GM’s Akerson: Companies Need to Change – or Die
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DEE-ANN DURBIN
TOM KRISHER
December 18, 2011

Dan Akerson is hardly a corporate diplomat. The chairman and chief executive at General Motors Co. says publicly what other CEOs say in private: He disses competitors' cars and laments his company's lumbering bureaucracy. He's told reporters that Ford should "sprinkle holy water" on its troubled Lincoln luxury brand, and has called Toyota's Prius hybrid a "geek-mobile." His candor often rattles the nerves of GM's public relations staff.

And you know what makes him really mad? "There is a resistance to change," at GM, Akerson recently told The Associated Press. By all accounts, though, the auto giant is moving at a faster pace under his leadership. Akerson is not the first to complain about GM's bureaucracy. But for the first time in years, the automaker has somebody at the top with an outsider's vision and a will to make changes to keep profits flowing and return the company to the glory years of a generation ago. GM now has a lineup of cars and trucks that are selling well, and it has turned a profit for nearly two years straight. The stock, although trading far below analysts' targets, is once again catching the eye of portfolio managers. Yet for Akerson, who took the CEO job 15 months ago, the work has just begun, and it hasn't gone totally as planned. He's being tested by a federal investigation into battery fires after crash tests in the Chevrolet Volt electric car, and he's grappling to fix GM's high-cost European operations, which are losing money.

Akerson was recruited by the federal government to join GM's board in 2009 just as the company was leaving bankruptcy protection. The government was majority owner at the time, and Akerson thought his management, financial and engineering skills — he's the former head of XO Communications — could help a company so important to the U.S. economy.

The U.S. Naval Academy graduate, who grew up in Minnesota, admits he knew little about cars in the beginning. But now he speaks with authority on everything from transmissions to batteries. Akerson, who often uses military metaphors, spoke with The Associated Press in New York about the car industry, the economy, his management style and the future of electric cars. Excerpts appear below, edited for length and clarity.

Q: Would you recall all 6,000 Volts to strengthen the battery?
A: If we find that is the solution, we will retrofit every one of them. By the way, if someone wants to sell it back to us now, we'll take that too. We're confident that we'll find a solution.

Q: Do you think the news about the Chevy Volt will harm sales of electric vehicles?
A: This car is safe. There is nothing happening immediately after the crash. I think in the interest of General Motors, the industry, the electrification of the car, it's better to get it right now, when you have 6,000 — instead of 60,000 or 600,000 — cars on the road. We're not the only car company that has liquid cooled batteries out there. So we think this is the right thing to do for our customers, and it was the right thing to do for General Motors and the industry.

Q: Are you moving past the early technology adopters on the Volt at this point, or has any data surprised you on who is actually buying this vehicle?
A: The average purchaser of a Volt is earning $170,000 a year. About a third of the customers haven't been in a Chevy store in more than five years and half have never been in there. They aren't just early adopters. Some of them — I think roughly half — are either Prius or BMW owners. So one, you could say Prius owners were probably early adopters in the olden days, but that's kind of passed through. But BMW people want styling, good design, and an innovative powertrain, or power source, and I think Volt is a game changer. And quite frankly that's one reason we want to kind of clear the decks here.

As you may remember, in the early days of Lexus, there were real issues surrounding quality. And they called back 8,000, reworked them, and put them back out. People don't remember that because Lexus is a great car, it's a great brand. I think it demonstrated that Toyota was sensitive to their customers' needs, perceptions, and safety, and it was an analog to what we wanted to follow here.

Q: When are we going to see the electric car as the typical family car?
A: We want to ramp Volt production to roughly 60,000 in 2012. I think Prius in its second year did a lot less than that, half. By this summer we will [be in] what I call the second generation, where we will achieve certain scale and we should see an appreciable drop in the cost of the production of the Volt. So, 2011 was kind of a year to get things aligned and make sure that the car was what we hoped it would be. We certainly see that in our showrooms and our sales and Consumer Reports' acceptance. We clear up this near-term issue hopefully soon so you'll see 60,000. It's an unanswerable question given what I know today, but people ask me and I say, "Well, I would hope by 2020, 10 percent of the cars sold would be of alternate propulsion." We're also working on hydrogen fuel cell cars which, in the end, are electric as well.

Q: You're gaining market share and your sales are going well. Why is your stock price so far below the initial public offering price? [GM's stock price is currently around a third lower than its IPO price of $33 per share in November 2010.]
A: That's bothering me. But at the same time, our industry — when I look at Ford, I look at us — we're all down about the same amount, within a percent or two. I don't say that because I take pride in it, it's just sometimes you can't fight city hall or trends in the marketplace.
Last year, when I was on the IPO trip, no one ever said 'sovereign debt issues' to me. I never heard of the word 'contagion' [from European government debt problems] other than about H1N1 [swine] flu. So there are a lot of negative factors here. At the end of the day we sell a consumer product that is somewhat discretionary, and it is an expensive consumer product that's highly complex, has a long product life, hopefully… General Motors has made good progress, but we're not nearly what I think we are capable of being. We have a lot of potential. We have a long runway. We have exceeded [Wall] street expectations so far this year on revenue and profits. I'm proud of that. I'm not happy about the stock, and we're going to do our best to make it better. But at the end of the day, we need to continue to build great cars that delight — surprise and delight — that have quality, reliability and durability.

Q: If you could wave a magic wand, what two things would you change at GM right now?
A: I want a miracle solution on Volt in the next week. That's not going to happen. On a more serious note, it all starts and it ends with product. I want sustainable, differentiable product. The generation that you see for the consuming public today is not just competitive, it's very competitive. We're holding our own. We're taking share. We're profiting. The second thing is, we've got to make sure that the culture evolves to one that's less hierarchal, flatter, more interactive. When I was at MCI, if we had 30,000 people in the company, we had 20,000 people who thought they were running the place. They were angry with senior management if they didn't move quick enough. And we need to instill that, a culture like that — that leans forward all the time rather than leans back.

Q: What makes you the maddest as a CEO?
A: There is a resistance to change… Everybody changes. Every corporation has to change, or it dies. You lose your competitive edge. There's a real strong competitive gene at General Motors. I would say you have to meet the market on its terms, you cannot dictate to the market. I don't like where our stock is. Well, what can I do about it? Execute on the fundamentals and the market will change and appreciate that. But at the end of the day, you have to create a culture that not only accepts change but seeks out how to change.

Q: With gas around $3 a gallon in the U.S., are people going to start going back to buying SUVs and trucks?
A: I was really amazed when gas spiked earlier this year and then it dropped 15 cents, and our pickup sales picked right back up. We've got to be prepared for everything. So from midsize down to compact (vehicles), we're going to be really good on mileage and on economy, and that's good. At the same time, if our customers want bigger cars, what are we going to do? Say "Well, we don't want to sell anything other than economy and small cars?" No, we're going to meet the market.

Q: So is there a fundamental shift in Americans' car-buying habits?
A: I think it's going to fluctuate with the price of energy.

Q: So really there's a shift, there's heightened attention paid to mileage, even if it's a massive Silverado, and your new trucks will be more efficient when they come out?
A: Yes. More hybrids.

Q: What do you see happening with auto sales in Europe?
A: It's hard to believe this, but it was only three years ago that I think there were many in this country and around the globe that thought the system was coming off the rails. It's amazing how short our memories are when you bring this up. People are going, "Oh, it wasn't that bad." It was bad. And when you fear for your job, that is uncertainty, and it's a negative bias and it undermines your confidence. If you get over that, then the next level of concern is, "Can I afford to spend anywhere from $20,000 to $50,000 on this consumer product?" And you saw it here. We hit a 40-year low in our sales in the 2008-2009 timeframe. The Europeans, I think, felt about like we do today: concerned, but not threatened. It was an American problem.
I think the roles are somewhat reversed today. The Europeans are feeling a great sense of insecurity, doubt, and I think their consumer confidence is in question. You can see the sales have fallen off for the entire industry in Europe, and so you have to look at your profitability. One of my four goals is to be profitable in all of our major regions and areas of operations. Last year, at this time, we were losing money. We restructured given what we thought to be the outlook. We're not going to achieve those sales and revenue numbers, so we have to look at our business operations there.

Q: What about China? What do you see happening in the economy there?
A: The Chinese government, I think, is very concerned with inflation. They're obviously a very active, very viable, economy and they've taken everything from reserve requirements to interest rate actions to try to slow it down. In the two years prior to this year, we grew by 20 to 30 percent.
That's a very difficult rate to continue to maintain. But if the market's going to grow on the order of 2 to 3 percent this year and we're going 10, that's fine by me. I do think the Chinese in some ways were prescient in that they saw a bubble creating and they clearly have cooled that down, and I think inflation has dropped off a bit. I think those were prudent actions looking over a longer term. So, I'm cautiously optimistic on Chinese growth and our role in it.

Q: Is there no longer a stigma about going to work at GM?
A: I don't think so. We are getting good young people. People want to work for us.

Q: How long do you plan on staying at GM?
A: I bought a condo in Detroit. I like the company. I like the city. I like the industry and I guess as long as I'm having fun and the board wants me, the management is willing to follow, I'll stay.

Auto Writer Bree Fowler in New York contributed to this report.