GM CEO Resigns; Confirms Interest in Saab But Reaffirms 31 December Deadline

In a surprise move General Motors (GM) has announced that chief executive Fritz Henderson has left the company following the board meeting on Tuesday. According to a Financial Times (FT) report, chairman Ed Whitacre will act as a temporary chief executive as the company begins a search for a new head. According to the report, Whitacre and fellow board member David Bonderman made the decision that the company would be better served going into its new initial public offering (IPO), which would complete its emergence from bankruptcy protection and from U.S. government ownership, with a different chief executive. According to the FT report a source close to the board said, "I don't think anyone thought it [Henderson's tenure] was a disaster. This is a killer board." Henderson's resignation comes five months after GM emerged from bankruptcy protection with a balance sheet significantly improved balance sheet as a result of being able to shed loss-making plants and units of the "old GM." Henderson had taken over as the chief executive of GM following the sacking of the company's previous chief executive by the presidential administration's auto task force eight months ago. However, the U.S. government is now taking a back seat in the management of GM , with a government spokesperson stating, "The decision was made by the board of directors alone. The administration was not involved in the decision."

There were reportedly disagreements between Henderson and Whitacre over whether the European unit Opel should be sold, but this was apparently not the main catalyst behind the decision with the board believing that GM required a fresh start under a new figurehead. This is despite the progress that had been made under Henderson's watch over the past five months. In a statement Whitacre said, "Fritz has done a remarkable job in leading the company through an unprecedented period of challenge and change. While momentum has been building over the past several months, all involved agree that changes needed to be made. To this end, I have taken over the role of Chairman and CEO while an international search for a new president and CEO begins immediately." It added, "With these new duties, I will begin working in the Renaissance Center headquarters on a daily basis. The leadership team – many who are with me today – are united and committed to the task at hand."

The future of Saab was also discussed at the board meeting, with GM stating that it has had "expressions of interest" in its Swedish premium brand and that the interested parties will have their bids evaluated by the end of the year. However, GM also went on to confirm that it will stop funding Saab's operations at its original deadline of 31 December if no serious bid comes to fruition. The statement said, "The board will evaluate potential bids between now and the end of December. At that time, we will determine whether a suitable arrangement for Saab exists. If not, we will begin an orderly wind-down of the global Saab business at that time." According to a report in Automotive News Europe there are a number of new bidders in addition to Beijing Automotive (BAIC), which was part of the original Koenigsegg consortium to acquire Saab. The report said that the Dutch supercar manufacturer Spyker and its Russian owner Converse Bank have submitted a bid to acquire all of Saab. Spyker is reportedly interested in Saab because of its strong brand values in addition to the company's future model plans such as the new 9-5 and the 9-4x crossover.

According to a report by Bloomberg, GM is also is considering the sale of parts of Saab to Beijing Automotive Industry Holding Co (see Sweden: 1 December 2009: Saab Holds Last-Ditch Talks with GM and Swedish Government) and closing down the rest of the brand, in which case Spyker would withdraw its interest. A source close to Spyker said, "You want Saab as a going concern - that's the only thing you want. You want the company alive and kicking. You don't want to pick up the pieces. Once you stop the business, it decomposes very quickly." In addition, there are reports that U.S. investment firm Merbanco and U.S. industrial holding company Renco are also interested in some kind of bid for Saab's assets.

Outlook and Implications

The departure of GM veteran Henderson from his position as CEO has come as something of a surprise as he has overseen a stabilisation of the company's financial position following its exit from U.S. government-administered bankruptcy protection. However, it is likely he was seen as symbolic of the old management regime at GM led by Rick Wagoner, and Ed Whitacre's comments suggest that the board wants a completely new management philosophy leading GM into its new IPO. It is certainly an aggressive statement of intent from GM's board, but it remains to be seen whether it is the right direction for the company.

The recent history of appointing chief executives from outside the automotive industry to the Chief Executive roles has been mixed. There is no doubt that former Boeing commercial airplanes CEO Alan Mulally's appointment to the position of chief executive of Ford has been a success since his appointment in 2006. Ford was the only one of the U.S. Big Three automakers not to request U.S. government funding or bankruptcy protection, while he has won praise for reducing labour costs and his diligent, hands-on management style. However, former Home Depot CEO Robert Nardelli, who was appointed as Chrysler's CEO under the ownership of Cerberus Capital, did not enjoy a happy tenure before his departure in April 2009. However, it could be said that Chrysler's problems were so deeply entrenched that there was little that one CEO could have done at that time.

Despite the news that there are companies still interested in bidding for Saab, it seems extremely unlikely that a deal will be completed by the GM's self-imposed deadline of the 31st December. If the proposed deal with Koenigsegg could not be completed in a much bigger timescale it appears unlikely that another deal with a small volume sports carmaker (Spyker) with a foreign backer will be completed by 31 December. All the old issues over funding and intellectual property remain, and a deal for the entire Saab operation to be completed in that timescale looks nigh-on impossible. If any deal is completed it is likely to be the much smaller-scale bid by BAIC which wants to acquire the machinery and tooling to manufacture the previous generation Saab 9-5 in China. However, this would effectively spell the end for the Saab brand and see the new 9-5 (see Germany: 27 August 2009: Frankfurt Motor Show 2009: Saab to Unveil All-New 9-5 Model), which debuted at the Frankfurt Motor Show, effectively stillborn.