THE BARRA ERA

GM's grueling comeback sets the stage for new CEO to think big

Outgoing CEO Dan Akerson has expressed confidence that Barra can guard against GM's old bad habits.

Photo credit: BLOOMBERG
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DETROIT -- In a 24-hour span this week, General Motors slammed the lid on a five-year chapter that will forever be defined by bankruptcy, bailout and caretaker management.

Now Mary Barra (BAR'-ruh), the first woman to lead a global automaker, inherits a company untethered from government ownership, with a rock-solid balance sheet, a clearer European strategy and a vehicle-development enterprise that's cranking out plenty of hits.

"This is a great company again," retiring GM CEO Dan Akerson told Barra and her new executive team in a ceremonial passing of the baton last week before hundreds of employees.

"Don't lose it."

For Barra, the 51-year-old engineer and outgoing product chief, the task must go beyond simply not being the Old GM. Akerson spent his three-plus-year tenure trying to disentangle GM's notorious bureaucracy and revitalize its worn brands. Barra will need to pick up those unfinished tasks and also define a vision for the next era, one in which GM can harness its size and engineering prowess to outgun more profitable rivals such as Volkswagen, Toyota and Ford.

"She'll need to get people in the organization behind a clear vision for the future," said Maryann Keller, a longtime automotive analyst and author of two books on GM. "What does the new GM stand for?"

The hard slog and tough decisions made under Akerson, and the renaissance in GM's vehicle development that predated him, have set the stage for Barra to think big.

North American profits are stout as GM commands firm pricing across a rejuvenated vehicle lineup. It is emerging as a leader in vehicle quality -- unthinkable even just a few years ago -- with a renewed rigor in product launches that has helped GM sidestep problems that have snared many rivals' rollouts.

Opel, the money-losing European business whose fate was in doubt just 18 months ago, is showing a pulse, on pace to break even within two years, analysts say. There have been recent moves to shore up weakening results in Southeast Asia while revamping the management team to wring more growth and profit out of China.

But Akerson's exit on Jan. 15 leaves a relatively inexperienced executive suite and redrawn management structure that will test Barra's team early on.

In an industry that tends to reward managerial stability because of its long product cycles, most of GM's top executives are yet again taking up new jobs. Barra herself is GM's fifth CEO in five years; GM must find a new CFO -- its third in three years -- when current finance chief Dan Ammann, 41, assumes his operations-heavy role of GM president, a revived post. Marketing chiefs for GM's two most important brands, Chevrolet and Cadillac, are new faces.

Power split


GM's executive structure has been overhauled, too. Ammann assumes a powerful role as the No. 2 and Barra's top lieutenant, overseeing GM's five regional presidents and the global heads of Chevrolet and Cadillac. Those executives had reported to Akerson.

Some members of GM's board weren't convinced of the need to revive the president position, even though Akerson and Barra lobbied for it, according to a person familiar with the board's thinking. But they eventually warmed to the idea of a hands-on No. 2 executive to flank a CEO whose experience is narrower than that of a traditional top executive at a major global automaker, the person said.

Solso: Joins Barra, Ammann as top leaders

Further splitting the power is the appointment of GM director Tim Solso as nonexecutive chairman. Solso, a Harvard MBA who doubled sales at engine maker Cummins Inc. during a 12-year stint as CEO that ended in 2011, joined GM's board last year.

"That troika setup can set up role confusion, especially in times of crisis. Who speaks for the operation?" says Jeffrey Sonnenfeld, senior associate dean for executive programs at the Yale School of Management. "But I've seen it work well with the right personalities."

Ammann's role as overseer of GM's historically powerful regional bosses looks like a redoubling of the commitment to one of Akerson's top priorities: abolishing the fiefdoms that have sapped GM's profits and efficiency. Regional chiefs have tended to operate autocratically, often to the detriment of GM's bottom line.

Ammann already is the point person to fix that problem. Last year he took on the arcane accounting overhaul that has enabled GM to more precisely track each region's profitability. Better financial transparency is eliminating what Ammann calls "wasteful internal negotiations," in which one GM regional unit that built a vehicle might try to squeeze another on a transfer price to enhance its own bottom line.

Ammann's No. 2 perch "gives him a greater ability to reduce complexity in GM's global operations, providing air cover for Barra to keep an unrelenting institutional focus on product excellence," Morgan Stanley analyst Adam Jonas wrote in a research note.

Unconventional pick


Barra's appointment surprised the broader business community by shattering the glass ceiling in the male-dominated, hubris-fueled auto industry. But her selection was unconventional in other ways, too.

Barra's resume lacks the prerequisites typically sought by major automakers. Until the bailout-related appointment of former CEO Ed Whitacre in 2009, GM carefully groomed CEO candidates with stints in finance and overseas posts before summoning them back to Detroit. Barra hasn't had those experiences.

But her background in the engineering and building of GM's cars -- and the car-guy bona fides of others on her team -- sends an important signal that GM's long-term strategy is pegged to its determination to make great cars and trucks, rather than squeezing suppliers and slashing costs.

Barra is GM's first engineer CEO since Bob Stempel in the early 1990s. She has spent much of her career inside GM's plants, helping in the mid-2000s to standardize manufacturing processes and equipment worldwide, a step that enabled GM to build vehicles for multiple markets from common platforms.

Mark Reuss, her successor as product development chief, is an engineer and GM's top ranking car guy, and has broad support from GM's engineering ranks. Although he was passed over for the CEO post -- some insiders worry about him bolting -- the 50-year-old so far has said he's eager to return to his roots in product development after six years running North America and Australia.

Even Ammann, GM's CFO since April 2011 and a former New York investment banker, is a certified test driver on the punishing Nurburgring Nordschleife racetrack in Germany, a passion that was lacking in the GM finance enterprise of old.

"The world's most successful car firms are led by teams who prioritize product above all else," Jonas wrote. "Tick the box for GM here."

Commencement day


Akerson's turn atop GM will be viewed as a battle waged against the vestiges of Old GM. His mantras were eliminating complexity and holding people accountable, which led to a wave of executive turnover under his watch.

He acknowledged last week before employees: "I always knew I'd be viewed somewhat as a transition CEO. We had to right the ship, get it under way."

Akerson long has expressed faith in Barra to play the role of steely-eyed outsider, guarding against GM's old bad habits, even though she is a GM lifer. She joined GM's Pontiac Motor Division at age 18 to inspect hood and fender panels on the Grand Prix under a GM program that helped pay her college tuition.

Even in recent weeks, it's as if Akerson, a former U.S. Navy officer given to nautical metaphors, has been scrambling to clear the decks for a smooth launch of the Barra era.

GM pulled the plug on its languishing eight-year effort to make Chevrolet a viable European brand. It said it would end production in high-cost Australia. GM is dumping its final shares in its former in-house lender, Ally Financial, another link to its flawed past. And it's selling the 7 percent stake it acquired last year in PSA Peugeot Citroen.

Akerson evoked that sense of transition last week when discussing the succession.

"It was almost like watching your daughter graduate from college," he said last week, recounting the moment he delivered the succession news to Barra.

But he made it clear that there's a lot more to be done.

"We've reformed, I think, General Motors," he said. "As far as we've come, we've got to go that far again." c

You can reach Mike Colias at mcolias@crain.com.


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