A CEO search, GM style: Who'll take it?
Whitacre describes chaotic time after Chapter 11 ordeal
Ed Whitacre writes that when he took over as GM's boss in July 2009, “I didn't know a soul at the company, didn't know cars, and hadn't stepped foot in Detroit in years.”
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At a General Motors board meeting in summer 2010, Chairman and CEO Ed Whitacre dropped a bombshell on his directors: He was stepping down as chief executive, a few months before GM's IPO.
"The board was a little surprised," Whitacre writes in his memoir, which is scheduled to hit bookstores next week. But the directors could tell that the no-nonsense Texan was set on his decision to leave just nine months after he took the CEO post.
They quickly began discussing options for a successor. That's when Dan Akerson, then a director and private-equity executive who had been an outspoken critic of GM's plodding, insular culture, raised his hand.
"The board was okay with that because our back was basically against the wall," Whitacre writes in excerpts of the book, published last week by Fortune magazine. "When Dan put his hand up, that took care of the problem. Not very elegant, I will admit. But that's how it played out."
Whitacre's book, American Turnaround: Reinventing AT&T and GM and the Way We Do Business in the USA, combines inside-the-boardroom drama with plain-spoken observations to weave a portrait of the uncertain, haphazard months after GM's July 2009 emergence from bankruptcy.
For example, Akerson's appointment was the second shotgun CEO pick by the board of the freshly reorganized GM, Whitacre writes. He describes an earlier board meeting, in December 2009, when directors mulled who would lead GM after they ousted former CEO Fritz Henderson.
Whitacre, then the nonexecutive chairman, asked the directors: "Does anybody here want the job?" He looked around the room "for any flicker of interest, any whatsoever. Dead silence," he writes.
"If nobody else wants the job," he told them, "then I will do it."
A 'scary' arrival
Whitacre, who is tall and lanky, with silver hair and a folksy Texas drawl, acknowledges having mixed emotions about becoming chairman in July 2009, days after GM's emergence from bankruptcy.
"I didn't know a soul at the company, didn't know cars, and hadn't stepped foot in Detroit in years," Whitacre writes. He summed up his arrival as "a little scary."
The former AT&T chairman describes his trepidation as his GM driver approached the company's foreboding Renaissance Center headquarters in downtown Detroit. The RenCen, as it's called in Detroit, was "the perfect metaphor for General Motors" Whitacre writes: "overblown, overdone, complicated to the max."
Whitacre's first stop that day was the office of then-CEO Henderson. Whitacre recounts being impressed with Henderson's grasp of the industry. He describes the GM lifer and former CFO -- and now CEO of steel industry supplier SunCoke Energy Inc. -- as an "encyclopedia of facts and figures" who "knew the global car business cold."
But Whitacre's confidence waned as his first meeting with his CEO unfolded. He asked Henderson for GM's organizational chart. Henderson didn't have one. He kept track of it "in his head," Whitacre writes.
"That was the first red flag," his book says.
He continued to press Henderson on his structure. The CEO had 15 to 20 direct reports -- "a huge number," Whitacre writes. He kept after Henderson for details on his executives and their responsibilities.
"It was then that I got my first inkling why we were in trouble," Whitacre writes. "Fritz could not explain, in a clear, concise fashion, what these people did."
Through a spokeswoman for SunCoke, Henderson declined to discuss Whitacre's book with Automotive News.
Fritz Henderson’s 90-day probation as GM CEO was up by December 2009, Whitacre writes, and GM’s directors weren’t convinced that Henderson had “a clear, compelling vision” for the company.
90 days to prove himself
Soon after that initial meeting, Whitacre presided over his first board meeting. After sitting through a meandering, 90-minute presentation by Henderson that did little to quell the board's concerns about the new GM's strategy, Whitacre finally cut off his chief executive and asked him to sit down.
The boardroom was "dripping with tension," he writes.
During an executive session, Whitacre and the board decided to give Henderson 90 days to prove himself. Some directors favored parting ways with Henderson right away. Chief among them was Akerson, Whitacre writes.
"Dan was pretty vocal during the executive session," Whitacre writes. "He said he thought GM was one of the worst companies he'd come across in his entire life. And he was not a fan of GM cars -- he made that crystal clear."
In those first months post-bankruptcy, the board's top priority was to simplify GM's org chart and clarify its vision. By December, Henderson's 90-day probation was up. And GM's directors weren't convinced that he had "a clear, compelling vision" for the company, Whitacre writes.
Whitacre recalls a comment by Steve Girsky, then a board member and now GM's vice chairman: "This is the same old GM." In December 2009, Whitacre delivered the news to Henderson that it was his last day as CEO.
The board found itself lacking any viable internal candidates and without the money to attract a star CEO from outside.
GM already had retained an executive-search firm that had rounded up a list of outside candidates that included "a number of heavy hitters from Fortune 100 companies." But GM still was bound by federal restrictions on executive pay from its bailout, and likely wouldn't be able to offer more than $2 million -- "not even close to competitive."
That's when Whitacre made his reluctant offer to take the job. He made clear that he was going to stay for "some short period."
Mark Reuss: Still a top internal candidate to succeed Dan Akerson as CEO.
Few options for leadership
As GM's November 2010 IPO approached, Whitacre began to worry that he might rattle investors if he left the company soon after GM shares began publicly trading.
"Management is a big consideration for many investors," Whitacre writes. If he went on a pre-IPO road show to tout the prospects of GM shares, only to leave soon after, "GM could be accused of misleading people."
That's when Whitacre told the board he would step down. Again, directors found themselves with few options.
Whitacre had one insider in mind: Mark Reuss, who had just been tapped as president of GM North America, a job he still holds. Reuss had "zoomed up the executive chain in record time," Whitacre writes.
"The plus was that Mark was showing a lot of poise and management potential," the book says. "The downside was that he hadn't been in the job long enough to prove himself as a CEO."
"If we asked him to step into the CEO's job, and it didn't work out, that would be a disaster for Mark -- and an even bigger disaster for GM," Whitacre writes. "The company needed stability. The revolving door in the CEO's suite had to stop."
Reuss remains a top internal candidate to succeed Akerson, 64, who has not given a time frame for his departure. Other internal prospects include GM product chief Mary Barra, CFO Dan Ammann, Girsky, and Tim Lee, head of GM's global manufacturing and its international division, which includes China.
You can reach Mike Colias at email@example.com.