Fritz Henderson Bows Out Of The Game At GM

Detroit Free Press

Fritz Henderson, who pitched for the University of Michigan in the late 1970s, once said his only regret in life was that he didn't have a 97-mile-per-hour fastball.

Even that might not have been enough. The government put him in charge of General Motors when the bases were loaded, an excruciating bankruptcy restructuring was on deck and a new board of directors in the dugout expected nothing less than a perfect game.

Well, Henderson can take a hot shower, take a deep breath and join that growing club of former auto executives who are still young and vital enough to forge a new career path.

"We had a million things to get done in a very short period of time," the 51-year-old Detroit native told a group of Free Press editors and reporters last week.

Ed Whitacre and the new GM board of directors wanted more.

Henderson, the son of a sales manager in the Buick division, was not just a GM lifer. He was a paratrooper. Nearly every assignment he faced after joining the company's New York treasurer's office in 1984 involved a turnaround. In 2004, he took over as president of GM Europe as it was hemorrhaging money and getting ready to pay $2 billion to Fiat to unwind a disastrous partnership created by his predecessor.

Before that, he helped grow GM's business and profits in China and closed the purchase of Korea's Daewoo, from which GM has invigorated its small car offerings in the emerging markets of Asia and Eastern Europe. Henderson also made his mark in South America, where he bolstered GM's already-strong position in Brazil and Argentina.

"He's been all over the world and had been very successful everywhere he went," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "But he's definitely not a patient man."

Upon graduating from U-M in 1980, he earned the highest score in the state of Michigan on the exam for certified public accountants. He worked as an accountant in Detroit for a year or so before entering Harvard Business School, graduating in 1984 and joining GM's New York treasurer's office, which has long been a training ground for the company's future chief executives.

What triggered his resignation is not yet clear. The board reversed a decision, previously supported by Henderson, to sell controlling interest in Opel to generate desperately needed cash to rescue GM's North American business. But after emerging from bankruptcy, keeping Opel became an option.

The board may have lost patience with GM's inability to close the sale of Saturn and, more recently, Saab. Even a deal to sell Hummer to China's Sichuan Tengzhong Heavy Industrial Machinery has not yet closed.

Many said that only an outsider, similar to Chrysler chief Sergio Marchionne, can deliver a wholesale transformation of a culture as historically hidebound as GM. In that respect, Henderson may have been a victim of his résumé and his loyalty.

Not much is clear, as new CEO Whitacre said nothing Tuesday beyond reading a four-paragraph statement. In paragraph two, he said the leadership team -- many of whom are GM lifers like Henderson -- is united and committed to the task at hand.

Henderson's time on the mound is over. Whitacre has turned to the bullpen.

GM Employees Get A Letter From The CEO

Story from the Wall Street Journal

Full text of GM CEO Fritz Henderson's letter to employees on the auto maker's bankruptcy filing:

June 1, 2009

GM Employees:

Today marks a defining moment in the history of General Motors. This morning, we announced an agreement with U.S. Treasury and Canadian and Ontario governments – which along with the recent agreements with the UAW and CAW unions, and sacrifices by our salaried employees and -- will allow us to form a leaner, more customer-focused, more cost-competitive company -- a "New GM" built upon the strongest parts of our business, with far less debt, lower operating costs and the ability to generate sustained and winning bottom-line performance.

To implement these agreements and launch the New GM, it was necessary to enter a court-supervised process, which we did earlier this morning with the full support of the U.S. and Canadian governments. While we preferred other paths to our goal, what is most important is our destination and getting there fast. The court process we're pursuing gives us powerful tools to accelerate and complete the job of reinventing GM. It also provides strong safeguards to our customers and our business between now and the time the New GM is launched as an independent company, which we expect will be in about 60 to 90 days.

As you know, the actions we've taken to create a New GM include some very difficult steps. Today, we're identifying the 14 manufacturing plants that will be impacted by our accelerated plan to improve our capacity utilization, as called for in our April 27 viability plan. These facilities include our Pontiac and Wilmington assembly plants, our Grand Rapids, Indianapolis, and Mansfield Metal stamping plants and our Livonia Engine, Flint North Components, Willow Run, Parma Components and Fredericksburg Components and Massena Castings powertrain plants. Our Orion and Spring Hill assembly plants will be placed in "standby capacity" status, along with the Pontiac Metal stamping plant. In addition, Janesville Assembly plant's status has been changed from closed to standby capacity. And, our Boston, Jacksonville, and Columbus SPO facilities will cease operations by December 31, 2009. In line with our structural cost reductions and the reinvention of our company, we're announcing plans to further reduce our North American salaried employment by 5,100 this year, including 4,000 in the United States. After completing these reductions, we will have reduced North American employment by 7,900 – or 22 percent this year.

GM will remain open for business during this period. All employees will be paid in the normal course and work as members of the New GM team. The only exception is the amount of non-qualified pension for some executive retirees. We also will reduce some retiree benefits for salaried retirees (those retired now and those who will retire in the future) and non-UAW retirees (those retired now and those who will retire in the future). We are continuing to determine how these changes will be made and we will communicate to the affected employees and retirees as soon as decisions are made. We intend to address this matter as quickly as we can.

Our warranty, service and customer support activities will continue uninterrupted, with U.S. government guarantees. New products and advanced-technology launches will continue on schedule, and all GM facilities will operate on the same basis they did yesterday, with no changes to the scheduled downtime calendar.

I've attached the news release we issued announcing these steps. Please read it carefully, but I want to share a few thoughts about today's news. I encourage you to share them with family, friends and others with a stake in GM's future:

* We're on a proven path. The process we're using to launch the New GM is an established and effective approach. While we expect that some parties will register objections during the court-supervised process, we are well prepared and confident that we will achieve our goals.
* We're committed to our April 27th viability plan. The plan we described in April, along with some additional initiatives, is New GM's plan.
* We remain a vital part of the global auto industry. Thanks to the difficult work we have done in recent years, GM has world-class assets that are highly valuable to consumers, stakeholders and the economy. We have developed a line-up of award-winning vehicles and a pipeline of exciting new products that customers want. We have substantial investments in important green technologies. Our smaller, stronger dealer network will raise the standards for customer service. And, we will remain a global company, with a tremendous work force.
* We're here to stay, and we will succeed by taking care of our customers. We have endured trying times together. The pain has been shouldered by many, and our April 27th viability plan asks for even more from us. But make no mistake – today's actions are designed to reinvent GM for sustained success. From here we move on, and we move up. New GM can and will win, and we will do it by putting our customers first.

We understand that you will have many questions throughout this transition process. Further information is available on Socrates or at GM.com/restructuring. Both will be updated often as new information becomes available. I also encourage you to visit GMreinvention.com and share it with others who have an interest in GM's future.

We also recognize that the further changes necessary to complete GM's reinvention must come from within the company. With that thought in mind, I'll post an Employee Blog later today with some of my thoughts about what we need to change at GM, and how we'll make them happen. I look forward to your feedback.

Along with our leadership team and Board of Directors, I am consistently inspired by your resilience and resolve. We know you will continue to rise to the occasion. Thank you for everything you have done and will do for GM.

Fritz

New GM Chief Bends to Pressure

As Originally Posted to the Wall Street Journal

DETROIT -- Facing heavy government pressure, General Motors Corp.'s chief executive spent his second day on the job making a public break from his predecessor, sending a sharply different message of willingness to shake up the ailing auto maker.

In an interview with The Wall Street Journal, Frederick "Fritz" Henderson said he is prepared to do whatever it takes to reorganize the company, including taking GM through bankruptcy court. The longtime GM executive was anointed CEO after the White House pushed out his former boss, Rick Wagoner, who had resisted bankruptcy even after the auto maker determined it could probably survive a short-lived reorganization with government support.

Mr. Henderson, 50 years old, also praised what he called the Obama administration's strong voice of support for the company, saying it liberated GM to take restructuring action it had in the recent past thought impossible to pull off.

"They think that I can lead this company inside or outside of bankruptcy court," he said. He said he expects the Obama administration's auto task force to play an active role in forcing unions and surety bondholders to make major concessions.

Mr. Henderson and the company's new chairman, Kent Kresa, have little choice but to follow the administration's game plan, given the government's effective firing of Mr. Wagoner and public dismissal of GM's latest restructuring plan as too little, too late. In addition to removing Mr. Wagoner as CEO, the government also replaced him as chairman. In coming months, six more directors could be replaced.

White House officials said Sunday that Mr. Henderson will be the company's permanent CEO and they believe he can deliver a satisfactory reorganization in a timely manner. On Tuesday, one administration official said Mr. Henderson is CEO "as long as we're satisfied he's executing according to the strong wake-up call we gave GM."

Mr. Henderson will be paid a salary this year of about $1.3 million after taking the 30% pay cut that GM imposed on top management. He will not be paid the $1 a year salary Mr. Wagoner agreed to accept after GM was given government aid.

While Mr. Henderson promised "deeper and faster" action at GM, he didn't completely break with his predecessor on strategy. He played down the need for an entirely new labor contract, said the company won't kill any more brands than the three reductions prescribed by Mr. Wagoner, and said the company will work to maintain a leading market share in the U.S.

Mr. Henderson made clear that he will use the full force of government backing to extract more painful changes from GM's union and its unsecured bondholders, which together represent more than $50 billion in the auto maker's debt obligations.

Mr. Wagoner's tenure was marked by a dogged pursuit of market share. He won some concessions from the United Auto Workers, but blinked at confronting the union on more fundamental issues, such as drastically reducing retiree health care, that weighed on the bottom line.

For much of Mr. Wagoner's eight-year tenure as CEO, Mr. Henderson worked as a close lieutenant. He was dispatched to turn around GM operations in Asia and Europe, then returned to Detroit to work at Mr. Wagoner's side, first as chief financial officer and since last year as chief operating officer.

Noel Tichy, a professor at the University of Michigan Ross School of Business, said Mr. Henderson's long experience at GM isn't necessarily a recipe for success. "It's an unnatural act for an insider to be a transformational leader," he said. "He grew up in a culture that has not been able to change."

A native of Detroit, Mr. Henderson played baseball at the University of Michigan, got an MBA at Harvard and joined GM in 1984. His career at GM paralleled that of Mr. Wagoner in many ways. Like his predecessor, Mr. Henderson started in finance and did a stint in Brazil. Mr. Wagoner sent him to Asia in 2002 and then to Europe in 2004.

For part of his time overseas, his wife and two daughters lived in Miami. After he became CFO in 2005, he flew home from Detroit on commercial flights on weekends. That ended recently when he moved his family, and five cats, to a Detroit suburb.

He's still flying commercial now that GM has sold its corporate jets. Last month, to get to the Geneva car show, he passed on a direct flight and sat through a layover in Amsterdam. In Geneva, he stayed at a Ramada airport hotel.

In an interview last month, Mr. Henderson indicated he was coming to the conclusion that GM couldn't continue on the same course as it did in 2008. "I'm not doing this again," he said, referring to continually asking for more government support. "You don't want to be careening from crisis to crisis."

But even as Mr. Henderson carries some of Mr. Wagoner's strategy into his tenure, he is wrestling with ways to refine his approach to the company.

"Big is only helpful if you harness it," Mr. Henderson said of GM's position as one of the world's largest sellers of cars. "Otherwise it's just big."

Mr. Henderson said he will remake GM's U.S. lineup by de-emphasizing the longtime reliance on trucks and SUVs that led to the company's financial collapse last year. He said that, from now on, nearly every vehicle will need to "pay rent" and be a profitable venture.

For years, GM has failed to make money on smaller cars, in part because of labor costs. This led to a dependence on sales of trucks and SUVs, which generated huge profits earlier in the decade, but lost traction amid high fuel prices.

Revised labor contracts, including another employee buyout program currently being planned, will be a key ingredient in meeting this goal, he said. So will applying practices that Mr. Henderson picked up while running GM Europe, where GM doesn't sell trucks and SUVs.

Mr. Henderson has served in an office down the hall from Mr. Wagoner since late 2005, when he became chief financial officer. Since then, he has negotiated labor contracts, sold assets, and wrote viability plans needed to win government backing. He was named chief operating officer about one year ago. But his tenure has been marred by the company's performance over the past 12 months, during which it ran out of cash.

During a separate interview, GM's new nonexecutive chairman, Mr. Kresa, said Mr. Henderson is squarely focused on delivering on the administration's expectations. "Fritz understands the mandate, and he's about to do it," he said.

Mr. Kresa, a longtime board member and a former director at Chrysler LLC, said Mr. Wagoner may have been constrained in considering options for the company by the lack of clear support.

"The difference is we have a mandate from someone who has a lot of power who will back us...," he said. "Rick never had that mandate."