GM CEO Search Ongoing; Company Will Pay Back Government Loans by Q3 2010

General Motors (GM) chairman & CEO Ed Whitacre addressed the media yesterday in a conference and webchat, updating the world on the status of the company's ongoing search for a new CEO to replace ousted executive Fritz Henderson. Whitacre denied that he was planning on taking the job long-term, but also said that he was not certain that the position would be filled from outside the company. "I'm enjoying it, I'll say that," Whitacre said. "It's a terrific company, great future, great people. Do I want to do it long-term? I told the board no. But I haven't defined that. I can't define that myself." Whitacre said that the ideal candidate is not coming to the job because of compensation, mostly due to the fact that GM cannot offer massive compensation for the position. "I think somebody would be wanting to do this, more than for compensation. It's a bigger deal than that," Whitacre said. "It's also about a desire to lead a big company." The government's limitations on executive compensation for companies that have taken bailout loans from the Treasury are an issue in attracting a new top executive, according to Whitacre, but the board is pretty sure of the kind of person it hopes to attract. "A person that's a motivating, inspirational leader that's familiar with big companies -- manufacturing or industrial -- would be helpful," Whitacre said.

Another interesting piece of information from Whitacre's talk yesterday was the revelation that the company plans to try and repay all US$6.7 billion in U.S. government loans by the end of June 2010, as the company's cash position is apparently better than expected. The first payment of US$1.7 billion will occur at the end of the month, according to Whitacre, with a US$1-billion payment every quarter until the second half of 2010, when the company expects to be able to hold an initial public offering (IPO) of stock in the new GM. It is obligated to repay everything by January 2015, but wants to get that accomplished much sooner. "I don't know if we can speed that up or not," Whitacre said. "It would be nice if we could."

Outlook and Implications

The search for a CEO is almost certainly being complicated by the salary caps imposed by the government, which serve to complicate the issue of helping GM to recover and find new personnel to fill out its executive ranks. The idea of repaying the government loans well in advance of their due date (five years early, in fact) is directly related to this issue, of course. Despite the fact that GM could potentially better put that money to use for other purposes (such as product development, or even to simply line the company's coffers in case of a second-dip recession in 2010), it will instead be likely used to pay back the loans early in order to get out from under the government's restrictive thumb. An IPO will be made as soon as possible as well, for much the same reason: the U.S. government is the largest shareholder at GM, but does not want to be. The sooner the government can divest its GM holdings, the happier everyone will be, including the taxpayers, the Congress, the White House, GM's board, just about everyone involved. The timing on the suggested repayment schedule would match nicely with roughly the same time that a new CEO could be announced. While Whitacre insists that he is not necessarily looking to have the job long-term, he may just happen to be the best candidate for it in the short term. Thus far, he has removed some long-time GM players and established a sense of urgency at the automaker that was perhaps lacking previously, but no big strategic changes have been made as far as one can tell.

From a fit standpoint, Whitacre is not necessarily a bad choice for the position, as he does not need the money and is in fact working without a salary until the board meets in January. He would likely do it for the challenge (as he has in taking his board chairman role), making the compensation issue under government control a moot point. Whitacre has decades of experience as a top executive, having done very well at AT&T, but he does not have a major manufacturing or industrial background, and no amount of skilled advisors can change that fact. While Whitacre says that the company is considering possible replacements from outside the company as well as within, but it seems far more likely that an outsider would help aid GM's legitimacy with Wall Street and the U.S. government, especially if the company plans on having an IPO in the near future. It also has the added challenge of having a decent number of good mid-level executives, but few standouts in terms of someone who can step up to take over the top job immediately.