June 10 (Bloomberg) -- Edward E. Whitacre Jr. built AT&T Inc. into the biggest U.S. provider of telephone service over a 43-year-career. By his own admission, he becomes chairman of General Motors Corp. knowing nothing about the auto industry.
The 6-foot-4-inch Texan nicknamed “Big Ed” said steering the nation’s largest automaker after bankruptcy is “a public service.” People who know him say he can meet GM’s need for the type of transformation he orchestrated at Dallas-based AT&T.
“I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”
Whitacre’s selection bucks more than a half-century of tradition at GM, where the only non-executives to lead the board since 1937 were interim Chairman Kent Kresa and John Smale, who held the job from 1992 through 1995. Whitacre will take the post when Detroit-based GM exits Chapter 11, perhaps by Aug. 31.
The White House said Ford Motor Co. Chief Executive Officer Alan Mulally’s move from planemaker Boeing Co. shows that success doesn’t hinge on automotive experience. Ford is the only major U.S. automaker to avoid bankruptcy.
“What was required was somebody with savvy, big-business experience that could take a company, change its management culture, make some of those tough decisions to put it on that path toward viability,” Press Secretary Robert Gibbs told reporters at a briefing today.
‘Good Choice’
A bachelor’s degree in industrial engineering and record in shaping a “monolithic” AT&T into a diversified enterprise make Whitacre “a good choice” for GM, said Jim Hall, principal of 2953 Analytics auto-consulting firm in Birmingham, Michigan.
“He was one of the guys who helped create a new AT&T that wasn’t so dependent on land-line phone service,” said Hall, a former GM engineer. “There’s a parallel with General Motors. GM is not now about just making cars. It’s about re-creating itself as a 21st-century car company. They have to have somebody at the top that understands they have to make a new GM.”
The U.S. Treasury, which is backing GM’s restructuring with about $65 billion, reached out “some weeks ago,” Whitacre said, enticing him out of retirement to help oversee a company that has lost almost $88 billion since 2004.
Talking With Rattner
“Lots of conversations” followed with Steven Rattner, the Wall Street dealmaker running President Barack Obama’s car task force, said Whitacre, adding that Treasury’s message was: “We need your help. It’s a great company. You could be a lot of assistance to GM.”
In addition to Kresa, the automaker’s new, 13-member board will include five holdovers -- CEO Fritz Henderson and directors Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis Jr. and E. Neville Isdell. Six others will retire, including all four who were appointed in the 1990s.
Rattner asked former CEO Rick Wagoner to cede his job to Henderson and named Kresa interim chairman in March after rejecting GM’s plan to return to profit.
Whitacre will have to contend with Treasury’s oversight, as the biggest equity holder in the so-called New GM, and pressure from Congress. He has faced lawmakers and investors before.
In 2006, while defending AT&T’s customer-privacy policy at a hearing where U.S. senators pressed him about the alleged sharing of data with a spy agency, Whitacre was rebuked by then- Chairman Arlen Specter for “contemptuous answers.”
Executive-Pay Vote
A year later, AT&T management prevailed on a shareholder proposal seeking an advisory role in executive pay, which got 44 percent of the vote. Whitacre announced his retirement at that meeting, leaving with compensation valued at $158.5 million, according to the Corporate Library in Portland, Maine.
GM’s directors are now working for $1 a year. The automaker plans to disclose board compensation terms when it announces the rest of the new members, said Julie Gibson, a spokeswoman.
James Kahan, 61, a former AT&T executive who worked with Whitacre for 20 years and talked to him about the job the night before it was announced, predicted his old boss will probably be heavily involved in GM’s restructuring.
“He’s not one to sit idly by,” Kahan said.
After graduating from Texas Tech University in Lubbock in 1964, Whitacre joined AT&T’s Southwestern Bell unit just as the touch-tone phone was being introduced. He worked his way up to CEO in 1990 and bought Pacific Telesis Group in California for $16 billion in 1997.
Telecom Consolidation
That was the first link-up among the eight Baby Bells, created in 1984 after then-AT&T Corp. agreed to cede local phone operations, and started a buying spree that totaled almost $200 billion and helped create the largest U.S. phone company.
“He started the whole telecom consolidation because he recognized that scale was going to be important,” said Jim Ellis, 66, a former general counsel at AT&T, who worked with Whitacre for about 30 years. “He had a vision to build the company, to increase the sales and the size, the efficiency.”
SBC, the smallest of the local Bells, changed its name to AT&T Inc. after it bought AT&T Corp. in 2005 for $16.5 billion and in 2006 had its first annual share-price gain in eight years. A year after Whitacre retired, AT&T relocated to Dallas, near his hometown of Ennis, from San Antonio.
The ability to sustain a “global enterprise” and set clear lines of responsibility is pivotal to GM’s future, said Michael Robinet, an automotive analyst at CSM Worldwide Inc. in Northville, Michigan.
‘Ensuring a Strategy’
“Let’s face it: The chairman is not necessarily operational,” Robinet said. “The chairman is about ensuring a strategy is followed.”
GM is proposing to sell its best assets to create a new company around its Chevrolet, Cadillac, GMC and Buick brands within 90 days. The remaining assets will be liquidated in bankruptcy to help pay off creditors.
Whitacre, a resident of San Antonio, a South Texas city of 1.2 million, will set a different cultural and geographic tone at GM, said Kahan and Ellis, the former AT&T executives.
Detroit is 1,237 miles to the northeast, almost twice as far as to Mexico City. While GM’s only Texas assembly plant is in Arlington, a five-hour drive, San Antonio is home to a pickup factory for Toyota Motor Corp., which ended GM’s 77-year reign as the world’s largest automaker in 2008 and beat GM in adopting new models such as hybrids.
As a “man of action,” Whitacre won’t sit still, Kahan said. “He doesn’t like long meetings,” Kahan said. “He’ll be fresh air.”
Reply With Quote
