April 28, 2010

How Ed Whitacre Is Rebuilding General Motors

It’s no secret I have been critical of General Motors management, right up to its bankruptcy filing a year ago. For decades, GM management focused on short-term profits, while it was steadily losing market share – from 53 percent of the U.S. market all the way down to 19 percent. Along the way it was unable to keep pace with international competitors or shifting customer demand and concessions in work rules, health care and pensions to its union that caused the firm to fail when the market collapsed in the fall of 2008.

All that changed rapidly when the Obama administration appointed Ed Whitacre as its chair in July 2009. Whitacre, the highly successful ex-CEO of ATT, took over as CEO as well last fall and immediately started transforming GM into a modern auto company that could compete in both the U.S. and world markets.

He went out on a limb and promised GM would return to profitability within two years and repay its debts to the United States government within seven years.  At the time GM was still in the red, while Ford was thriving and Toyota was outpacing both in worldwide production and sales.  Furthermore, American consumers were distrustful of General Motors quality and angry that their tax dollars had been used to keep the company on life support.

When Toyota encountered its quality problems earlier this year, Whitacre moved in high gear to capture the available market share. Now he has taken action to fulfill his promises. Not only has General Motors repaid its loan with interest from the United States government, it has continued to improve customer service.  Currently, GM is projecting ambitious global growth in 2010 and 2011. In the coming months, the company plans to initiate a public sale of stock, allowing the automaker to regain its independence from the U.S. government.

How did this turnaround happen so rapidly?  How did Whitacre restore a bankrupt giant, repay billions to the government, and make bold growth projections for the future?

Whitacre made the tough internal decisions. He shed unprofitable brands like Saturn, Hummer, Saab, and Pontiac, eliminated layers of management, abandoned the company’s fossil-like committee structure, reduced excess global inventory, and closed 1,350 underperforming dealerships.  Those were not popular decisions internally or with GM’s bloated dealer structure.  But they were necessary steps to shed its losses and transition away from the finance-driven “analysis paralysis” that dominated its management for four decades.

He became the face of the company with the public.  With public speeches, press interviews, and even starring in company ads, Whitacre put himself on the line with the American public.  Americans wanted a real leader at the helm of GM, and Whitacre was willing to be that person. 

He regained trust in the company.  By backing up his public promises – and offering himself up as the new face of GM, Whitacre lent personality and warmth to a brand that had become a concrete monolith of stagnation.  At risk to his impressive professional career, Whitacre put his reputation on the line. He fought for new customers by making promises about GM’s autos and trucks and their quality, even offering a “money back guarantee.”  If nothing else, Americans respect a confident, trustworthy leader who is trying to restore respect for a tattered institutional brand.

He’s not done yet.  Whitacre is not one who rests when a preliminary goal is met.  In his recent television spot and speeches, it’s clear that he and GM management are focused on improving GM’s product lineup while fulfilling its promises to its customers.

At a time when so many leaders have failed, Americans are pleased to rally around a corporate comeback story built on trust and quality assurance. With Ed Whitacre still at the helm, it’s a comeback story that could keep going for years to come.