SPECIAL REPORT-For GM IPO, the government’s a back-seat driver


“I tell people — half kidding — I had a good seat at a
bad movie,” Girsky told analysts in June in describing his
involvement with the early stages of GM’s bailout.

How that movie ends is an open question.

Executives, suppliers, consultants and bankers point to
change in GM’s once notoriously rule-bound and slow-moving
culture, a process that accelerated under Whitacre.

Other signs include cost cuts and a deepened dedication to
quality in new vehicles like the Chevy Cruze, a small car
reviewers have praised for a comfortable interior and mileage
on par with the Honda Civic.

Analysts also agree that the Obama administration’s
restructuring gave GM a shot at sustained profits by slashing
jobs, plants and debt and allowing it to break even at the
worst U.S. sales levels in 25 years.

One key measure of GM’s success centers on its improved
pricing. For most of the past decade, GM relied on fire sale
incentives to move metal and manage inventories because it was
locked into a UAW contract that forced it to pay workers nearly
full wages whether plants were running or not.

But with newer products and more flexibility in its labor
contract after the restructuring, GM began to push prices
higher — up $3,000, for example, for the average crossover
like the Chevy Equinox or Buick Enclave.

Consumer Reports, the most influential guide to U.S. car
purchasing, gave GM high marks in October for its gains in
dependability on a range of new models. They include the
Cadillac CTS-V — Whitacre’s ride of choice.

GM, analysts say, also has lined up potential successors
for Akerson down the road.

Mark Reuss, 47, whom Whitacre appointed to a new job
running North America, has a reputation as an unrelenting
advocate for vehicle quality.

He was one of the organizers of an effort that began in
2006 to get senior executives to drive pre-production cars
weekly in a bid to iron out problems. They called the
improvised effort to hold the line on quality “the knothole
rides.” Every new car had to come through that single opening
with Reuss and like-minded car guys as gatekeepers on winding
drives near the GM test track in Milford, Michigan.

“In the past we had meetings,” said Karl Stracke, GM’s vice
president of global vehicle engineering. “The guys in the
meetings had not always ridden in the cars, and there were
finance guys questioning all the time why we need something we
knew was important to get performance from the car.”

Chris Liddell, 52, a 2009 hire from Microsoft who has
acknowledged his desire to become CEO, has also won praise for
simplifying the presentation of GM’s financial information and
working to shore up financial controls, an area of weakness
singled out by the Obama autos team under Steven Rattner.

Joel Ewanick, who was hired in mid-year to revive GM’s
marketing program in the United States after helping to drive
Hyundai’s fast sales gains, has also described a more ordered
and disciplined approach to marketing GM’s remaining brands,
GM, Buick, GMC and Cadillac.

The first major effort under his watch was a new ad
campaign for Chevy that unspooled at the start of the World
Series. The ads under the theme “Chevy Runs Deep” were crafted
to evoke the positive connections an earlier generation of
Americans felt for GM cars and trucks.

After years of touting the battery-powered Volt as a
technological breakthrough and greener than a Toyota Prius, the
new ad settles on a simpler pitch. The Volt’s on-board engine,
the ad implies, provides a way to have an electric car with
extra assurance that you can go wherever the road takes you, an
implicit jibe at Nissan’s fully electric Leaf.

“This is America, man,” actor Tim Allen narrates in his
familiar, guy-next-door baritone. “Home of the highway,
last-minute detours and spontaneous acts of freedom.”

Despite GM’s gains, the almost certain prospect of U.S.
government involvement in the automaker into the next
presidential term represents a risk for investors who will be
asked to put money into the IPO, analysts say.

The decision to push ahead with a November IPO for GM in
the face of a “lackluster” market, for example, was clearly a
political call by the Obama administration eager to show
progress in paying back taxpayers, Morningstar’s Whiston said.

“I think it’s going to put an overhang on the stock for a
few years,” he said. Even so, he sees GM emerging as worth up
to $86 billion, enough to make taxpayers whole on the bailout.

Other industry observers worry that GM’s rush to market and
the turnover at the top with four CEOs in the past 18 months
has developed as a distraction, keeping the automaker from
honing the kind of discipline and focus that marked the early
turnaround of rival Ford under CEO Alan Mulally.

Mulally, a former Boeing executive, is credited with
breaking down fiefdoms at Ford. His boss Bill Ford once
famously said the company had “more intrigue than czarist

“GM doesn’t have the kind of clear leadership that Alan
Mulally brought to the Ford organization.” said Dennis Virag,
president of Ann Arbor, Michigan-based Automotive Consulting
Group. “They are making progress, but it’s at a snail’s pace.”

Peter Kaufman, president of the Gordian Group and an
adviser to dissident bondholders in GM’s restructuring, said
many of the questions raised by the government bailout in 2009
were still alive for investors on the cusp of the IPO.

“Are they running this company for profit to shareholders
or for other, more political, goals?” Kaufman asked. “As long
as the government runs this company, that will be a key
(Reporting by Clare Baldwin, Soyoung Kim and Kevin Krolicki;
Additional reporting by David Bailey, Bernie Woodall and Deepa
Seetharaman in Detroit, John Crawley in Washington and Philipp
Halstrick in Frankfurt; Editing by Jim Impoco and Robert

SPECIAL REPORT-For GM IPO, the government’s a back-seat driver