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The circumstances surrounding the resignation of General Motors (NYSE: GRM) Chief Executive Officer Fritz Henderson are still unclear. But it's likely that whoever succeeds Henderson will no doubt have a turnaround plan more compatible with that of the company's board, and will likely come from outside of GM's ranks.
Henderson, who resigned Tuesday, was a longtime GM veteran who joined the company's treasurer's office in 1984. The Detroit-born Henderson is the son of a former GM executive. He became CEO in March after the Obama administration ousted then-CEO Rick Wagoner.
And therein was the problem: Henderson was so firmly entrenched in GM and its old culture that it was trying to shake, the board lost confidence in his ability to transform the company that would one day emerge from years of declining market share, a tainted consumer perception, and ultimately, bankruptcy.
"My biggest strength is I've been with GM for 25 years," Henderson said, according to an interview with Bob Lutz, the company's vice chairman of product development, The New York Times reported. "And my biggest weakness is that I have been with GM for 25 years."
Henderson's resignation was largely seen as affirmation that his numerous actions to change the ailing company were not enough. He was said to have flunked his 100-day review yesterday, people familiar with the matter told Bloomberg News .
Public statements made by Henderson and government-appointed Chairman Edward Whitacre Jr. sometimes clashed, indicating the two executives had different visions on what direction the company should go.
For example, when GM emerged from bankruptcy in July, Henderson targeted an initial public offering (IPO) for next year. Months later in November, Whitacre would tell The Wall Street Journal there was no timetable for an IPO.
"I think it's even too early to speculate" on an IPO," Whitacre told The Journal. "The sooner the better…but I really do not know."
Whitacre said last month that he and GM's board felt greater pressure to pay back the company's debt to the U.S. government.
"I'm feeling internally and the board is feeling internally the need to start paying back the debt to show the taxpayer that we're making progress," he said. "We are definitely feeling the pressure."
Whitacre, himself an outsider best known for building AT&T Inc. (NYSE: T) into one of the largest telephone companies in the world, is an outsider like Ford Motor Co. (NYSE: F) Chief Executive Officer Allan Mulally, a former executive at The Boeing Company (NYSE: BA) who had no previous experience in Detroit.
Mulally has been credited with preventing the need for Ford to take government bailout money, which went a long way in the minds of U.S. consumers who contributed to the strengthening of the company's market share. He also pared down the automaker's brands and is making marked progress in paring down the very $26 billion in debt that helped Ford pass on government intervention.
Now, GM hopes to pay Ford the sincerest form of flattery – imitation. Several directors expressed the view yesterday that the new CEO should be an outsider, people familiar with the matter told Bloomberg. That's in line with what the Treasury's auto task force urged in an August meeting with GM's board.
Still, Whitacre wouldn't commit publicly to bringing in an outsider.
"Will it be internal or external? I don't know," he said in a 30-minute address to GM employees. "Will we make a valid look? You bet we will. Will we find the right person? You bet we will. In the meantime, it may take a year, I don't know how long it will take."
Although the U.S. Treasury, which owns 61% of GM, says it had no involvement in Henderson's resignation, the company's board eventually decided it was time for Henderson to go.
"There was no direction or input from the government," GM spokesman J. Christopher Preuss told The Wall Street Journal. "It was completely by the board and of the board."
While GM searches for Henderson's replacement, Whitacre will take the reins on day-to-day duties at the automaker, which include the restructuring of its Opel unit, driving the company back toward profitability and finding new blood for key management positions.
News and Related Story Links:
- The New York Times:
GM Asks Its Chief to Resign
- Bloomberg News:
GM's Henderson Said to Flunk Board's 100-Day Review
- Money Morning:
The "New" GM: What Will it Look Like, and How Far Will it Go?
- The Wall Street Journal:
Chairman Tightens Grip as GM Rebuilds
- Bloomberg News:
Whitacre Said to Expect CEO Search Taking Up to Year
- The Wall Street Journal:
GM's Chairman Seizes the Wheel