Henderson Said to Flunk Board's 100-Day Review on Remaking GM
Dec. 2 (Bloomberg) -- General Motors Co. Chief ExecutiveOfficer Fritz Henderson resigned after eight months on the jobas directors concluded he hadn’t done enough to fix GM’sfinances and culture, people familiar with the matter said.
The board gave Henderson, 51, a 100-day review yesterday onhis performance since GM’s July 10 bankruptcy exit, said thepeople, who asked not to be identified because the discussionswere private. Several directors also expressed the view that anoutsider was needed to run the automaker, one person said.
Henderson’s exit caps a tenure that included the abortedsales of the Saturn, Saab and Opel units; a struggle to replacetop managers such as Chief Financial Officer Ray Young; and U.S.market-share losses. Chairman Ed Whitacre took over on aninterim basis, giving the former AT&T Inc. CEO and chairman achance to help pick a successor and put his stamp on GM.
“The next person will be the board’s person,” saidMichael Robinet, an analyst at CSM Worldwide Inc. in Northville,Michigan. “They will have interviewed and vetted the person.”
The search for a new CEO “begins immediately,” Whitacresaid in a statement released by GM after the board met yesterdayin Detroit, where the automaker is based.
GM hadn’t started recruiting before that session, said oneperson briefed on the effort. The pace and scope of Henderson’sprogress fell short of what the board wanted, said the people,who wouldn’t provide details. While the new directors have beenon the job about 145 days, since GM left Chapter 11, theyreferred to the evaluation as a 100-day review, the people said.
Tom Wilkinson, a GM spokesman, declined to comment beyondthe statement.
‘Accelerate Our Progress’
Whitacre, 68, was selected by the Treasury’s auto taskforce to lead the revamped board when GM left Chapter 11 withthe government as the majority owner. He told reportersyesterday that “we need to accelerate our progress.”
The comment echoed Whitacre’s remark in a Nov. 10 interviewin which he said he was urging executives to “hurry” whilesaying the board was “fully behind Fritz.” Henderson, a 25-year GM employee, became CEO in March when the task force askedRick Wagoner to leave as part of a U.S. rescue.
Until midday, there was no sign at GM’s board meeting thatHenderson’s job was in jeopardy, two people familiar with thesession said. Directors approved GM’s 2010 business plan and ablueprint for restructuring the Opel unit in Europe before thetalk turned to Henderson’s evaluation, the people said.Henderson was at today’s meeting, the people said.
Conference Call
GM management learned of the board’s decision about 2 p.m.Detroit time yesterday, when the eight-member executivecommittee and other senior leaders were summoned to a conferencecall on which Whitacre delivered the news of Henderson’sresignation, people familiar with the discussion said.
Managers asked Whitacre whether he wanted theirresignations, and he told them he had faith in their abilitiesand wanted them to stay, two people with knowledge of theconference call said.
Henderson’s departure stunned executives, said one personclose to the board’s discussion. GM had exceeded the financialtargets in the viability plan crafted by management and theTreasury’s auto task force, the person said.
The Treasury’s force told directors at an Aug. 3 meetingthat Henderson had a 40 percent to 60 percent chance of fixingGM, a person familiar with the briefing said at the time. Taskforce advisers also urged GM to bring in outsiders to help shakeup a hide-bound culture, that person said.
The value of having an outsider as CEO resurfaced atyesterday’s meeting, said one person familiar with the session.
Bankruptcy, Exit
Henderson’s service as CEO was the shortest at GM since atleast 1912, according to records compiled by trade publicationAutomotive News. His previous posts at GM included working asCFO and chief operating officer under Wagoner.
As CEO, he presided over GM’s slide into bankruptcy on June1 and emergence 40 days later backed by $50 billion in federalaid.
Last month, Henderson surprised analysts as GM reportedgenerating $3.3 billion in cash in the third quarter and saidrepayments would start early on $6.7 billion in federal loans.At the same time, he said GM lost $1.15 billion and wouldconsume cash again this quarter.
Whitacre also said last month he favored an initial publicoffering later than that originally discussed by Henderson.
Board Disagreements
“Whether it was the sale of Opel or the timing of a GMIPO, it had become clear in recent months that the board and theCEO were not always on the same page,” Himanshu Patel, aJPMorgan Chase & Co. analyst in New York, wrote in a report lateyesterday.
The disagreements were “useful in some cases, but probablyunhealthy for any company longer term,” Patel wrote.
Whitacre told reporters in Detroit that Henderson “hasdone a remarkable job leading the company through a time ofchallenge, and momentum has been building over the past severalmonths, but we all agreed changes needed to be made.” He didn’ttake questions or elaborate on the executive shake-up.
With his new duties, Whitacre said he will be working atGM’s Renaissance Center headquarters in Detroit on a “dailybasis.”
The automaker notified U.S. officials about Whitacre’sascent and Henderson’s departure, said Chris Preuss, a GMspokesman. GM’s board, not the Obama administration, madeyesterday’s personnel decisions, a U.S. official said.
Pressure on Henderson
Henderson was under pressure to return GM to profit aftermore than $88 billion in losses since the end of 2004. GM’s 2009U.S. sales through November tumbled 32 percent, and its marketshare was 19.8 percent, down from 22 percent a year earlier.
GM is cutting its U.S. brands from eight to four, keepingthe Chevrolet, Cadillac, Buick and GMC brands. In addition toending its affiliation with Saab, GM is winding down Saturn andPontiac and has a deal to sell Hummer to Chengdu, China-basedSichuan Tengzhong Heavy Industrial Machinery Co.
Also under way is a search for a new CFO to replace Young,who will be reassigned as a lieutenant to Nick Reilly, the chiefof GM’s international operations, people familiar with thatsearch have said.
Henderson’s successor will face challenges including therestructuring of Opel, the quest for profit in North America andthe management of the remaining four U.S. brands, CSM’s Robinetsaid.
“There are still a lot of balls in the air,” he said.
To contact the reporters on this story:Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net;David Welch in Southfield, Michigan, at david_welch@businessweek.com;Katie Merx in Los Angeles at kmerx@bloomberg.net.
Last Updated: December 2, 2009 00:03 ESTSource: Bloomberg
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