GM Maps Future by Revamping Management Team

When General Motors Corp.'s (NYSE: GRM) Chief Executive Officer Fritz Henderson resigned last week, it not only set off a comprehensive management shakeup at the highest levels, it also signaled an entirely new direction for the beleaguered carmaker's future.

Henderson's resignation was the definitive moment in the changing of the guard at GM, and the death knell for a culture built on a "business as usual" mind-set.

That much was made clear by new Chairman and Interim CEO Ed Whitacre Jr. as he laid out his vision for the company's future for about 800 high-level employees at a meeting last week.

Whitacre's address emphasized his determination to remake the Detroit automaker into a company "able to respond quickly to changes in the market, while still retaining the global scope necessary to develop world-class products and technologies."

The shakeup comes after the company slashed costs and headcount in order to restructure and emerge from the bankruptcy it filed last June. In the United States, it will be left with only 34 assembly plants, down from 47 in 2008, and its headcount will decline from roughly 91,000 at the end of 2008 to about 64,000 by the end of 2009.

In order to make the reductions the company has been forced to cut its catalog offerings to four primary brands: Cadillac, Chevrolet, Buick and GMC. Gone are Saab, Saturn, Hummer and Pontiac. It is in negotiations with Eurozone governments to determine the fate of its Opel brand.

Whitacre hopes his changes have set GM on a new course -- a direction for the future dependent on an aggressive management team that can recapture market share on the home front with new products, while leading expansion into emerging markets crucial for long term growth.

Killing the Old Bureaucracy

Whitacre and GM's board forced Henderson out after only eight months, frustrated with the pace of change and his efforts to transform the company from years of declining market share and tainted consumer perceptions.

Whitacre, the former CEO at AT&T Inc. (NYSE: T), has said he wants to speed up changes so the company can boost sales and market share and repay much of $52 billion in government loans with a public stock offering.

As he announced sweeping changes to key management positions, Whitacre urged the automaker's employees to leave behind the old bureaucratic culture, assuring them they would not be fired for taking risks.

"We want you to step up. We don't want any bureaucracy," Whitacre told employees, strolling back and forth across a stage at the company's headquarters, according a report on the meeting by The Associated Press. "We're not going to make it if you won't take a risk."

Whitacre said that he's tired of ideas sitting on desks "while we wrangle," and encouraged employees to initiate and accelerate change during the 45-minute speech broadcast to employees worldwide on the Internet.

He appointed 77-year-old Bob Lutz as his adviser for product development, and promoted many of the company's younger executives, while reversing some of Henderson's changes.

"Maximum Bob," an auto industry veteran and chief cheerleader for the upcoming Chevy Volt, will be responsible for "all creative elements of products," as well as customer relationships.

Lutz would seem the perfect foil for the company's old culture, having a long history of challenging the status quo. When Lutz returned to GM in 2001 after 30 years with other companies, he quickly grew tired of GM's numbers-oriented bureaucracy, printing up post-it notes that asked, "Says Who?"

In an e-mail, Lutz ushered in the new era when he said Whitacre will hold people accountable.

"He expects people to execute. Otherwise, he will replace them," Lutz said.

A Big Bet on China

GM's survival hinges on its efforts to expand its presence in Asia and compete successfully on the world stage by offering products that stir consumer demand.

Global automobile sales are undergoing a major reorientation towards Asia and away from the United States and Europe, as manufacturers in China and India continue to advance.

In 2009, the cheap-money policy of the People's Bank of China helped China leapfrog the U.S. to become the largest car market in the world. From January to October, a whopping 10.9 million automobiles were sold in China - easily surpassing the United States, where only 8.6 million vehicles were sold.

GM has become the second-largest automaker in China mainly through a 50-50 venture with its Chinese partner SAIC Motor Corp. Ltd., which makes a wide range of GM-designed cars. In fact, the Detroit auto giant announced it sold more vehicles in China in November than in its home market of the United States, reaching 177,339 vehicles.

That's double the number of cars sold in China a year ago, and enough to boost GM's share of the burgeoning Chinese market by 13%, a spokesman for the company told AFP.

And now, GM and SAIC have reached an agreement to make small cars and commercial vehicles in India, taking their 12-year Chinese partnership into one of the world's fastest growing auto markets, according to a report by The New York Times.

"We have had a successful relationship with them for 12 years," Nick Reilly, president of GM's international operations, told reporters on a conference call last Friday. "It seems to us very sensible and a big opportunity to broaden that relationship outside China."

The India joint venture, in which SAIC will invest cash and GM will contribute existing Indian assets, aims to sell 225,000 vehicles a year in the next couple of years, Reilly said.

An Edge in Battery Technology

On May 19, 2009, U.S. President Barack Obama raised the average fuel economy standards for new cars to 39 MPG and 27 MPG for trucks and moved up the deadline for meeting those standards to 2016.

The change guaranteed that more plug-in hybrid electric vehicles (PHEV) will be on the road soon, with automakers like Daimler AG's (NYSE: DAI) Mercedes-Benz unit, Nissan Motor Co. Ltd. (OTC ADR: NSANY), Tesla Motors Inc. and old rival Ford Motor Co. (NYSE: F) racing to revamp their product lines with alternative energy solutions.

But GM feels it has an ace in the hole with the cutting-edge lithium-ion battery technology powering its new PHEV, the Chevy Volt.

The Volt's battery packs will deliver three times as much energy per pound as the nickel-metal based batteries weighing down the Japanese hybrids, and are so advanced they feature dedicated on board computer controls to manage electric-power flow and heating and cooling equipment.

With fully charged batteries the Volt is designed to cruise for up to 40 miles without touching a drop of gas - the average distance 75% of Americans travel on their daily commute. After a recharge from the internal combustion engine, the Volt should easily average over 100 MPG.

The car is so important to GM's future that before he resigned, Henderson called the new technology "the lifeblood of the future."

Currently, more than 13,000 people have signed up on GM's waiting list and the company is projecting the initial product launch may require over 100,000 vehicles.

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