New GM CEO makes good impression on "Meet the Press"
Fritz Henderson, the acting CEO of GM, spent 15 minutes talking to David Gregory on “Meet the Press” yesterday. (The link contains the show’s transcript.) I was fairly impressed, particularly by answers to two questions.
Before I get to those, I’d like to mention a couple things about Henderson for people who don’t know who he is. (I hadn’t heard of him until he moved up to replace Rick Wagoner, whom Barack Obama fired.)
Henderson has been with GM for 25 years, essentially his entire professional career. It is certainly justifiable to ask him whether it’s reasonable to expect someone so entrenched in GM culture to be able to bring massive, disruptive change to the company.
In 1997, he took over GM operations for several South American companies. He was successful enough to then be moved to run operations on 4 continents over the next several years. In 2006, he became GM’s Chief Financial officer, then Chief Operating Officer in 2008 – clearly a promotion signaling that he was supposed to succeed Rick Wagoner, which he did in a way that I’m sure nobody ever expected.
I felt sort of bad for Mr. Henderson when David Gregory insisted on spending so much time talking about GM’s past, sort of like talking about the business equivalent of a horror film might be better for ratings than the relatively dry discussion about the future. But Henderson handled himself well, essentially saying that he’s made mistakes just like everyone else has, but that he’s well aware of the importance of learning from them.
Henderson also made clear that he would like to avoid bankruptcy but that the company will be making preparations so that if that route becomes necessary, it can be done efficiently. (Personally, I think that bankruptcy will happen and that the stock is worthless.)
The first of Mr. Henderson’s answers which really impressed me was this:
MR. GREGORY: Do you expect and would you like to see President Obama encourage the country to buy American cars?
MR. HENDERSON: No, actually. I think the consumer should buy exactly what kind of car they think meets their needs and that excites them. And as I look at it, it’s our job to make sure we provide that, not necessarily have it mandated or otherwise encouraged. I think we have fantastic cars and trucks. We’re going to win in the marketplace and not necessarily because–just because we’re a U.S. company.
I have never bought an American car. And during the show, Mr. Gregory noted that the government’s report on GM’s first proposed restructuring said “Fundamentally, the lingering consumer perception is that GM makes lower-quality cars.” I represent part of that lingering consumer perception…but even my perception is improving, especially after seeing things like Buick (tied with Jaguar) unseating Lexus at the top of J.D. Power’s reliability survey for 2009 vehicles:
Unfortunately for GM, Cadillac, which came in 9th in the survey, was the only other “nameplate” which did better than the national average, with GMC, Chevrolet, Saturn, Pontiac, Hummer, and Saab all in the bottom half. Nevertheless, the Buick achievement is notable for the company as a whole, as I’m sure even GM is smart enough to take some lessons from what Buick is doing right and apply them to other brands. The good news is that at least 3 of the bottom 4 GM brands are likely to be sold or closed. GM has already announced plans to somehow deal with Saab, Saturn, and Hummer, and it’s unclear what will happen with Pontiac. (It may remain as a specialty brand with a more limited number of offerings.)
As someone whose tax dollars have gone to save GM, and despite my rather deep pessimism about that money ever being repaid at more than 10 cents on the dollar, I want GM to succeed. I particularly want them to succeed if they void all their current union contracts and start over with operating overhead that will leave them competitive with their competition. If GM is no longer dominated by unions, I may consider buying a GM vehicle when I need my next car. The same goes for Ford and Chrysler, both of which place in the top half of the J.D. Power survey: I could consider one if their quality keeps going up and they are either not highly unionized or else they have beaten the unions back to contracts which are not much different than those received by non-union workers at other companies.
I applaud Mr. Henderson’s strong statement of commitment to the brands’ quality and his belief that his company can win in fair competition against other nameplates.
And here’s the other answer I liked a lot:
MR. GREGORY: Your predecessor, Rick Wagoner, agreed to work for a dollar, given the taxpayers were putting so much money into General Motors. You didn’t make that agreement. You’re going to be working for considerably more than that. Why?
MR. HENDERSON: David, at the beginning of this year, as part of the series of sacrifices, my salary was cut 30 percent, and basically it stayed where it is. My, my salary today is the same it was two weeks ago. We’ve asked all of the parties of General Motors, including myself and others, to make sacrifices, and it’s going to stay that way.
MR. GREGORY: But how much will you make?
MR. HENDERSON: My salary is $1.3 million.
It’s about time an experienced, valuable executive stands up for himself. Sure, I understand the “I feel your pain” symbolism of working for a salary of $1. But Mr. Henderson probably has (had) a lot of his net worth tied up in GM stock, which is now around $2 a share and, in my view, worth around $2 less than that. He could probably move to any non-Big Three automaker and earn more than his current salary which, as he noted, was already cut something like $500,000.
If we, the aggregation of taxpayers, who have involuntarily given billions of dollars of our money to GM to “save” it, isn’t it incredibly stupid for someone to try to talk an executive out of $1.3 million in salary if he’s really the right guy for the job? If he’s worth $1, then he’s the wrong guy. If he’s the right guy, he’s worth a lot more than $1.3 million to try to protect and save 1,000 or 10,000 times that much.
I shudder to imagine how much money the taxpayers have likely lost due to the brain drain from AIG, which we’ve put nearly $100 billion into and stand at the ready to put in more, after the insane “AIG bonus attack” by Congress. No, it hasn’t come into force because it seems to have died in the Senate, but the spectacle was enough to cause people to leave, such as this rather high-profile resignation for all to see in the New York Times.
Now that all the other bailed-out institutions are confirming their intent to pay “retention bonuses", Barney Frank is strangely silent. Maybe he realizes that he overplayed his hand before. Maybe he realizes that his actions regarding the AIG bonus tax were based on a complete lack of understanding of the industry. And maybe Geithner/Obama told him to shut the hell up. My guess is that it’s all three and that we’ll never know for sure about any of them.
Back to the main point of this note: If Mr. Henderson can execute as well as he seems to have in the past, if he’s as willing to learn from GM’s mistakes as in the past, and if he’s willing to take on incredibly difficult battles with the unions (which may put him in some opposition with the union-owned Obama administration), GM may yet survive though, as I’ve said twice already, probably not without current shareholders losing everything and current bondholders losing something.
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