GM’s Fritz Henderson steps down as CEO
The abrupt resignation of General Motors Co. Chief Executive Fritz Henderson, who stepped down after just eight months in the top job, signals a push by the automaker’s board to speed the pace of change at the struggling company.
Shock from Tuesday’s announcement quickly reverberated throughout the industry, which had interpreted improving financial news out of GM as a sign that the company had begun to turn around under Henderson’s watch.
The timing was doubly surprising considering the fact that Henderson had been slated to make the keynote speech opening the Los Angeles Auto Show today. Instead, GM’s vice chairman for marketing communications, Bob Lutz, will kick off a show that promises to be dominated by speculation over who will take the reins at the Detroit automaker.
Until that person is found, the job will be handled by GM’s chairman, Edward E. Whitacre Jr., who was named to the board in July after spending most of his career in telecommunications, most recently as head of AT&T Inc.
The news sparked speculation that Henderson had clashed with Whitacre over the direction of the company and concerns over Henderson’s role in the failure of several important deals in past weeks.
The removal of Henderson, a 25-year veteran of GM, may also indicate that Whitacre intends to radically change the culture at the automaker by bringing in new blood with little institutional memory of the “old” General Motors.
“One of the major criticisms of Henderson is that he’s a GM lifer,” said Rebecca Lindland, an auto industry analyst at IHS Global Insight. “Whitacre, being an automotive outsider, came in and said that we need to change the way things are done.”
Henderson’s departure was announced immediately after a meeting called by the GM board to discuss, among other things, the future of the Saab brand after an agreement to sell it fell through last week. Saab is among a number of brands GM is attempting to sell as the automaker moves to focus on just four marques: Chevrolet, Cadillac, GMC and Buick.
“Fritz has done a remarkable job in leading the company through an unprecedented period of challenge and change,” Whitacre told reporters in a hurried news conference in which he did not take questions. “While momentum has been building over the past several months, all involved agree that changes needed to be made.”
GM officials declined to elaborate on the board’s decision to accept Henderson’s resignation.
But a particularly sore point may have been a series of soured deals engineered by Henderson.
In September, an agreement to sell GM’s Saturn brand to auto distributor Penske Automotive Group Inc. fell through. And last week, a similar plan to sell Saab to Swedish sports car maker Koenigsegg Group also collapsed.
No alternative bidder has emerged for Saturn, and although GM said Tuesday that the company had been approached by several parties interested in Saab, spokesman Chris Preuss said that if a deal isn’t made soon, “an orderly closure will be effectuated.”
Perhaps most problematic was Henderson’s plan to sell GM’s European division, Opel, to a consortium of buyers led by Canadian parts supplier Magna International Inc. GM’s board began questioning the wisdom of that sale, which would in effect remove GM from the European market, despite Henderson’s insistence that it be completed.
In November, the board voted to reject the sale of Opel, keeping it under GM’s umbrella.
“Henderson wanted to sell Opel; the board overruled,” said Michelle Krebs, senior analyst at Edmunds.com. “In recent months, the board and Henderson appeared as if they were not on the same page.”
Although many major GM changes in the last year have been carefully shepherded through the Obama administration, now that U.S. taxpayers own 61% of the automaker, company and government officials insisted that the request for Henderson’s resignation came directly from GM’s board.
“This decision was made by the board of directors alone,” an administration official said.
The son of a GM executive, Henderson, 51, had been at the company since 1984 and was the consummate company insider. He was named to GM’s top job in March, after his predecessor, Rick Wagoner, was ousted by President Obama’s auto task force.
Known inside GM as “Chainsaw Fritz,” he was seen as a pragmatic, hard-charging leader willing to make tough decisions.
In less than a year on the job, Henderson has steered GM into and then out of bankruptcy and overseen massive workforce reductions, plant closures and plans to slash brands.
Until now, he was seen as having made relatively strong progress considering the automaker’s significant problems. Last month, GM said it had generated enough positive cash flow to begin paying back billions in outstanding loans to the U.S. and Canadian governments.
But Whitacre, who had publicly supported Henderson until now, also expressed impatience with the speed of GM’s change.
Soon after his arrival in July, Whitacre began arguing that GM should not cede market share despite a shrinking brand portfolio and that it needed to return to profitability sooner and abandon routine practices such as giving large cash rebates on vehicles to juice sales.
A wiry 68-year-old Texan nicknamed “Big Ed” whose hobby is killing rattlesnakes on his Texas ranch, Whitacre made his name turning a small regional telecommunications company, SBC, into the national giant that is AT&T. Upon taking the job, he admitted that he knew almost nothing about cars.
With a pair of personalities that forceful atop one of the world’s most closely scrutinized companies, some observers speculated that conflict was inevitable.
“When you have people at that level, strong-willed people, there is a lot of potential for disagreement,” said David Cole, chairman of the Center for Automotive Research.
With Henderson gone, GM’s board faces the formidable challenge of finding someone able, and willing, to take over the captain’s chair.
Although most of the $50 billion that GM borrowed from the federal government has been converted to equity, the automaker still has significant debts to cover in the worst auto market in a quarter of a century.
No longer the world’s largest automaker, GM has seen its share of the U.S. market fall below 20% for the first time ever, the result of a 32% sales decline through November.
And because of the financing it received from Washington, GM executives are subject to pay restrictions that could scare away many candidates. Under new pay rules, Henderson’s salary would have fallen to $950,000 next year, from $1.3 million in 2009.
Alan Mulally, chief executive of Ford Motor Co., is frequently held up as the kind of energizing outsider GM needs. A veteran of Boeing Co., he helped Ford avoid a government bailout and in the third quarter show a surprising $1-billion profit.
But his pay dwarfs that of a potential GM hire. In 2008, Mulally’s salary was $2 million, with other compensation valued at more than $15 million.
While the search for a new CEO is conducted, Whitacre said, he will remain in Detroit.
