December 03, 2009

GM Doesn’t Need A New CEO – It Has Whitacre

The last thing the General Motors board needs is a head hunter to find a new CEO.  It already has one of the best CEOs in the country: a tough-minded Texan named Ed Whitacre.           

Whitacre is exactly what GM needs: an outsider who can shake this complacent culture at its core.  He turned Southwestern Bell (formerly SBC) into the most successful regional Bell operating company.  Then he proved his moxie in turning around large bureaucracies when he acquired the failing AT&T, retained its name, and incorporated it into SBC.  These days the new AT&T is the national leader in telecommunications, thanks to Whitacre’s wisdom and aggressive operating style.

And while great strides still need to be made, Whitacre already has set a new cultural trajectory at GM as chairman and should continue to shake things up as CEO.  For starters, he should ban power point charts, consultants, and the “analysis paralysis” that have plagued GM for decades.  Then he should eliminate all the unecessary committees, excess staff groups, and former finance people masquerading as car guys.

Whitacre says he’s “not a car guy.”  That’s probably a good thing.  He isn’t ingrained with the bland design concepts and faulty strategic planning that caused GM’s share of the U.S. market to drop from 53 percent to 19 percent across the past half century.

This forty-year slide, which famously resulted in bankruptcy this year, was led by a steady stream of financial executives who were more interested in short-term profits than they were in building exciting, quality automobiles.  The worst of these was Roger Smith, who took the helm in the 1980s and saw GM’s market share took its steepest decline (a 10 percentage point drop in 9 years).  Smith seemed far less interested in keeping pace with automotive innovation trends than he was in acquiring Hughes and EDS; both of these proved to be enormous distractions and were later spun off by his successors.  Meanwhile, GM lagged far behind increasingly popular foreign competitors, a trend which has unfortunately continued through today..

Smith also repeatedly gave the United Auto Workers seemingly everything they demanded.  From 100 percent-paid lifetime health care and a “jobs bank,” to  promises not to outsource its parts supply without union approval, he capitulated over and over again.  Smith would do anything to avoid a strike and hit to short-term profits; he even paid former EDS CEO Ross Perot an additional $700 million to leave the GM board and end Perot’s barrage of a questions which revealed embarrassing inadequacies at the car company.

But with Whitacre, bureaucratic waffling – and other leadership and management problems – will not be an issue.  One of his strongest qualities is his impatience with bureaucracy.  He can quickly cut to the core of complex issues and bring the right people together to solve seemingly intractable problems.  At 68 years old, he may not be willing to be CEO for more than 2-3 years, but that’s long enough to make the big moves required to get GM back on track.

To buffer his efforts, Whitacre could recruit a real car guy from outside the U.S. as his chief operating officer.  Since the Germans design better cars than GM ever envisioned, perhaps someone like former Porsche CEO Wendelin Wiedeking would be a fine choice.  Wideking – who rose from the factory floor to build Porsche into one of the most profitable auto companies in the world – has undeniable car knowledge.  Unfortunately though, his career hit a bump when he overreached in attempting to take over much-larger Volkswagen.  The “too clever by half” stock move left Porsche with so much debt that VW took it over (an interesting twist of fate), and Weideking left the company in July of 2009.

However, Wiedeking would be a good partner for Whitacre until GM can develop a new generation of outstanding designers and operating talent to take the helm themselves a few years down the road.

If Whitacre is serious about changing the hidebound GM culture, moving company headquarters to his native Texas (like he did with the old AT&T) might spur the change he needs.  That would shake the GM culture to its core, and send a clear signal that there is no going back to the old ways.  A crazy idea?  Only to the Michigan politicians.  After all, ExxonMobil – the former Standard Oil of New Jersey – successfully moved its headquarters to Dallas, and Boeing moved from its native Seattle to Chicago. 

In my experience an entrenched culture like GM’s cannot change without new blood which posseses the courage to ignore precedents and move swiftly towards making the company competitive.  IBM broke tradition in turning the company around under Lou Gerstner , and today the company prospers.

And as GM’s competitors refuse to stand still these days – innovating, improving, and gobbling up market share – GM must dramatically increase the rate of change to have a chance of catching up.

Ed Whitacre is capable of overseeing such a rapid evolution.  When you have the right leader in place, why hire a search firm?