will own 12% of the company, will name one director to the board.

The United Auto Workers health-care trust, which owns 17.5% of GM, has already named its representative to the board -- Stephen Girsky, a former auto industry analyst who in the past has served as an advisor to both GM management and the UAW.

The new directors replace several who were closely associated with Mr. Wagoner, including the lead independent director, former Eastman Kodak Co. CEO George Fisher.

Six current GM directors will remain on the board. They include former Coca Cola & Co. Chairman Neville Isdell; former Northrup Grumman Chief Executive Kent Kresa, and former Ernst & Young Chairman Phil Laskawy.

Although GM emerges from Chapter 11 with much less debt and lower costs, the board will have to grapple with a number of challenges. It remains heavily dependent on trucks for most of its profits and it's still losing market share to foreign rivals. It will also lose control of its critical Opel unit in Europe when it sells its majority stake.

Mr. Whitacre is coming into the chairman job with no auto industry experience. But some people who know Mr. Whitacre said he's up to the task.

"He's very tough, which is called for in this situation," Karl Rove, a former adviser to President George W. Bush and a longtime associate of Mr. Whitacre's, said. "He's not going to let things remain how they are...this was a very astute pick."

GM, despite its larger scope and international complexities, ended up having a far smoother ride than did Chrysler, whose own Chapter 11 process was plagued by an acrimonious spat with creditors.

Still, the administration remains sensitive over claims that it trampled over existing law in pushing the two companies through Chapter 11. "Every step that General Motors and the U.S. government took during this complex process was in full compliance with U.S. bankruptcy law and established precedents," said Mr. Rattner, the principal member of the administration's auto task force.

With GM beginning a new life as at least a temporary ward of the U.S. government, Obama administration officials have pledged to pull back from day-to-day interactions with the company.

GM is still going to be looking for help in Washington, though. The company said earlier this year that it was seeking $7.7 billion in Energy Department loans to push ahead on more energy-efficient cars. To qualify for the money, it must be certified as "economically viable" by the U.S. government, a step that could happen within weeks.

—Sharon Terlep contributed to this article.

[Oracle of Delphi]

[Justin Bimmer]

The first official board meeting is slated for the first week of August, when all the directors are expected to drive GM products and spend several days talking about the company.

This is a good sign.

[Oracle of Delphi]

And more than a few board members have no manufacturing experience at all, sure sounds like the old GM to me ...

[ShadowDog]

Yah, like my mom says, "Show me."

[aldw]

At the very least the new chairman Edward Whitacre is a mechanical engineer even if he isn't a car guy, so there is a little hope there. Still, less talk more action is required.

Edited July 11, 2009 by aldw

[Croc]

How many times have we heard in the last year that GM has ended "business as usual"? Will we get another full-page NYT ad with a written apology, and promise to be better this time as well, or are they going to take that to WaPo?

[caddycruiser]

And more than a few board members have no manufacturing experience at all, sure sounds like the old GM to me ...

YES. Although great to hear about Bob, I've had a nagging feeling it was based on a big part to the "okay, we're set...but none of us know anything about cars...who can we get or keep, quickly?" Of course, that could be wrong, but again, it seems too likely. Even if they're not the best accountants, as it's been said time and time again, in the end it only matters if you have products people desire and buy in droves and only successful car & auto industry experts can really do that. Having the best accounting system doesn't help, unless they're saying "Do whatever you need to, as long as they sell."

We'll see.

[ZL-1]

How many times have we heard in the last year that GM has ended "business as usual"? Will we get another full-page NYT ad with a written apology, and promise to be better this time as well, or are they going to take that to WaPo?

Good point. This time around everyone is expecting GM to talk less and do more: seeing is believing.

[2QuickZ's]

Yah, like my mom says, "Show me."

I agree. I'm done buying GM products for a while and it has nothing to do with their bankruptcy. It has everything to do with their piss poor customer service and their apparent inability to stand behind their product. I'm not abandoning them and I hope the new company succeeds. I'm just taking a hiatus until I have reason to believe they really have changed.

Maybe the fact the some of their new board members have probably never even driven a new GM product will help. My guess is Fritz is out of touch with the reality of the company and its customer service and product flaws. I'd guess he also doesn't quite comprehend how many people they have pissed off and completely alienated over the last 30 years, either.

[hyperv6]

The details are coming out on some of the changes that are coming.

Things like th Single 8 member committe to replace the tweo senior leadership forums is only a start on the removal of the bureaucratic managment system now in place. The redundent decision making machine is being cut down and this is only the start.

We need to see what all they have planned before we condem this. This time is not like the past times. While some here think the oversight people will just prevent RWD and V8's. The truth is they are more here to make the whole system smaller in size and cost.

Will it work I can't say yet as there is much more to be shown. But I do know they are making the right moves now and I am waiting to see what more is done.

As for the sevice I have recieved on my 2 cars I bought last year it has been great. The dealer could not be better and even with the teething problems with my Turbo upgrade kit it has been address and fixed.

In fact after I sent an e mail to the lead engineer at the GM Performance Team he called me 15 min later and helped me and the dealer solve the odd issue we had. It was a simple clearance issue on a Bosh Map that came about with the changing of a intake tube. He even had my old intake tube in his office. It was only one of two that had this issue and was the one replace after my intercooler was damaged in a a crash. He even foillowed up with my dealer and myself.

Note I am not a GM employee and e mailed the engineer cold. GM's E mail system is not hard to figure out if you know the persons name.

As for the other car it has not had to go back for anything.

Edited July 12, 2009 by hyperv6

[Oracle of Delphi]

Note I am not a GM employee.

That is plainly obvious ... You also aren't a Spelling Bee Champion either.

GM's E mail system is not hard to figure out if you know the persons name.

Stating the obvious again, especially since I told you all that years ago when Oldsmoboi wrote Lutz for the 1st time ...