There’s a new sheriff in town (GM)

DFN: If anyone can turnaround, save GM, its Ed Whitacre.

GM CEO takes bold steps

He topples hierarchy, vows to repay U.S. loans

BY TIM HIGGINS
FREE PRESS BUSINESS WRITER
http://www.freep.com/article/20100110/BUSINESS01/1100452/1322/GM-CEO-takes-bold-steps

SAN ANTONIO — Ed Whitacre walked into Charles Foster’s office one day a few years ago to chew the fat.

The two executives and friends — Foster was a senior executive at SBC Communications at the time and Whitacre was CEO — were older men reflecting on their successes.

"Life has been good to me," Foster recalled telling Whitacre. "I’ve really been able to get everything I want and certainly everything I need.

"And he said, ‘Well, I don’t.’

"I said, ‘What is it that you want that you don’t have?’

" ‘I want a bulldozer.’ "

Soon enough, Whitacre — who spent 17 years as CEO and $200 billion to put AT&T back together again — bought a used bulldozer to push things around on his south Texas ranch.

After taking over Dec. 1 as General Motors’ CEO — after Fritz Henderson resigned under pressure — Whitacre is pushing things around again.

And employees at the Detroit automaker still are trying to figure out Edward E. Whitacre Jr.

Interviews with friends and former colleagues paint a picture of a man who is loyal to those he trusts and is able to focus on the short-term while having a long-range vision. He’s also called impatient. Upon announcing plans to retire from AT&T in 2007, his local newspaper in San Antonio said that Whitacre planned to spend his time on civic causes such as schools and highway congestion.

Yet more than one person said Whitacre seemed bored as a retiree in San Antonio, where he has a $2.1-million mansion in an old-money neighborhood two miles from downtown, a nearby ranch and an easy life of golfing, fishing and hunting with his chocolate Labrador retriever, Lucille.

Starting from scratch

While he may have initially turned down the Obama administration’s request last year to become chairman of General Motors, none of his friends and former colleagues interviewed by the Free Press were too surprised that he ended up eventually accepting — despite his self-proclaimed lack of automotive knowledge.

Now at GM, he is wasting no time getting his hands dirty. Whitacre has rewritten the company’s mission statement, shuffled the senior executive ranks, hired a new chief financial officer and brought in a couple close allies from his days at AT&T, including John Montford, who was made senior adviser for government relations and global public policy .

Whitacre has promised to pay back $6.7 billion in U.S. government loans by the end of June and faces the challenge of eventually taking the company public again, so taxpayers can try to recoup more of the nearly $50 billion the U.S. government spent to keep GM alive last year.

He faces the twin challenges of making the company profitable as quickly as possible — something he said he hopes occurs this year — and doing all of the preparation required for a company to become publicly traded, something he said could happen as soon as late this year.

Mixing in the elevators

Whitacre also is setting up a new style of leadership.

GM’s culture faced heavy criticism from the Obama administration’s auto task force.

As a hierarchical company, it was unusual for a higher-ranking GM executive to visit an underling’s office. The task force head even complained about how GM’s top executives rode elevators equipped to bypass workers on other floors of the headquarters.

Not in Whitacre’s world.

Whitacre jokes that he rides all of the elevators.

Workers say they bump into the new CEO wandering the halls of GM’s Detroit Renaissance Center headquarters, chatting up workers as he goes, asking for directions and popping into offices to talk.

Whitacre can be seen eating lunch in the RenCen food court, where he ate a taco salad on a recent afternoon and confided to an executive that it was "OK, but you haven’t had Mexican until you’ve been to Texas."

"That’s just me," the new chief executive said in a recent interview.

"I don’t feel isolated or insulated at all," Whitacre added.

In his first week as GM CEO, Whitacre even donned jeans and an old sweatshirt to visit a Flint assembly plant — a dramatic contrast to Henderson.

In an interview with the Free Press, a week before Henderson’s resignation, the subject of jeans came up. "I have jeans. I do wear them — at the appropriate time. I do have more suits than jeans, though," Henderson said.

Whitacre said those were the only clean clothes he had because he was living in a hotel. Since then, Whitacre has found an apartment but says he hasn’t had time to explore Detroit beyond eating at a few restaurants.

As CEO, Whitacre said his days are longer than the one or two days a week that he had been spending in Detroit as GM’s chairman alone. "It’s like 14 hours a day, 5 1/2 , six days a week, and when I think I can escape for a weekend, my phone rings," Whitacre said.

Despite the interruptions, Whitacre confessed he likes the job.

The early days

Whitacre grew up in a sleepy railroad town in Texas called Ennis. In his senior year of high school, he played on the baseball team and took photographs for the school yearbook.

While others in his class were headed toward jobs with the railroad, Whitacre’s parents wanted something else for him.

"My father was a locomotive engineer for 50 years," Whitacre reminisced in an ExxonMobil corporate publication in 2008 after he joined the oil company’s board of directors. "He never finished high school. He told me he did not want me working for the railroad. Both my parents were insistent that I get a college degree."

Whitacre set off for an engineering degree at the Texas Tech University in Lubbock, in part because the tuition "was only $75."

He landed a job at Southwestern Bell in 1963 as a facility engineer, launching a career in the telecommunications industry that would make him rich and powerful.

Along the way, his career took him through a variety of positions throughout the company, requiring him to move 19 times and to live in Texas, Arkansas, Kansas and Missouri.

A force at AT&T

Tom Frost, a retired San Antonio banker, was on the Southwestern Bell board of directors when Whitacre was elected CEO in 1990 and remembered Whitacre’s rise.

"He started from the bottom — even climbing (telephone) poles. He had had experience in the entire organization," Frost said.

Early on as CEO of Southwestern Bell, which eventually became known as SBC and then AT&T, Whitacre displayed traits that Detroit is now seeing in action.

He surprised St. Louis in 1993 when he announced that he was moving the company’s corporate headquarters from Missouri to San Antonio

In the late 1990s, as the telecommunication industry sat on the precipice of deregulation, Whitacre told his executives that they needed to make a decision that either they were going to begin buying up competitors or be purchased themselves.

"We were the smallest of the Baby Bells. … We knew that if we didn’t become the aggressor, we were going to get bought up," said Foster, the former SBC executive.

"He had vision out beyond where the rest of us were," he said. "We were spending all of our time getting things done inside the company, and he was spending a lot of his time trying to figure out what the future was going to look like."

Whitacre led SBC through a slew of acquisitions, buying up other Baby Bells and eventually acquiring AT&T and adopting its name. In 2006, Whitacre’s final full year as AT&T CEO, the company had $117 billion in revenues, a market value of $244 billion and generated a 53% total shareholder return, according to the Texas-based company. (GM, by contrast, posted losses of more than $80 billion since 2005 before filing for bankruptcy reorganization last summer.)

"Of all of the Bell company executives, after the breakup of AT&T, he was the one who wouldn’t accept the status quo. He wanted it to be that his company was the best," said Reed Hundt, who was chairman of the Federal Communication Commission when Whitacre began his buying spree.

"By operational excellence and acquisitional brilliance, he did build the winner," Hundt added. "That’s a big deal — there were a lot of tough competitors, but he built the winning telecom company in America."

The rapid expansion of AT&T is not without critics, though.

"Most of those who love him are dealmakers," Jeffrey Sonnenfeld, associate dean for executive programs at Yale School of Management, previously told the Free Press.

Pete LaTona, a former AT&T sales manager, was critical of Whitacre in an essay published by the American Chronicle last summer, saying the company’s large acquisitions hurt the company.

"An already low level of customer service only got worse as the financial pressures from acquisitions grew," he wrote. "The company became obsessed with getting more and giving less."

At GM, Whitacre is talking about increasing sales and growing the automaker’s market share. He hopes to return to profitability in 2010, the first time since 2004 and a year ahead of previous plans.

A search is under way for a new GM CEO, and Whitacre says he doesn’t know how long he will have the position. Asked what he would be doing if he wasn’t at GM, Whitacre told the Free Press: "I’d probably be on a … bulldozer pushing around dirt."

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: