The auto industry is still reverberating with the unexpected news Thursday of Edward Whitacre's decision to step down as chief executive and chairman at General Motors. Though the formerly bankrupt automaker has had two profitable quarters, there's still plenty of work remaining to ensure GM's long-term viability. And that work now falls to Whitacre's successor, Daniel Akerson, who'll take over as CEO Sept. 1 and as chairman by year's end.
Not the least of details Akerson will need to tend to is the auto giant's much-anticipated initial public offering of stock, the filing for which could come anytime soon. The offering is expected to raise as much as $16 billion, and help GM to repay the $50 billion it owes the U.S. Treasury.
To do that, Akerson will need to convince shareholders that GM, which is only a year out of bankruptcy and has posted just two profitable quarters, is a worthy investment.
Another Telecom Veteran
In comments made during the company's second-quarter conference call, Whitacre said he was comfortable stepping down at this time because "GM is on the right track with good momentum behind us and a bright future ahead of us." On Thursday the company reported it earned $1.3 billion in the second quarter on revenues of $33.2 billion. The results follow a first-quarter profit of $900 million.
Though a good showing, GM's second-quarter earnings were half that of smaller rival Ford Motor (F), which posted a $2.6 billion gain. Ford also weathered the financial crisis and economic downturn without the aid of a government bailout, unlike GM -- and Chrysler.
Akerson, 61, is little known within automotive circles. He joined GM's board about a year ago, after the company exited bankruptcy. As with Whitacre, former CEO at AT&T (T), a big chunk of Akerson's management experience is in telecommunications. He spent a decade at MCI Communications, before moving on Nextel Communications in 1996 and eventually to Nextlink Communications, which became XO Communications, according to data compiled by Bloomberg.
XO filed for bankruptcy in mid 2002, and Akerson left the company later that year. Since 2003, he has been a managing director at Carlyle Group, a private-equity firm. Akerson's experience in private equity makes him a good choice as Whitacre's replacement, Joe Phillippi, principal of Short Hills, N.J., consulting firm AutoTrends, told Bloomberg News. "He's a PE guy, and the function of a PE guy is cash flow and cash out, as in taking a company public." Phillippi said.
As Much Political as Financial
Some industry insiders, including Micheline Maynard, senior editor at Changing Gears, said it's yet too soon for an IPO. She'd like to see GM log a few more quarters of healthy revenues and earnings, which, of course, are dependent on strong auto sales.
But as the economic recovery seemingly stalls, consumers are less confident that they can take on more debt in the form of auto loans, fearing job loss or other negative impacts, such as further erosion in home values. "Everyone is worried about the economy right now," Maynard told NPR's Morning Edition program.
GM's fast-track to an IPO, however, is as much political as financial. With midterm elections looming in November, the Obama administration is eager to show the American public that it acted prudently in bailing out GM. A public offering of stock would go a long way toward that aim.
President Obama has already held as successes the 55,000 jobs the administration says have been created since the bailout, as well as the million-or-so jobs its says were saved by not allowing GM and Chrysler to go under. Speaking last week, Whitacre wouldn't speculate on the timing of an IPO, but did express eagerness for GM to lose its "Government Motors" moniker that critics have attached to the car company for accepting taxpayer money.
Keeping GM on Course
Still, as Akerson looks to become GM's fourth CEO in half as many years, there's concern that his tenure may be as short-lived as that of Whitacre or Frederick "Fritz" Henderson, who was ousted last December. Whitacre said Thursday it was never his intention to stay one day longer than necessary at GM. The 68-year-old Texan is eager to rejoin the retirement he left behind to help GM through its post-bankruptcy transformation.
The slightly younger Akerson is expected to mark his term in years not months, as in the cases of Whitacre and Henderson, who took over from long-time CEO Rick Wagoner in 2009. Whether Akerson, a Naval Academy graduate, can keep a righted GM on course rides not only on a successful IPO but the company's continued ability to produce vehicles the American driving public wants.
One thing is certain: GM's new admiral has little time to waste in plotting a successful course.
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