With Whitacre at GM, Detroit outsiders will be 'in'

Rebecca Cook/Reuters/File
Edward Whitacre (shown here in 2006) is GM's new pick to be its chairman later this summer.

Maybe what US carmakers need in their top ranks is a little less Detroit.

That was the theory when Ford tapped West Coast outsider Alan Mulally to become chief executive officer in 2006. Now General Motors and Chrysler are following suit with personnel changes, as they seek to restructure in bankruptcy with aid from the US government.

GM on Tuesday announced that Edward Whitacre, a Texan and former telecom executive, will take the role of board chairman.

Chrysler is poised to be part-owned by Fiat, with Italian Sergio Marchionne as chief executive of both firms.

The top-level turnover is happening with a nudge from outside Detroit, as both Fiat and the US government are in a position to set terms for the rescues of GM and Chrysler. The Obama administration had an influential role in Mr. Whitacre's selection and will also help fill several other board slots as the company remakes itself.

Bottom line: Between the pressures of bankruptcy and the influx of outsiders, fresh thinking is on the way.

There's no guarantee that new hands on the wheel will steer these carmakers successfully toward profits. But the case of Ford offers hope. When Mr. Mulally arrived from managing commercial jet production at Boeing, there were questions about whether he could get up to speed in a very different end of the transportation industry. But he helped focus the struggling company on a few core tasks: streamlining its product development and fixing a debt-burdened balance sheet. Whereas some industry analysts thought Ford was in much worse shape than GM, it's the one Detroit carmaker that hasn't had to seek a federal rescue.

At GM, Whitacre is clearly not a "car guy." Unlike Mulally, he's not even a manufacturing guy. He built Southwestern Bell into a telecommunications giant that eventually engulfed its former parent, AT&T.
But Whitacre won't have to run the company. As chairman, he will have to keep tabs on how CEO Fritz Henderson is doing.

In Detroit, Whitacre's initial focus won't be on the kind of rapid expansion he pursued as a manager. Instead, he'll preside as GM shrinks, in a bid to become profitable at a smaller size. Whitacre is expected to take the chairman role once GM emerges from bankruptcy, in 60 to 90 days.

Kent Kresa, who is acting as GM's interim board chairman, told reporters Tuesday that he picked Whitacre with input from Steven Rattner of the Obama administration's auto industry task force.

The government, Mr. Kresa said, wants to be very involved in picking GM's board, but after that, does not want to be part of GM's day-to-day operations.

Because it is providing about $50 billion in aid to GM, the government (aka the US taxpayer) is expected to own a 60 percent stake in the new GM.

Kresa said he has been searching for other board candidates "who have been involved in companies where there has been a dramatic change in the marketplace."

At Chrysler, Mr. Marchionne comes as an outsider to the US but not to the industry. He helped Fiat restructure, and hopes for a repeat performance. This week, Fiat reaffirmed its interest in the Chrysler partnership, despite a potential legal delay as the Supreme Court considers whether to review Chrysler's bankruptcy restructuring.

Chrysler's current CEO, Robert Nardelli, is also an industry outsider. A veteran of Home Depot, he will see his role at Chrysler end as the firm emerges from bankruptcy.

– Guest blogger Mark Trumbull is a Monitor staff writer.

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