Moving deck chairs on the Titanic

Checkout Wikipedia for the origins of the saying Moving deck chairs on the Titanic - I especially Like Stephen Colbert's analogy.

Whilst the signs are increasingly looking positive for Ford, the same can't be said for GM.

Earlier this month, Chairman Whitacre announced he was taking over as acting chief executive following the resignation of Fritz Henderson as CEO. Henderson had led GM through bankruptcy and in the months following after taking over for Rick Wagoner, who had resigned as part of a government bailout of GM.

Anyone coming into a role after such a profound change i.e. merger, acquisition,... accumulation of more than $80 billion of losses in eight years... is going to have a tough and short tenure.

Apparently, Obama's administration was an advocate for the change by having appointed Whitacre as it's broom. Whilst the situation for Fritz wasn't great with GM in bankruptcy, he didn't exactly do a fantastic job of the Saab sale, UAW negotiations or the attempted sale of Opel to Magna International.

But wait, there's more!

GM has appointed the chief financial officer, Chris Liddell, of Microsoft as its new finance chief, and as it turns out, life isn't too bad working for a government agency: Chris will have a base salary of US$750,000 and also receive stock awards worth US$3.45 million in stock over three years beginning in 2012. That's a step up from his pay at Microsoft but a cut from GM's past CFO salary.

Will replacing Fritz bring about changes at GM? According to the WSJ, changes in leadership account for roughly 10% of the variance in corporate profitability on average. To quote:
As Mr. Buffett likes to say, "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

So, who is likely to replace Fritz? BusinessWeek offers some insights but it's clear that GM's board probably has their eye on someone already - you generally don't let a CEO go without a plan to replace them. I think it would be wise to get someone in from a manufacturing background (as Ford did with Alan) as I can testify that more 'virtual' industries like financial services and, to a degree software, are able to maneuver far quicker than an auto maker will be able to. Whitacre is yet to articulate the long-term strategy and priorities for GM - let's hope he does so soon!

On the positive side, GM did repay some of it's loans recently... that's good, right?

Image by ivan petrov

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posted by Lee Gale @ 1:39 AM,


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