Retirees would likely see their medical benefits cut deeply. Lenders who own GM's debt might be offered 30 to 40 cents on the dollar. Most vulnerable could be the parts suppliers waiting to get paid by General Motors. Meanwhile, union workers at Ford Motor Co. Ford has not sought government funding like GM and Chrysler, and is the first U.
Ford's deal with its staff was expected to serve as a model for similar agreements for GM and Chrysler. If hundreds of parts suppliers, many already on the edge of bankruptcy themselves, don't get help too, that could shut down the entire auto industry. There were thousands of crucial questions that had to be asked and answered with management: Which brands and factories would survive? Which ones would the company have to give up?
What would be the endgame strategy? What would be the enterprise value of NewCo? The liquidation value of OldCo? First, they hoped to avoid bankruptcy altogether, believing the government would provide enough funding to bring GM through the crisis. At least two cabinet members in the Bush Administration and others had provided assurances to Rick and board members that government help would be forthcoming.
Second was a "prepackaged" bankruptcy plan being developed by general counsel Robert Osborne with Harvey R. Under this plan, GM would prepare a reorganization in cooperation with its bond creditors that would take effect once the company went into a Chapter 11 bankruptcy.
The goal of a so-called prepack is to shorten and simplify the bankruptcy process. Miller commanded great respect in bankruptcy circles and in the GM boardroom, and for good reason. At the age of 75 Miller was the only attorney in the country who had successfully dealt with as many high-profile bankruptcies. Miller was already in the middle of the largest corporate liquidation ever, at Lehman Brothers.
And third was the NewCo plan, based on years of? Inside and outside GM, the pressures mounted. Each day the company lost more money and got closer to running out of cash.
In Washington several prominent politicians began calling for Wagoner's resignation. On Dec. The next day I went to see Wagoner to offer encouragement and advice. It is not unusual for a CEO to lose his job when his company is forced into bankruptcy and a major restructuring. I'd seen this play out many times before and learned the boss should never volunteer his resignation without first putting in place the things that would help the organization survive.
I wanted to help fortify Rick's resolve and keep us all focused on the endgame. From my perspective Wagoner had been unfairly treated by many politicians and the media. Since taking over as CEO in , working closely with Fritz and vice chairman Bob Lutz, Rick orchestrated large, dramatic changes at the company. They closed GM's quality, productivity and fuel-economy gaps with the world's best automakers, winning numerous car and truck awards.
They built a highly profitable business in China, the world's biggest potential car market. They reduced the company's workforce by , employees, to , And he was able to accomplish all these changes without causing massive disruptions among GM's dealers or major strikes with the unions.
Ultimately, those structural changes positioned the company not only to survive but also to bring about the extraordinary turnaround. But now, with the economy and the company in free fall, all of that hard work seemed to be forgotten. If you're going to be killed on the battlefield, we need to make it worth it. Plus, we need an agreement with the government and GM's board to do the NewCo plan. And we must put a qualified successor in place.
It must be Fritz and not some government guy. It's going to be painful for you, but you've got to stay on the horse until we get all three. Wagoner was already there. He had no intention of resigning and was determined to complete his mission.
I gave him a bear hug, letting him know he had my full support. When we gathered for a telephonic board meeting on Dec. Only two weeks after arriving at GM I was about to present the plan to the board of directors in a conference room outside Wagoner's office.
Also on the phone were the company's lawyers and investment bankers. A Spiderphone was in the middle of the table for what would be a historic meeting of the board. Only three days earlier the Senate had abandoned negotiations to provide funding for the auto industry. Suddenly a free-fall bankruptcy within days loomed large.
Consideration of the NewCo plan, now refined with the help of chief financial officer Ray Young and other senior finance staffers, took on greater urgency as we were just two weeks away from running out of cash. But I have an alternative strategy for the board's consideration. I suspect there might be some controversy over it, but I believe this could be lifesaving for General Motors.
Is there a precedent for this, Mr. Miller's deep baritone voice filled the room, pointing out that the idea was unorthodox and lacked precedence. Other attorneys chimed in, claiming the plan oversimplified the situation and there would be major problems with it. Yet another added that this would not be viewed well by the court and doubted any judge would allow it. Instead, the current team is a model of earnest conflict transmuted into productive collaboration.
If you'd quit paying attention to GM a few decades ago, you wouldn't recognize the carmaker these days. If crosstown rival Ford is family, with all the issues that implies, then GM is a country. Until Barra's arrival, that assessment was true: Chapter 11 has chastened GM, but in the company still swaggered into the largest initial public offering in US history. The temptation was for GM to stage an imperious return to the corporate stage.
Barra, who had run both entire factories and human resources before being tapped by the board to become CEO in , wasn't going to stick to that script. Before the financial crisis, GM believed itself to be indispensable. Barra, better than anyone, knew that was false. GM wasn't an empire. It was a fragile, if enormous, group of people who had to work together to survive and prosper.
That survival was immediately threatened. She persevered, however, and luckily she had four years of working with Ammann and Reuss to draw upon.
But it made me impatient. When's the best time to solve a problem? The minute you know you have it. Ammann actually recalls interviewing with Barra in , to assume the treasurer's job at GM. While the banking crisis that had triggered the Great Recession had largely been resolved in , the US auto industry was reeling. Annual vehicle sales in had fallen to a staggering 10 million, a harrowing plunge for a market that had peaked above 17 million in prior years.
Chrysler also had to be bailed out, and after its own bankruptcy was rapidly merged with Fiat in a desperate rescue undertaken by the Fiat CEO Sergio Marchionne, who died unexpectedly this year. The carmaker had just 10 CEOs before the financial crisis. Externally, it was unclear the car business would recover. But Barra, Ammann, and Reuss weren't panicking. They were also revamping the automaker's byzantine financial system, which Obama administration "car czar" Steven Rattner, head of the Auto Task Force, had labeled as epically disorganized.
That process empowered Barra and Ammann to make long-overdue decisions, such as selling GM's perennially underperforming Opel-Vauxhall division in Europe to Peugeot in For Barra, return on investment became a mantra. There were no sacred cows, even brands that had been part of GM for decades. Ammann also spent a lot of time with Reuss as part of a traveling "road show" for investors before the IPO. Reuss for a time had been in charge of GM's Australian and New Zealand operations, so he and Ammann could bond over their common experiences in the Southern Hemisphere.
They also shared an arid sense of humor and a love of fast machines. Reuss is well known for his skill behind the wheel, and if you ask around, people will tell you that Ammann is no slouch. We'll quickly get to a place where we can talk about it. I have no doubt that we make better decisions because of that.
It creates a richer debate and a richer analysis. The core concept for all three executives is trust, built on a mutual respect for what Barra calls "leveraging diversity of thought. We look at things from multiple dimensions and make better decisions. Their diversity shows up in obvious ways. Ammann obviously prefers a more casual wardrobe, while Barra favors subdued, tasteful ensembles.
Reuss is usually wearing a sharp suit, elegant shoes, and a wristwatch from his collection. Barra has enormous respect for Reuss' vast automotive knowledge and admires Ammann's ferocious ability to learn and learn fast.
She considers Reuss the best car guy in the business, recollecting that Dan Akerson called him the soul of the company.
And she says that Ammann conducts himself as though he'd been at GM for decades, not just for eight years, thanks to his willingness to go everywhere and meet everybody. A word he likes is "win," and Barra has translated that attitude into something of a mission statement. So once you get that as a mindset, you can then figure out what it's going to take to solve the issues that are preventing you from getting there. Don't tell me why you couldn't do it in Tell me what it takes to get it done now.
GM has been doing plenty of winning since , but, yet again, when I ask Reuss if it's pat-ourselves-on-the-back time, he looks at me as if I were insane.
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