- The Washington Times - Wednesday, December 2, 2009

General Motors’ ultimate “insider” has been pushed out.

Chief Executive Officer Frederick A. “Fritz” Henderson - a lifer at a company once near death - resigned Tuesday at the behest of GM’s new board of directors.

Analysts said the move was not a surprise - not even to Mr. Henderson, 51, whose father was a Buick sales executive in Detroit.

“It doesn’t come as a total shock,” said Michelle Krebs, an analyst with Edmunds.com.

“The choice of Henderson to stay on after the bankruptcy was always an iffy proposition, and I think that he knew that. It had become increasingly evident over the last couple of months that there was increasing tension between Henderson, [Chairman Edward E.] Whitacre [Jr.] and the board,” she said.

Mr. Whitacre will be interim CEO while the company conducts a global search for a replacement - a search likely to be complicated by federal compensation rules for bailed-out companies.

A reorganized GM exited bankruptcy in July, under federal auspices, with a new board of directors composed substantially of industry outsiders such as Mr. Whitacre, who was CEO of AT&T; Corp. for 17 years.

Steven Rattner, the former head of the Obama administration’s auto task force who oversaw the Chrysler and GM bankruptcies, openly stated that he felt an outsider was needed at GM.

As the representative of GM’s new majority owner - the federal government - he fired former CEO Rick Wagoner eight months ago but kept his deputy, Mr. Henderson.

Mr. Rattner said Mr. Henderson was to be given the title of “interim CEO” but that the word interim was dropped at the request of Mr. Henderson, who observed he could be fired at any time anyway.

Analysts - as well as the Obama administration - argue that GM’s entrenched culture resulted in failure and will destroy the company again if unchanged.

“GM has has a long-inbred management. These guys were on the watch over the last 10 to 15 years of GM’s decline. We always referred to the [old] board as the board of bystanders,” said Paul Niedermeyer, managing editor of the irreverent industry Web site thetruthaboutcars.com.

The site began a running feature called “General Motors Death Watch” about five years ago, he said. Since the automaker’s bankruptcy, the site has become the kinder, gentler “General Motors Zombie Watch.”

Mr. Whitacre announced the resignation at a hastily arranged news conference late Tuesday.

A GM spokesman said the move was about change.

“Based on the determination of the board and the pace of the change in the company, it was determined that it was best to initiate a change in direction,” spokesman Chris Preuss said.

Mr. Niedermeyer said Mr. Whitacre tends to run his companies with a strong hand.

“This is good news. Their management ranks need to be refreshed, they need fresh blood,” Mr. Niedermeyer said. “Look at [Ford CEO Alan] Mulally. Ford had a reputation for entrenched bureaucracy, which [previous CEO] Bill Ford couldn’t cut through.”

A former Boeing Co. CEO, Mr. Mulally is held up by many - including Mr. Rattner - as an example of a visionary outsider who can turn around a struggling auto company.

Many observers say GM will have a hard time attracting such a qualified executive to run its operations.

“Maybe they have someone in mind, I don’t know, but it’s certainly not easy. You have to deal with the board, you’ve got the government in your business, and you’ve got to run a car company that’s got to move quickly to become profitable,” said Ms. Krebs of Edmunds.

“I don’t know where they’re going to find a person to do that,” she said.

In October, the federal government slashed the salaries of the top executives at the 25 largest bailed-out firms by an average of 90 percent.

Mr. Henderson’s compensation was not cut that much, but his base pay was reduced to $950,000 although he will receive $4.4 million in stock.

Mr. Mulally, by contrast, earned $13.6 million last year, and that was down 37 percent from 2007.

Stephen Massocca, managing director of Wedbush Morgan Securities in San Francisco, noted that highly talented executives can choose the companies they want to run.

“It’s going to be difficult to get market compensation at these government-run companies. You’re going to be living in a fish bowl, and you’re going to get hauled in front of Congress whenever to get a paddling,” Mr. Massocca told Reuters news agency.

“People who have options in life are going to look at that and say, ‘Why am I going to do this?’ You start looking at companies like AIG, Fannie Mae and Freddie Mac, ultimately you’re not going to have talented people working or running these companies, because there are going to be better opportunities elsewhere.

“I have no idea if that’s the motivation for Fritz Henderson to resign or if he was pushed out because of not being able to sell the piece of dung that Saab is,” Mr. Massocca said.

Ms. Krebs said Mr. Henderson and the board had clashed recently about the attempted sale of several GM units: Saturn, Saab, and especially Opel, the company’s European division.

Mr. Henderson clung to the original plan to sell Opel, but the board reversed course last month and opted to keep, and downsize, the unit.

It was the right move, Ms. Krebs said, but it created immense problems with U.S. ally Germany, which will experience plant closings and heavy job losses despite having already provided funds to Opel.

“Selling Opel never made a lot of sense to me,” Ms. Krebs said. “I think they made that with their backs against the wall, but he held on to it.”

Sweden’s Koenigsegg Group AB backed out of a deal this week to buy Saab, a Swedish luxury brand. GM said Tuesday there are other bidders but that Saab will be wound down by year’s end if it is not sold by then.

The Saturn deal fell through in October, when Renault wouldn’t commit to producing Saturns under a long-term agreement with racing legend and dealership mogul Roger Penske.


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