Just a year after going through its bankruptcy reorganization, General Motors expects to be back in the black for 2010, or so forecast the carmaker’s chairman. But Ed Whitacre, who is also serving as GM’s acting CEO conceded, “there are some obstacles that could get in the way.”
In his second “media roundtable” since taking on the chief executive’s duties at the end of November, a surprisingly candid Whitacre also acknowledged GM “probably made some mistakes” when it dropped more than 1000 dealers as part of its bankruptcy reorganization. And, as a result, it will likely bring back “hundreds,” he added, through a new, Congressionally-mandated arbitration program.
“It was not a perfect process,” said Whitacre, a former chairman of AT&T. As a result, some good dealers may have been cut and, he added, they will “be good” to get back into the General Motors retail network. But Whitacre also expressed concern that GM not be forced to take back “a lousy dealer…arbitrarily.”
During an hour-long session, GM’s new boss covered a wide range of topics including the search for a permanent CEO, a slot left in limbo by the firing, on November 30th, of former Chief Executive Fritz Henderson. An outside search firm has been overseeing the process and Whitacre said he expects it to brief the GM Board of Directors soon, though he declined to say when a candidate might be selected.
If anything, Whitacre’s comments suggested the process will not be a hasty one. A number of possibilities have been raised in the media, but Whitacre would confirm only one, noting that GM new Chief Financial Officer, Chris Liddell “certainly could be” a candidate if he proves himself in his new job. Liddell, who had been Microsoft’s CFO, formally begins his GM career next week.
That will be just in time for the annual North American International Auto Show, an event that typically draws as many as 5,000 journalists during its media preview. Whitacre noted he will be at the NAIAS, though in a relatively casual meet-and-greet role, leaving other executives, such as Vice Chairman Bob Lutz, to handle formal interviews.
Whitacre noted, during his roundtable, that after months of turmoil, the key management slots at GM have largely been filled – though he also made it clear that he and the rest of the Board have put in place strict metrics by which top managers will be judged by.
Two of the last slots were filled late last month when GM hired in two former AT&T executives to handle government relations in its Washington, D.C. offices. That will be critical, Whitacre stressed, conceding that the company’s bankruptcy and multi-billion dollar bailout have left an unpleasant “taste in some people’s mouths” in the nation’s capital, which might reach a point of hostility among some. The willingness to accept the dealer arbitration process clearly underscores GM’s desire to work through that problem.
GM also needs to rebuild relations with the German government, as well as the powerful German auto union, IG Mettal, following the company’s decision not to sell a controlling stake in its European subsidiary, Opel. “We still have work to do,” said Whitacre, noting that top management will meet to plan strategy for Opel on Thursday.
Whitacre also said GM has to prove itself with consumers by delivering good, high quality products.
Earlier this week, the automaker reported a 30% sales decline for 2009, and a 6% drop for December, a month where most of its major competitors, including both Ford and Toyota, saw significant sales increases. Nonetheless, Whitacre said he was “encouraged” by the December figures, in light of the company’s ongoing reorganization, which includes the elimination of four of its eight North American brands.
The Acting CEO added that December and other signs suggest the economy is on the right track. That will be a critical matter if the automaker is to get back into the black this year.
“My prediction is we will be,” he said, later cautioning that “there are some obstacles that could get in the way,” including the economy and fuel prices.
While Whitacre didn’t directly link the two issues, it seems likely that GM’s performance in the market, and the improvement of its balance sheet will determine the timing of a planned Initial Public Offering. There’s been much talk of the IPO taking place in 2010, “but if it did it would be late in the year,” Whitacre noted several times, adding there is “not really” any overwhelming pressure to take GM public again this year.
In other matters, the lanky Texan said GM is “proceeding with the winddown” of its Saab brand, because “I’m not confident” a proposed purchase of the brand by a Dutch-based consortium will succeed. “It’s real easy,” added Whitacre, “Just show up with the money and you can have it. But nobody’s shown up with the money.”
GM had hoped to sell off three of the four brands it planned to abandon, killing off only Pontiac. But the sale of Saturn fell through and it looks like Saab will be euthanized, as well. As for Hummer, which is tentatively being sold to a Chinese carmaker, Whitacre said, “As far as we know, it’s proceeding as it should proceed.” If things stay on track, the Hummer deal would be completed on January 31st.