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General Motors Needs a Culture War


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General Motors Needs a Culture War


'Fritz That's It" was the enigmatic name of a famous night club in Los Angeles that closed abruptly last year. Enigmatic and abrupt also are good words to describe Tuesday's ouster of Frederick "Fritz" Henderson as CEO of General Motors. After just nine months on the job he was told, in effect, "That's it."

It's hard not to feel sorry for Mr. Henderson, who had little time to prove himself. But his removal was the right move. He is a GM lifer, and job one at the company is to change a management culture so hidebound that there was once even a Corporate Bulletin Board Study Committee (no kidding).

Last March, a member of the government's auto task-force asked Mr. Henderson what he thought of GM's corporate culture. "It's fine," he replied. He added, "In reality, it's the only culture I know." Which was precisely the problem.

At the end of March the task force demanded the departure of Rick Wagoner as CEO of GM and Mr. Henderson, by default, was thrust into the job. GM was already getting government welfare and on the brink of bankruptcy. He took over at the worst possible time and with exactly the wrong background.

Not only was Mr. Henderson, like Mr. Wagoner, a GM lifer, he came from a GM family. His father worked for GM and his brother still does. As a baby, Mr. Henderson even crawled around the same playpen with the offspring of other GM executives.

Mr. Henderson might have had a chance had he brought in some key executives from outside General Motors. Instead he named a new executive team that consisted entirely of other GM lifers, with the sole exception of the septuagenarian Vice Chairman Bob Lutz.

Mr. Henderson did dismiss some key Wagoner appointees, but he replaced them with other GM lifers whom he simply promoted a level or two. The company's new board and Chairman Edward Whitacre Jr.—installed by its post-bankruptcy majority shareholder, the United States of America—weren't pleased.

Other signs of discord had surfaced in recent months. The board overruled Mr. Henderson's effort to sell GM's money-losing European operations, including its Opel subsidiary in Germany. The board wants Opel fixed, not sold, because it believes GM needs small-car and diesel technology from Europe.

What's more, Mr. Henderson was talking about floating a GM public stock offering next year. This would be a political bonanza for the Obama administration in advance of the 2010 elections. But Mr. Whitacre was sounding a different tune, saying such talk was premature.

Rosy overoptimism has been a sign of GM's culture for decades. Just last month, GM executives told the New York Times they were sweeping away the "old GM" by shortening the forms for performance reviews and reducing the layers of managers for approving key projects. It was just the sort of early victory declaration that a truly new GM would avoid.

GM's board pounded Mr. Henderson on a slew of issues this week, and over breakfast with Mr. Whitacre Tuesday the embattled CEO asked for an expression of confidence. Mr. Whitacre said no, and Mr. Henderson could see what was coming. At lunch time he quit.

His successor most likely will come from outside GM. One good candidate would be AutoNation's tough-minded CEO, Michael Jackson, who fixed that dealership chain a few years ago. Or the board might go outside the auto industry, as Ford's board did successfully three years ago with Alan Mulally from Boeing.

GM's recruitment challenge is that high-quality candidates won't be lining up to run a company that's nicknamed Government Motors, subject to federal pay regulations and beset by operational disarray. Sales at Chrysler, now being managed by Fiat, are still much weaker than GM's. But at least that company has a clear leader (Fiat's Sergio Marchionne) and a clear game plan (building cars developed by Fiat). GM has neither.

GM owes American taxpayers billions of dollars; if nothing else that should make everyone hope the company finds the right leader, rights itself and succeeds. History shows that unlikely turnarounds can happen, both inside and outside the auto industry. That's what GM needs now.

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