General Motors may make cars and trucks, but these days the most important order of business is to extract itself from state ownership. That single-minded goal appears to be behind a flurry of announcements coming out of the company’s Detroit headquarters.
Just moments after it announced strong second-quarter results—US$1.3 billion in earnings compared to a loss last year of US$13 billion—GM said its CEO, Ed Whitacre, would leave the company on Sept. 1. His replacement, the company’s fourth CEO since March 2009, will be Daniel Akerson, a managing director at private-equity firm the Carlyle Group. At the same time, GM said it was going ahead with its plan for an initial public offering, even though markets have been in free fall over fears of a return to recession.
The IPO, along with the management shakeup, would help GM finally shed its status as a ward of the state, say analysts. When the financial crisis hit, GM tumbled into bankruptcy and was rescued by governments in Ontario, Canada and the U.S. While it has enjoyed a resurgence in sales, it has also faced resentment from taxpayers over the bailout. Meanwhile, Whitacre was hand-picked by the Obama administration to become GM’s chairman last year, and took over as CEO after former chief Fritz Henderson was forced out. “This seems to be about the IPO,” says Jeremy Anwyl, CEO of the automotive website Edmunds.com. “GM wants the issue of succession planning off the table.” Ultimately, Whitacre’s departure as CEO erases the perception that Washington is still in the driver’s seat.
The fact is, GM can’t afford to wait much longer to go public. Thanks in part to gimmicks like employee pricing, but also a rebound in consumer confidence, it has posted two profitable quarters in a row and can use that to lure investors. But that window may not stay open for long if the economy slows and investors flee the markets. Even if the IPO goes ahead by the end of the year, it will still take up to three years before Washington completely unloads its stake. So while the worst appears to be behind GM, objects in the mirror still loom larger than they may appear.