March 12th, 2013
Former Chairman and CEO, GM
Ed Whitacre took America’s biggest corporate failure and quickly moved it back into profitability. To do so, he restructured the management team, launched a new vision and turned GM’s corporate culture upside-down. Now, with the U.S. treasury still owning about 32% of GM stock, American taxpayers take a special interest in the successes and failures of the company. What were the impacts of his short tenure, and where does he see the company going?
Ed Whitacre, former CEO at both AT&T and General Motors, related the story of how he became involved in the GM bailout. It began in 2009 with the call from Steven Rattner, then President Obama’s “Car Czar.” It took a few more calls, but within a week, Rattner persuaded Whitacre to take on the role of CEO of the newly bankrupt company.
Why did GM go bankrupt? “I asked the question, what went wrong here,” Whitacre recalled. “The answer from senior management was that they did nothing wrong, It’s just the economy.” But they couldn’t explain why other car companies, such as Ford and Toyota, were solvent. Even the board was convinced it was on the right track and would recover from economic woes.
Looking at that question from his own perspective, Whitacre came back again and again to bureaucracy. “They had the matrix system of management, which meant that everyone had more than one boss and therefore they had no boss. Matrix management is supposed to be collaborative but it isn’t because you collaborate so much you never do anything, you never get anything done, you never take any actions.” Consequently Whitacre changed top management, and he changed the culture.
He also brought his own personal style to the workplace. In an unprecedented move, he drove to the headquarters of the United Auto Workers, unannounced, and asked to meet with UAW head, Ron Gettelfinger. Whitacre found that Gettelfinger had a good feeling for the success of GM. After that, the two men met regularly for breakfast, focusing on getting GM working again. “We had similar backgrounds so we just hit it off,” Whitacre recalled. “He worked with us and we worked with him.”
Were there other options to a government bailout? No. Whitacre said. “There wasn’t one dime out there.” Nobody in the private sector would put money on GM. He believes that the government did the right thing in bailing out the company, which saved jobs not only for GM employees, but for a million people involved with suppliers and dealerships and local businesses. He added that the government did not come in to meddle in business affairs.
One of the first decisions was to develop a new mission. “What’s the purpose of this company?” Whitacre asked. The answer was “To design, build, and sell the best vehicles.”
The Chevy Volt was a game changer, he said. “Companies have a responsibility to work on new technologies. It was the first electric vehicle where you didn’t have range anxiety.” He sees an optimistic future for the electric vehicle, but it will be dependent on the distribution of charging stations.
Regarding the company’s IPO, Whitacre believes that the treasury department should have elected to sell all its stock on day one. “There were more people who wanted to buy than there was stock to be bought. And it was also $33 per share.” GM stock is now about 20% below the IPO price. “Had the government at that time elected to sell more, or produce more stock,” Whitacre said, “we could have gotten a lot more money back for the taxpayer.”
Whitacre’s management style was to walk around, visiting employees. “I believe you should treat people the way you want to be treated. And I believe we’re all alike and we all want to feel like we belong, that we have a part in what you’re trying to accomplish, we can do something good, we can participate in it. And I think that needs to be conveyed. People are the biggest asset of any company. If you don’t have the people with you, you’re not going to make it.”