By Thomas Heath and Frank Ahrens
Washington Post Staff Writer
Friday, August 13, 2010; A01
General Motors took an unexpected detour Thursday, as its chief executive said he is stepping down just days before the company plans to file what may be the biggest initial public offering of stock in U.S. history.
At the same time, GM announced its biggest profit in six years, a $1.3 billion turnaround quarter as the nation's top automaker prepares to pay back the government's $51 billion bailout a little more than one year after emerging from bankruptcy.
It's not typical for a chief executive to announce his resignation on the eve of an IPO, but that's what the 68-year-old Edward E. Whitacre Jr. did, saying he will be succeeded on Sept. 1 by Daniel F. Akerson, a GM director and a managing director of the Carlyle Group, a Washington private-equity firm. The Obama administration appointed Akerson, 61, to GM's board a year ago after forcing G. Richard Wagoner Jr. to step down as chief executive.
"My goal in coming to General Motors was to help restore profitability, build a strong market position and position this iconic company for success. We are clearly on that path," said Whitacre, the former AT&T chief who took over GM's top job in December after the board fired Wagoner's successor, Fritz Henderson. Henderson faltered in getting rid of unwanted company assets, such as Saturn and Saab, and was criticized for being a GM lifer, unable to make fundamental change.
"A strong foundation is in place and I am comfortable with the timing of my decision," said Whitacre, who will exit as chief executive in less than one month but will remain GM chairman through the end of the year.
GM's filing to sell shares of stock could come as early as Friday, with the launch itself coming later this year, according to sources close to the situation who spoke on the condition of anonymity because the company has not yet filed.
The government owns 61 percent of GM, which is hustling to shrug off the "Government Motors" tag. GM has paid back $7 billion of a government aid package worth $50.7 billion. The remainder of the payback will come from the history-making IPO, which some analysts guess will bring as much as $70 billion. To date, the largest IPO in U.S. history is the $17.9 billion offering by Visa in March 2008, according to data compiled by Bloomberg.
Unlike with the Wagoner sacking, both the government and GM said Whitacre's exit was decided solely by the company.
"The board advised [the government] of the decision, but they did not have to approve it," said GM spokesman Greg Martin.
Treasury Department spokesman Mark Paustenbach agreed. "Today's management changes were commercial decisions made by the General Motors board of directors and as such did not require any government approval," he said.Tough critic of GM
Like Whitacre, Akerson has a background in telecommunications, having held top jobs at Nextel, MCI Communications and XO Communications. He joined the Carlyle Group in 2003 and is head of its global buyout division and a member of the firm's executive committee.
He became the chief architect of GM's bankruptcy after he was put on the GM board by former government "car czar" Steve Rattner a year ago, thanks to his experience in finance and turnaround management. Akerson was known as a tough critic of GM's internal attempts at a makeover, arguing that it did not go far enough to change the company's sluggish culture.
"There are remarkable opportunities ahead for the new GM, and I am honored to lead the company through this next chapter," said Akerson, who was recruited to Carlyle by close friend and Carlyle co-founder William E. Conway Jr. because of Akerson's front-line operations experience.
"I knew he was a leader," said Conway, who called Akerson "one of the real stars of American business."
They met 28 years ago at MCI Communications, where Conway was the chief financial officer and Akerson, a 1970 graduate of the U.S. Naval Academy who served five years on a destroyer, ran one of the telecommunications company's big divisions.
"People follow him. He is good at hiring and firing. He knows how to build a business. Operations. Finance. He had really done it. I thought he would be a big plus for Carlyle," Conway said.
Akerson lives in McLean, where he just built a new home. He is likely to keep the home, but leaving Carlyle for the job of chief executive at General Motors will probably be a financial sacrifice. As a Carlyle managing director, Akerson makes millions a year. He is unlikely to match that compensation at GM, which will be under close scrutiny for years because of the taxpayer bailout.
While Conway bemoaned the loss, he said that no one -- including himself -- is irreplaceable and that Carlyle has a deep bench of candidates to succeed Akerson.'Big surprise'
Whitacre's resignation stunned auto analysts.
"It was a big surprise, and it caught everybody off guard," said Jeremy Anwyl, chief executive of the auto Web site Edmunds.com. "But when you step back, it makes all kinds of sense." Anwyl said that part of an IPO is the "road show" -- when the company's top executives travel the country, seeking investors. "If you're doing a road show, investors are entitled to know who the managers are for the foreseeable future. Instead of dodging the question of succession planning, GM is answering it in the most tangible way."
Whitacre's short tenure raises a question: If his plan all along was to be a transitional leader, why did the board fire the previous transitional leader, Henderson?
"At the time, Fritz provided necessary leadership continuity as the company went through a period of great change," GM's Martin said. "But the board eventually decided that a new direction was needed to drive the company to a new level of urgency and decisiveness not previously seen."
Once the backbone of American manufacturing, GM -- like its nearby rival, Chrysler -- now stands at a turning point.
One year ago, both companies were emerging from government-backed bankruptcy on unsteady legs. Chrysler survived liquidation with a hasty marriage to Italy's Fiat, which now owns 20 percent of the company and has management control. The government took a more direct interest in GM, first sacking Wagoner, who is now a Washington Post Co. director, and taking a 61 percent ownership stake in the company. Ford was the only one of Detroit's Big Three to pass up a government handout.
Earlier this week, Chrysler said that it narrowed its second-quarter losses and that it plans to bring a small and popular Fiat model to the U.S. market later this year. GM, thanks to cost cutting and solid sales among its four remaining brands -- Chevrolet, Cadillac, Buick and GMC -- swung to second-quarter profitability.
At GM, even though 14 of 15 top executive jobs have turned over during the bankruptcy, much of the lower management remains, raising questions about just how much the company has changed.
"There is still clearly work to be done in stability and credibility," said Edmunds.com's Anwyl.
Much will depend on the fate of the 2011 Chevrolet Cruze, the first mass-produced new vehicle rolled out by the new GM. Starting at less than $17,000, the Cruze enters the crowded and competitive field of high-mileage compact family sedans, going up against Toyota, Honda and several other automakers.