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.

New era of capitalism deepens -- Chrysler sale OK'd by high court

The new post-financial system collapse era of American capitalism took off in earnest today when the U.S. Supreme Court lifted its stay and cleared the way for Chrysler Corp. to be acquired by its union and Fiat, the Italian automaker. According to Cable News Network (CNN), the high court voted to turn down an appeal by Indiana state pension funds that had challenged the complex deal, removing the last impediment to the White House-backed sale. The court had delayed the sale Monday, apparently to review last-minute filings from the parties. The ruling means Chrysler, for decades the third-largest U.S. automaker, will emerge from bankruptcy owned primarily (55 percent) by the United Auto Workers trust with minority ownership (20 percent) by Fiat. The governments of the United States and Canada also will own smaller stakes, CNN said. "We are delighted that the Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker," the White House said after the Supreme Court order, according to CNN. The quick action by the high court was vital to avoid Chrysler's liquidation, CNN said, because the automaker had shut down operations after its bankruptcy filing last month and was losing $100 million a day.

The last American car

Chrysler's bankruptcy filing may have bought the beleaguered carmaker a little more time in the short term, but signals the end of the U.S. automobile industry as any of us have ever known it. When the third-largest domestic car company emerges from court protection in August, the entire industry will not look anything like it does now. If the U.S. government gets its way, and there doesn't seem to be much reason to think it won't, Chrysler will be majority-owned by the United Auto Workers healthcare trust fund and merged with Fiat, which will be tasked with introducing the innovative, gas-efficient new models that stumped its previous owners for 40 years. If it is successful running Chrysler, Fiat -- an Italian company -- will end up the majority owner, according to the Reuters international news service. General Motors, once the symbol of American capitalism, is laying off tens of thousands of workers, shutting down subsidiaries and will wind up majority-owned by the U.S. government. Bondholders and previous shareholders will end up with very little. Only Ford, the second-largest U.S. automaker, has not mortgaged its present and future to borrow billions from the feds. U.S. President Barak Obama endorsed the Chrysler bankruptcy filing, saying it would save jobs at the automaker, and at auto parts companies and other firms that supply it. But Obama criticized some of Chrysler's bondholders and creditors that refused to agree to a proposal to reduce the automaker's debt by nearly $5 billion. "I stand with Chrysler's employees and their families and communities," he said. "I don't stand with those who held out when everybody else is making sacrifices. That's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations." The bankruptcy filing evoked memories of 1980, when the United States provided more than $1 billion in loan guarantees to keep Chrysler afloat.