Analysis: After Opel reversal, GM CEO in spotlight

(Reuters)

At the new General Motors (GM), the buck now stops with the board. The surprise decision by General Motors Co to drop a plan supported by Chief Executive Fritz Henderson to sell the company's Opel unit has raised new questions about the standing of the veteran GM insider after just six months on the job.

"It isn't clear who is running GM," said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. "They've got a problem here."

Henderson, who joined GM in 1984 and worked his way up as a financial manager, has only been in charge of GM since this spring, when the Obama administration ousted Rick Wagoner and ordered the company to appoint outsiders to its hitherto insider-dominated board.

The reversal on selling Opel to a group led by Canada's Magna International Inc suggests to some the new directors - including Ed Whitacre, the former AT&T Inc CEO who now serves as GM's chairman - are not deferring to anyone. Noteven Henderson, who expressed confidence recently the Opel sale would be wrapped up soon.

The sale was controversial from the start. "My view was always if at the end of this Opel ended up outside GM, that was a strategic mistake," Mike Jackson, the head of Auto Nation, told the Reuters Auto Summit in Detroit.

John Smith, a GM group vice president and chief negotiator in the Opel restructuring, told reporters on Wednesday that the decision not to sell Opel was debated vigorously within GM.

"This has been a close call from the very first of the three detailed reviews with our board," Smith said. "It was a coin toss in August, it was a coin toss in September and a coin toss of a kind in November."

Henderson had Favored Henderson, who vowed to shake up the slow-moving culture of the 101-year-old automaker, had argued the Magna deal was the best remaining choice for cash-strapped GM after seven months of painstaking talks with bidders.

He also said in an interview on CNBC in late October that he thought the board supported the move. So the company's announcement on Tuesday that the board had decided to abandon the sale left industry watchers wondering whether Henderson was out of the loop - or losing clout.

"What worries me is the indecisiveness," Ken Lewenza, the head of the Canadian Auto Workers union told the Reuters Auto Summit on Wednesday. "But if at the end of the day it means success for General Motors, it might make sense."

Henderson was already looking like the odd man out in Detroit, where the other two car companies, Ford and Chrysler, are now run by executives - Alan Mullaly at Ford and Sergio Marchionne at Chrysler - who have spent most of their careers outside the car industry.

The recommendation to replace Wagoner with Henderson, overhaul the board and find an outside chairman was made at the highest levels of the White House and the Treasury Department.

But it was not one that sat easily with everyone, according to Steve Rattner, the former head of the Obama administration's autos task force.

Rattner said in Washington last month that, while it was obvious Wagoner could not continue at the helm of GM after burning through $44 billion in cash in 15 months, it was "less clear was whether GM would be better off with Rick's deputy, Fritz Henderson, or with an outsider."

But the task force had to move quickly in restructuring.

"We were exceedingly nervous about the likelihood of recruiting a thoroughbred outside player, particularly in the midst of turmoil," Rattner said.

Rattner said Henderson had been eager to take on the CEO role at GM, but had asked not to be called an "interim" choice, saying that would undermine his chances of success.

To be sure, outsiders can flame out just as spectacularly as insiders in the car business, as the short reign of Bob Nardelli at Chrysler amply demonstrated.

Although Mullaly is drawing raves from the industry for his turnaround of Ford, Marchionne's magic so far has been confined to Fiat SpA in Europe.

The tougher review of management decisions by GM's board will also be seen as positive by governance critics who had charged the former board with being asleep at the wheel during the long skid into bankruptcy.

And not everyone thinks GM's reversal on Opel was a verdict on Henderson.

Lincoln Merrihew, an analyst at Compete Inc, thinks the decision may just be a reflection that the auto industry is pulling out of its tailspin and the desperate measures GM was once contemplating are no longer necessary.

"Is one possibility that the board is shifting control?" Merrihew said. "Sure. I think a more likely possibility is that they feel more confident in the recovery and less of a need to sell assets."