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Now Whitacre can drive GM where he wants

He took one of the smallest of the “Baby Bells” and turned it into the giant of the telecommunications industry. And Ed Whitacre has already hinted that he’s out to restore GM's past glories.
Image: Whitacre Takes Over As Interim GM CEO As Henderson Resigns
GM Chairman Ed Whitacre reads a statement announcing that Fritz Henderson will be stepping down as the CEO of the company at a news conference Dec. 1, 2009 at the GM headquarters in Detroit, Mich.Bill Pugliano / Getty Images
/ Source: contributor

He took one of the smallest of the “Baby Bells” and turned it into the giant of the telecommunications industry. And he’s already hinted that he’s out to restore the past glories of General Motors. Now, “Big Ed” Whitacre won’t have anyone to stand in his way.

In a move that shook an industry that seldom can hide secrets for very long, GM ousted short-time President and CEO Frederick "Fritz" Henderson, yesterday. For the time being, at least, he’ll be replaced by the company’s brusque and ambitious Chairman Ed Whitacre, Jr., the Texas telecommunications engineer who took regional phone company SBC and used it to rebuild the legendary AT&T.

Henderson, 51, had served barely eight months in the job, assuming the chief executive post following the abrupt ouster of his mentor, Rick Wagoner. Wagoner was fired by the Obama administration, which wanted a change in management before it would approve a massive bailout of the fast-failing automaker. Whitacre, 68, was brought in as part of the sweeping out of the old, and insular General Motors Board of Directors.

The plain-speaking Henderson was initially hailed for his willingness to consider steps his predecessor continued to rule out. Some of those included abandoning four of GM’s eight North American brands and, ultimately, the need to declare bankruptcy to wipe out the automaker’s massive debt and make other key changes that would be virtually impossible without court protection. In a development few believed possible, GM shot through the Chapter 11 process in barely two months.

But since then, the company has had mixed results. The automaker reported far smaller third-quarter losses than anticipated — though GM officials were quick to acknowledge that the preliminary results did not meet standard accounting practices. And a number of new GM products, such as the Chevrolet Equinox crossover vehicle, have been getting strongly positive reviews.

But while the sale of Hummer and the closure of Pontiac are moving forward, a bid by Detroit entrepreneur Roger Penske to buy Saturn collapsed. And the intended purchaser of Saab has walked too, though others may yet be interested.

Meanwhile, GM’s November sales were weaker than many had hoped for, despite the company’s continuing reliance on incentives — estimated to run over $4,000 a vehicle, more than any of its competitors.

But some insiders are saying that Henderson's real problem was the handling of the proposed sale of GM’s European subsidiary, Opel. That move was encouraged by the German government, which provided a multi-billion-dollar bridge loan earlier this year to prevent the operation’s collapse. Henderson acquiesced to the idea that Opel would be acquired by a consortium led by Canadian mega-supplier Magna International.

In a stunning move completely unlike how the “old” GM operated, Whitacre and the board rejected the idea, lining up the necessary cash to keep Opel within the automaker’s family.

Whether the aborted sale was the final straw remains unclear, but at a hastily called news conference Tuesday afternoon, Whitacre walked out of the boardroom at GM headquarters in Detroit and told a group of reporters: “While momentum has been building over the past several months, all involved agree that changes needed to be made. To this end, I have taken over the role of Chairman and CEO while an international search for a new president and CEO begins immediately.”

There have been more than a few pundits, in recent months, who predicted Whitacre might eventually want to run the full show. But the timing nonetheless took everyone by surprise, including a cadre of senior corporate executives waiting for Henderson in Los Angeles, where the outsted CEO was to deliver the keynote speech at the 2009 Los Angeles Auto Show. Instead, the task will be handed to GM’s septuagenarian Vice Chairman Bob Lutz.

Whitacre may have already signaled he was firmly in the driver's seat when he became the face of GM's "May the Best car Win" ad campaign earlier this year, which did not get rave reviews. Some said Whitacre was trying to make himself the new Lee Iacocca, whose image of reliability helped revive Chrysler's fortunes with his "If you can find a better car, buy it," ad trademark.

Whitacre declined to take questions following his short summation of the boardroom coup, briefly switching to a folksy Texas twang to promise the assembled media he’d be back to say more “soon.” GM’s chief spokesman, Chris Preuss, took over handling the frenzied press, telling them, among other things that Whitacre “does not have long-term designs on the (CEO) job.”

Preuss also insisted that there had been no advance notice given to the White House, even though the government owns a majority stake in the automaker and has invested $50 billion in it. President Barack Obama himself has said on numerous occasions that he didn’t want his administration to play a day-to-day role in GM’s operations, but the pronouncement still came as something of a surprise. Whitacre did offer a salve to the federal auto “czar,” proclaiming a key goal was to ensure the U.S. gets its money back.

A search for Henderson’s replacement began right away. Stephanie Brinley, a Detroit-based analyst with AutoPacific Inc., doesn’t see anyone rising above the trenches at GM. And considering the cuts made at cross-town rivals Ford and Chrysler, it seems unlikely GM will find an alternative there.

Poaching someone from one of the Japanese and German “transplant” automakers also seems unlikely. Most of their senior executives are largely responsible for marketing and sales and have little experience with key operations like product development, purchasing and manufacturing.

That makes it highly likely GM’s recruiters will look beyond the auto industry’s confines. They can point to Ford, which, three years ago scored a big success luring over Boeing’s second-in-command, Alan Mulally. But the failed tenure of now-departed Chrysler Chairman Bob Nardelli offers a countervailing cautionary note.

Of course, Big Ed might just find there is no one to fill his Texas-size shoes.

On the morning when GM emerged from bankruptcy, the former AT&T boss hovered in the background as Henderson laid out his vision of the future. But as Whitacre began to walk out, this reporter caught up with him for a brief moment and asked if he was satisfied with the automaker being downsized. He shook his head, no, clearly aware that at one point, GM controlled more than half the total American car market.

“We won’t buy it back,” he stressed, adding that growth would have to come “organically.” But there was no question, he made clear with few words, that Whitacre had his own visions of glory and he wasn’t going to settle for someone else’s.