The short answer is no. Whitacre has self-admittedly stated he’s not a car guy. What Whitacre does know is mergers and acquisitions. Aside from figuring out how to deal with Saab, it doesn’t look like GM really needs to be buying up companies. Ed is a numbers guy and if that makes you a bit nervous, it probably should. GM’s other “numbers guy” was Rick Wagoner.
However, unlike Wagoner, Whitacre appears to be able to make tough decisions or at least make decisions. After going through the boardroom like a knife through butter, “Big Ed” has either pressured or made enough people nervous enough to quit their jobs. Perhaps bankruptcy and government intervention are partially to blame for nausea running through the boardroom, but the rattlesnake-killing Texan probably isn’t the antacid the few remaining executives hoped for.
It’s hard to understand what exactly is going on at GM. Whitacre has been notoriously vague or altogether absent from filling in the owners; that’s the general public; about what’s going on with our company. When Fritz Henderson “resigned” Whitacre didn’t take any questions, and then backed out of a conference with reporters later. It isn’t entirely clear why Fritz left, but it appears that he didn’t take too kindly to taking directions from the GM Board of Directors… and Ed Whitacre.
GM’s dire position is proof of Henderson’s dubious leadership and management abilities, but Whitacre, previously the CEO of AT&T and SBC, doesn’t really have such an impressive resume, either. While SBC gorged on AT&T, Ed Whitacre had slowly reassembled Ma Bell, the telephone monopoly that was broken up in 1984.
Where is AT&T now? Well, its own customers are starting to stage protests and be vocal about the poor service of its wireless networks. It temporarily stopped selling one of its most popular phones, the iPhone, in New York because the network is just that bad. AT&T’s public response to attacks made by Verizon is a series of half-baked commercials with Luke Wilson. When they are not busy ignoring network upgrades, AT&T is delivering apps so that customers can point out to them just how bad its network is. It’s noteworthy that most of AT&T’s recent troubles haven’t occurred under Whitacre’s watch. However, AT&T’s network needing $5 billion in upgrades just to catch up to Verizon, according to some analysts. You don’t incur a $5 billion performance gap in 2 years.
If over promised and under-delivered sounds familiar, it should. It’s this same nagging problem with product at AT&T that, among many other factors, got GM where it is today. There’s still hope left at GM but it remains unclear for how much longer. Although GM says it’s on the path to recovery and will pay off its government loans, it still has to get past the hurdles of Saab’s sale to Spyker, the ongoing wind-down of Pontiac and Saturn, not to mention the apparently failed sale of Hummer.
Car guys and gals can breathe a little easier knowing “Maximum” Bob Lutz is still running around GM HQ. Lutz has most visibly helped push GM into some great cars like the Cadillac CTS-V and Corvette ZR1, and some sales flops like the new Pontiac GTO, he’s also had a hand in product quality issues. Most notably, panel gaps and interiors are finally coming up to par, but Bob won’t be there forever. At 77 years old, Lutz has tried to step down and retire before. Undoubtedly, he wants to retire to more peaceful adventures like flying fighter jets.
While it might be preparing to pay back its government loans and possibly readying an IPO, GM is not out to the woods yet. If Ed and Bob can’t do it, who can? That’s a question even GM is asking themselves, especially in light of Whitacre being crowned official CEO.
Does leadership even matter at GM at this point? General Motors is in the process of pulling one of the biggest mea culpa’s in automotive history. Detroit has long been criticized for its gas-guzzling SUVs. Guess what? They make them because they sell and have huge profit margins. Government-forbid a company sells products that make them money.
Those days are over, for many reasons. For one, now that GM has taken from the government cash pile it now has to build things that appease the government. That means high mileage, tiny cars to replace all those SUV’s. The same cars that make very little profit for car companies or carry high price tags that people just won’t buy as long as there’s bigger offerings for the same price and cheap gas. Case in point, the Chevy Volt. By all accounts a revolutionary car that’s going to get amazing mileage and cost little to operate, if you can afford the $40,000 plus price tag. But wait, there’s more! The government is going to step in with a $7,500 credit if you buy one.
So after the Volt is released, what will the state of GM be? Well, if you’re a tax payer you bailed them out in 2008, you provided cash for clunkers in 2009, possibly again in 2010, you will be subsidizing the purchase of the Chevy Volt. This is just General Motors. This doesn’t take into account Chrysler.
If you’re still fine with that as long as it helps the environment, great. But those green benefits won’t have any impact for another 20 years. To even get to the point where plug-in hybrids will be affordable and save substantial amounts of fuel will take nearly 50 years and over $300 Billion in additional government subsidies, according to the U.S. Energy Department-funded analysis by the congressionally chartered National Research Council
This is and has been Detroit culture. In the future, when GM isn’t selling cars like the Volt, or is going bankrupt because the profit margins aren’t there, they will be back in D.C.. Inevitably, Government officials and GM Execs will scratch their heads and wonder what went wrong. All they did was build cars nobody wanted and were too expensive. In the name of doing the right thing they’ll cut another check and this cycle will continue. No finer example of this can be found than Detroit itself. A student who starts high school in Detroit has 1 in 4 chance of graduating and the system is $269 million in debt thanks to mismanagement, fraud, and a declining population.
Ed Whitacre wants you to think – and we want to believe – that it’s going to be different this time. But if ignoring your customer base, government entitlement and subsidization plans, and poor leadership haven’t worked in the past, why would they work now?
How about a novel concept, one that works for every other successful company? Don’t plan to fail right off the bat. Don’t show us vehicles that will only work with a government subsidy. General Motors won’t survive on the Volt alone, so GM and the government need to stop acting like it. Plug-in Hybrids and electric cars aren’t going to keep the books out of the red for another 30-40 years, maybe longer. GM has proven that it has a lot of good tech on the tables, but where is the affordable application and product? While GM has given us speed freaks great cars like the new Camaro, Corvette ZR-1 and CTS-V it has also left us with the rental-fleet worthy Impala, and ho-hum Cobalt. They’ve thrown better cars out into the garbage with the Pontiac G8 and new Saabs.
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Published February 10, 2010 by Eric Moretti
Filed Under: Opinion & Editorials