Wednesday, July 1, 2009

Industry experts fear GM still stuck in same gear

Nice to hear that automobile industry experts have begun to question General Motors' decision to choose a longtime veteran insider to run the largest U.S. automaker after the federal government made removal of the old CEO a condition of extending billions of dollars in loans. Cable News Network (CNN) said today that "many" industry experts are questioning whether 25-year GM insider Fritz Henderson is the right person to make the major changes needed to turn the largely moribund carmaker around, an issue raised here three months ago. Like the Ford Motor Co. and bankrupt Chrysler Corp., GM has been unable to build fuel-efficient vehicles that could compete on quality with rival Japanese automakers Toyota and Honda, even more than 30 years after the first OPEC oil embargo heralded a sea change in world fuel supplies. GM filed for bankruptcy protection at the urging of the Obama administration on June 1. "The removal of managers and executives has been mainly at lower levels, thinning ranks and taking out layers. It's not replacing people who made the mess and created the culture," said former GM market research and planning executive Rob Kleinman. Now managing director of consulting firm RAK & Co., Kleinman said what GM needs now is a management overhaul if it is to return to profitability. "Most successful turnarounds have been led by outsiders," he said. "The fact that Fritz [Henderson] seems dedicated to keeping the management team in place makes me extremely uncomfortable." In fact, GM's domestic rivals are being run by former industry outsiders, with Ford hiring Alan Mulally from Boeing in 2004 and Chrysler now headed by Fiat CEO Sergio Machionne, who was not in the industry when he was hired by the Italian carmaker in 2004, Reuters said. "You need some fresh blood in there," said industry analyst and consultant Erich Merkle. "The culture is not one that fosters speed, especially speed to market." But Henderson insisted Fortune magazine that he can bring about the necessary changes, CNN said. "I know the industry inside and out; I know the industry well," he told the magazine. "I think that does bring some experiences that can be very helpful in terms of change because I know what needs to be changed." And David Cole, chairman of the Center for Automotive Research, called Henderson a "high-speed decision-maker" who already has made important changes in GM's executive culture, CNN said. But Kleinman said GM was suffering from being out-of-touch with consumers and a decided lack of accountability, things a corporate insider would be unlikely to be able to fix.

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