General Motors Co. used a government rescue to transform into an agile business determined not to repeat its past, Chief Executive Officer Dan Akerson said.
Bankruptcy once was unthinkable for GM, which had half the U.S. auto market, Akerson said in a speech today at the Economic Club of Washington. “We are humbled by our near-death experience,” he said.
GM restructured its business in bankruptcy last year with the help of a federal bailout before a $23.1 billion initial public offering in November, cutting jobs, closing plants, renegotiating labor agreements and decreasing the number of dealers in its U.S. network, reported Bloomberg.
Now that IPO is done, some key executives are leaving because of government-imposed pay restraints, Akerson said. He said he’d like to shift toward incentives and variable pay for management. There won’t be increases in base salaries this year, he said.
“We have to be competitive,” Akerson said. “We’ve been able to attract great people. We’re starting to lose them now.”
The remaining government shares amount to about a third of company ownership, Akerson said. Shares will have to sell in the “upper 40s or low 50s” for taxpayers to break even, he said.
GM rose 15 cents to $33.89 at 11:28 a.m. in New York Stock Exchange composite trading.
Besides cost structures, one of the challenges in turning GM around has been a corporate culture resistant to change, Akerson said.
Biggest Surprise
The biggest surprise after joining GM’s board was “too often things were done intuitively,” he said.
It was “anathema to GM culture” to consider whether to use another company’s engine, he said. Management had been arrogant, he said. They underestimated foreign car companies and their ability to make quality vehicles.
Citing his work in private equity before taking the CEO post at the Detroit-based automaker in September, Akerson said few investors would have bet on the company 18 months to 24 months ago.
“Three weeks ago, people by the hundreds of thousands did just that,” Akerson said. “They saw a new company positioned to break even at the bottom of the market, not the middle.”
GM sells more cars with its remaining four brands of Cadillac, GMC, Buick and Chevrolet than it did a year ago with eight brands, he said.
