GM: It’s more management on the fly at General Motors. That’s certainly the impression left by its sudden change in chief executives. Swapping in Dan Akerson for Ed Whitacre may be a better long-term solution. But clumsily announcing the switcheroo on the eve of a potential IPO filing adds to fears the company isn’t quite ready for prime time.
Not that Akerson is a bad choice. He was involved in GM’s major post-bankruptcy decisions as a board member. And his background running Carlyle’s buyout funds, and before that XO Communications, suggests he has useful restructuring experience.
But the decision – announced in improvisational fashion at the end of the carmaker’s second-quarter earnings call – seemed hastily executed. Akerson wasn’t even present - he was dialing in - and at one point he and Whitacre were talking over each other.
Whitacre says he has been discussing the move with the board since taking over in January. But given that almost every major piece of news from GM has leaked its way into the press well ahead of time – from its second-quarter earnings to its $5 billion credit line to the timing of its IPO filing – the management shift was a bit of a shocker.
Akerson is now GM’s fourth boss within 18 months. That’s no problem longer-term, assuming he stays put. But it is yet another management change in a company that is still struggling to root out decades-long practices that led the company into bankruptcy.
True, it’s having some success, as last quarter’s results show. Market share and cash flow improved, and earnings jumped 54 per cent from the first quarter to $1.3 billion. But a much lower tax rate of 23 per cent helped generate half that gain. And despite shedding most of its debts in last year’s bankruptcy, GM’s North America pre-tax margin, at 7.9 per cent, is running at just two-thirds of Ford’s, its more heavily indebted rival.
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A new, younger boss with relevant experience in taking a bust company back to the market may be the right way forward. But throwing him in at the last moment before an IPO means prospective investors will have no assurances he will click with GM’s current executive team, not to mention the rank and file of the broader organisation.
That may well prompt investors to push for a lower valuation as a result - thus hurting returns for Uncle Sam, which owns 61 per cent of the company and is expected to sell shares in the IPO. A couple more quarters to iron out the kinks and allow Akerson to get his feet under the desk would serve GM’s return to the stock market well.