Akerson's goal: Faster, leaner, smarter
To fix GM, he's tackling IT, accounting mess
Akerson: Fixing the fundamentals
DETROIT -- General Motors CEO Dan Akerson envisions a day when GM will be able to check instantly the profitability of every vehicle it sells.
That, Akerson believes, would enable GM to pinpoint the product lines and countries that contribute most to the bottom line, leading to faster and better decisions. It also would let GM more precisely track each business unit's results and hold its leaders accountable.
"As we see this organization evolve, we will have people with global responsibilities for certain functions that have profit and loss from top to bottom," Akerson told Automotive News.
That's not how GM operates today.
The effort shows two ways that Akerson, 64, is putting his stamp on GM in his third year steering the automaker:
1. He wants to "create a culture of accountability" and eradicate the complacency that has festered inside GM for decades.
2. He wants to simplify a bureaucratic and fractured corporate setup that can obscure the true profit picture and leave business units competing against one another, to the detriment of the company as a whole.
Standing in his way, though, is lingering dysfunction in GM's accounting, information technology, human resources, legal and other back-office operations. That has made it impossible to track closely the company's financial performance across its divisions.
Akerson is attacking that problem in part with an overhaul of GM's IT operation. The company is hiring up to 10,000 IT employees and opening software and data centers so it can regain control of its IT infrastructure. Currently, outside providers handle 90 percent of GM's IT work. GM wants to flip that ratio.
The overhaul will reverse what Akerson regards as one of the key strategic blunders GM made in recent decades: buying IT provider EDS in 1984 and spinning it off 12 years later. EDS later was acquired by Hewlett-Packard Co., which, along with other providers, has continued to handle GM's IT needs.
He equated the outsourcing to "the U.S. military hiring another country to be the U.S. Marine force."
"It was like the management of this company saying, 'That's IT. Let those guys handle it. We're car guys,'" Akerson said. "No, you're not. You're car guys who need IT to gain competitive advantage."
In tackling GM's legacy problems, Akerson embraces the role of steely-eyed outsider who can apply practices from outside the automotive world to fix things. He has been criticized for not being an automotive insider, let alone a "car guy." He's OK with that.
"We need to fix some fundamentals here, and we are," he said. "That will make us a much better competitor in ways that the car guys never could have imagined."
Akerson is relying on many outsiders to make those changes. For IT, he recruited Randy Mott, a former Hewlett-Packard executive who previously helped Wal-Mart Stores Inc. build an in-house IT system to analyze customer buying trends.
On infotainment, Akerson said GM can lead the industry in part because of a string of recent executive recruits "from the tech side of the world" that he believes gives GM a competitive edge. Among them: former execs from Dell Inc., Sony Corp. and Alcatel-Lucent, which includes the former Bell Labs.
"If you would've brought somebody from Apple here five years ago, this whole industry would be radically different in this area of infotainment," Akerson said.
GM's outsourced IT setup left it without strategic control of its data and created a splintered, costly system, Akerson said. GM now outsources its IT to 23 data centers, which Akerson said is akin to a view that "every car needs six wheels." He plans to consolidate that to two GM data centers.
The IT overhaul is the latest front in Akerson's battle to simplify GM's structure and cut costs. In marketing, GM this year consolidated its roster of outside media-buying firms and Chevrolet creative-advertising agencies from more than 100 to just two, which GM believes will save $2 billion over five years.
GM is streamlining product development by building more vehicles on fewer platforms and eliminating executive-level engineering positions that insiders say bogged down development.
Already, GM has made "tremendous progress" in reducing its fixed costs to about $19 billion a year in North America, from $27 billion before its 2009 bankruptcy, J.P. Morgan analyst Ryan Brinkman said in a research note last month. Based on a recent meeting with company leaders, Brinkman said GM is targeting more back-office cost cuts and sees IT "representing the greatest opportunity."
Akerson's simplification mantra is aimed at increasing pretax profit margins to 10 percent, from around 6 percent, which would rival Volkswagen Group, Toyota Motor Corp. and other top players.
Now that the restructuring of product development and marketing is on pace, Akerson is targeting GM's back-office quagmire -- the "plumbing," as he calls it. He said fixing the accounting system -- a process that is nearly complete -- is a key to gaining better visibility into GM's true costs and profits.
GM's accounting systems "weren't linked. They weren't uniform," he said. "We had different entities in this company juggling ledgers, for God's sake. That's just not done."
GM has a long history of being forced to restate financial results. As recently as 2010, in a regulatory filing ahead of its initial public stock offering, GM called its internal controls over its financial reporting "not effective."
Akerson said it's too early to discuss the corporate restructuring in detail. But he believes that fixing the company's "plumbing" will give it an edge that GM has never had.
"Many companies have won in competitive dynamics because they have better information," he said. "That will drive a lot of different behavior in this company."
You can reach Mike Colias at email@example.com.