The TakeAway: Will the “new improved” GM fulfill its social duties as it prepares for an IPO?
“What’s good for GM is good for America”, the old saying goes. But that’s a misquote. Former GM CEO Charles Erwin Wilson really said, “What’s good for the country is good for General Motors, and vice versa.” This saying took on new meaning last year when the two entities fused, as the US government injected $50 billion (some say $65 billion) of bailout funds into GM to rescue the “too big to fail” automaker from bankruptcy. As a majority shareowner, the US Treasury took the steering wheel, while Wall Street executives and union leaders sat in passenger (and board) seats.
Yesterday, GM announced that Edward Whiteacre, the handpicked CEO that the Obama Administration recruited from retirement a year ago, is stepping down. The company also posted quarterly profits of $1.3 billion on the strength of revenues that climbed to $33.5 billion – the best quarterly results in six years. Which leaves us to ponder the implications for the “good for US / GM” equation.
First, let’s look at the numbers. For the first time in years, Michigan no longer leads the list of states with the highest unemployment rate: July rankings from the Bureau of Labor Statistics peg Michigan’s 13.2 percent at second place, after Nevada’s 14.2 percent. (The national unemployment rate is 9.5 percent.) According to Bloomberg, Detroit lost 18,700 jobs in the last year, ending in June. (Chicago led that list, losing 76,000 jobs in a year.) Monthly foreclosure rates announced today place Michigan – along with Nevada, California, Florida, Illinois, and Arizona – among the five states that account for 50 percent of the national total, now more than 300,000. Comparing these stats to GM’s financials, we’re better off going with the mis-quoted formulation, in the hope that the company’s new-found financial success trickles down to benefit its home state – and country.
Having grown up in Michigan, I’ve a deep sensitivity to the soul crushing impact of the recession there, which has been going on for decades – long before Michael Moore’s Roger & Me spotlighted the problem. That’s why I have mixed feelings about the GM announcements. Does this mean more jobs for those thousands of laid-off workers and, by extension, all those others who supply goods and services to them, yet are now jobless, too? Can the turnaround team – Wall Street analysts and venture capitalists – revive GM’s sense of public obligation and stakeholder engagement, in addition to strong financial performance? Or do they view these as “luxuries” in the face of market challenges and downsizing?
Outgoing CEO Whiteacre, the former chairman of AT&T, commuted during his yearlong tenure between his Texas home and a Detroit condo. He became GM’s CEO last December, after board pressure forced longtime GM exec Frederick “Fritz” Henderson to resign. Whiteacre’s successor is Daniel Akerson, another government-appointed GM board member, who currently heads the Carlyle Group’s global buyout business and serves as a board member of American Express. Akerson, who has a background in telecommunications, becomes the fourth GM CEO in 18 months. He’s one of several private equity executives – others include Stephen Girsky (Morgan Stanley) and David Bonderman (TPG Capital) appointed to GM’s 13-member board in 2009 with responsibilities for remaking corporate strategy, culture, new business development, and alliances.
It’s clear that GM intends to get out from government ownership, and many believe there will be a public offering – perhaps the largest US history – later this year. Less clear are the lessons of bankruptcy Pulitzer Prize winner and former Dow Jones Newswire President Paul Ingrassia writes about, and assurances that a meltdown won’t happen again. After all, pre-bailout directors remain on the GM board, and you have to wonder if the insular GM culture has really changed with all those outsiders coming into town.
As I think about the economic wreckage in Michigan and so many other parts of the country, I hope the new, improved GM pays heed to something more than stock price: the good of the country, meaning America’s recovery.