Reorganized GM Promises Fundamental Change

Potential casualties of GM’s reorganization are sales chief Mark LaNeve and GM North America President Troy Clarke. Meanwhile, the auto maker renews its relationship with Bob Lutz, who had planned to retire.

Byron Pope, Associate Editor

July 10, 2009

6 Min Read
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The new General Motors Co. features a revamped organization and the promise of fresh faces. And one familiar mug.

Expect the auto maker, which emerges today from bankruptcy, to exhibit marked change from the culture that has stifled its progress in the past, says Fritz Henderson, president and CEO.

GM CEO Fritz Henderson will now oversee auto maker’s North American operations.

“Business as usual is over at GM,” Henderson says here at a press conference to unveil the new-look GM. “Einstein’s definition of insanity is doing the same thing over and over again and expecting different results. We know we have to change, and today is about the beginning of that change. And our job is to prove it.”

A key part of the auto maker’s reorganization includes slimming its U.S. executive ranks 35% by the end of the year, with the majority of the cuts coming from the upper echelons of the company.

Potential casualties include Mark LaNeve, vice president-sales, service and marketing at GM North America, and Troy Clarke, group vice president and president-GM North America. Their positions are effectively eliminated as Henderson now assumes responsibility for the auto maker’s North American operations.

Although Henderson stops short of saying LaNeve will be dismissed, he strongly hints his days are numbered.

“There’s a huge amount of change going on,” Henderson says. “Mark is head of sales today, and because we have a lot of changes between now and the end of July, Mark is responsible for hitting sales numbers this month.

“The North American structure is going away, and there are a lot of (personnel) moves that have to be dealt with in the short term,” he adds.

While LaNeve may be on his way out, Bob Lutz is back in the fold. Lutz, who previously was set to retire, has agreed to return as vice chairman responsible for all creative elements of products and customer relationships.

In his new position, Lutz intends to drastically change the way GM communicates with its customers and the media.

“We’re going to take a much more aggressive stand in communications and be less worried about ‘Gee, what is someone going to think?’ We’re going to go from being very defensive and risk-adverse in communications (to) much bolder getting our story out,” Lutz says.

One thing Lutz won’t try to communicate to the public is GM’s internal culture shift. “The car and truck buyer doesn’t care about that,” he says.

“The car and truck buyer wants to know that these brands are respected, and they will not be derided for buying a GM vehicle.”

Under the new organizational structure, Lutz and Tom Stephens, vice chairman-product development, will work as a team and partner with Ed Welburn, vice president-design.

Henderson outlines four pillars upon which the new GM will be built: Having four brands, rather than the eight GM had pre-bankruptcy, will streamline marketing initiatives, Lutz says.

  • Four core brands in the U.S. and the largest, strongest dealer network in the country;

  • A fresh lineup of Chevrolet, Cadillac, Buick and GMC cars, trucks and crossovers, each with leading-edge designs and technologies that matter to both consumers and the environment;

  • A competitive cost structure, a cleaner balance sheet and a stronger liquidity position;

  • A winning culture focused on customers and products.

“I was head of sales and marketing for BMW and let me tell you, it has to be the easiest sales and marketing job in the world, because you know exactly what your brand stands for, what your product stands for and who your customers are,” he says. “When you’re dealing with many brands it becomes much more difficult. That’s one advantage of focusing on four core brands.”

During the bankruptcy process, GM “wound down” some 1,350 dealers in an attempt to weed out underperforming locations.

However, the House Appropriations Committee earlier this week endorsed legislation that would require GM restore agreements with discarded dealers.

Congressman Stephen LaTourette (R-OH) tells Ward’s GM has failed “to demonstrate there is a savings associated with fewer dealers, since the dealers themselves bear the costs of operating their dealerships with little help from the manufacturers.”

LaTourette bashes the actions, including similar moves by Chrysler Group LLC, as “punitive and secretive.” In a statement sent to Ward’s, he adds: “It’s the most un-American thing for the government to help force you out of business and deprive you of the American dream.”

Should the legislation be enacted, GM would adapt, Henderson says. But the CEO defends the auto maker’s dealer consolidation process.

“Our dealers were wound down in the most responsible fashion possible,” he says. “We certainly don’t think (the legislation) is warranted because we tried to soften the blow for dealers.”

GM will continue to cut its dealer ranks, with an objective to reduce the number in the U.S. from 6,000 this spring to approximately 3,600 by the end of next year. Even with the cuts, GM says it still will have the largest dealer network in the U.S.

The auto maker also announces a new marketing partnership with online auction site eBay in California, Henderson says.

“Customers will be able to bid on actual vehicles just like they do in an eBay auction, including the option of choosing a predetermined ‘buy-it-now’ price,” he says. “We’ll be testing this.”

If the program is successful GM will consider implementing it in other areas of the country, Henderson reveals.

The auto maker also says its subsidiaries outside the U.S., which were not included in the historic Chapter 11 filing, will be acquired by the new company and expects those operations to continue without interruption.

However, a deal that reportedly was going to give Canadian supplier Magna International Inc. a controlling stake in GM’s German subsidiary Adam Opel GmbH has hit a snag. GM continues to monitor the situation, Henderson says without elaboration.

Although the U.S. Dept. of Treasury now controls 60.8% of GM, Henderson says he doesn’t expect to have daily communications with the Obama Admin.’s auto task force as he did throughout the bankruptcy proceedings.

“I certainly think the nature and the frequency of our relationship will change dramatically effective today,” he says.

Meanwhile, former AT&T boss Edward E. Whitacre Jr., GM’s new chairman of the board of directors, says his stint at the telecommunications giant will help him in his new role.

“I’ve been around big companies a long time, and people are the same in all companies,” he says “These are good people, and there’s a lot of change going on, as there was in the telecommunication industry, so there are a lot of similarities.”

Whitacre also defends the re-hiring of Lutz, considererd a rogue by many.

“I gave no pause about hiring Lutz,” he says “He’s a car guy, and he has a lot of history with this company. He’s the right guy for this job.”

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About the Author(s)

Byron Pope

Associate Editor, WardsAuto

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