If anyone wants to know the extent and the reality of the turnaround in products and profits at General Motors, this is the week of a key revelation: the 2011 results on revenue and income.
Reuters reports that GM is likely to report 2011 net income of about $8 billion on Thursday – the company’s richest year ever, helped by growth in China and strong profits in North America (all figures in U.S. dollars).
This is good news for Canadian and American taxpayers who still own a substantial chunk of the company. If these result hold up over time, or perhaps even improve, you and I will get all our bailout money back once GM sells the remaining shares held by governments in the U.S. and Canada. Naturally, some will argue the bailout was wrong, that it rewarded incompetence and that GM should have been allowed to fail in the best or worst capitalist way.
That’s just a nonsensical, purely ideological argument. Yes, in a nasty, brutish world – to borrow from Hobbes – GM would have been allowed to implode in 2009. That would have vaporized hundreds of thousands of jobs in bankruptcy and likely tipped the U.S. into a full blow depression – Canada with it. Fortunately, cooler heads prevailed and GM is in the midst of rebuilding its business and its products.
It appears that GM’s top leadership has its foot on the gas pedal, too. Last week The Wall Street Journal reported that GM aims to raise its profit margin to 10 per cent over the next several years, up from the current margin of about 6 per cent, Daniel Ammann, chief financial officer, told The Journal. That’s BMW and Audi territory, which is almost unheard of in a mass market auto maker like GM. Reuters reports that if GM achieves this margin, it may generate up to $15 billion in profits.
Wow. Quoting The Journal, Reuters said GM confirmed the numbers.
The man at the wheel of all this change, the man pushing for a complete cultural change at GM, is Dan Akerson, the CEO. I had a dinner-table interview with him last month in Detroit and left believing that this sixtysomething graduate of the U.S. Naval Academy at Annapolis considers himself more than a mere multimillionaire capitalist, but actually a patriot.
At first, the thought of an alumnus of The Carlyle Group now acting as a red-blooded patriot … Well, the cynical side of me could not buy into the idea of Akerson as patriot, denying his own self-interest and enrichment for a nobler cause – rebuilding GM into a global engineering and manufacturing powerhouse.
Then he told me how much he’s making at GM.
“I’m probably in the bottom 10 per cent of CEOs,” he said, noting that his pay packet by law in the United States is limited, though even with those limitations he recently turned down a raise.
“I said, ‘I can’t do that,’” not while governments in the U.S. and Canada own more than one-third of GM, and certainly not while GM remains in the early stages of rebuilding its business. For those same reasons, GM’s top 25 executives are not eligible for bonuses.
After about 18 months on the job he’s settled into a life in Detroit, not Washington, D.C., where he had lived for more than eight years before coming to GM, and where the parties are better and the scenery is prettier. He said he’s only now begun to fully grasp the complexities of running what is again the world’s largest car company.
He told me that though he’s run three public companies in his career, and though during his eight years at The Carlyle Group he had contact with some 80 CEOs while orchestrating investments and turnarounds, nothing he’s seen or managed before compares with GM. This car company is probably the most complex enterprise he’s ever encountered, he said.
I’m told that Akerson is a strategic thinker, not a nitty-gritty details guy, and he’s very impatient with laziness and mediocrity. Akerson told me he sees his job as an agent of cultural change GM. Speed matters, he said, and GM is not nearly fast enough.
GM needs to bring to market new models with rapid-fire speed and needs to do so without any Aztec-like disasters. He is trying to instill urgency into the decision-making at GM. I am also told he is a stickler for holding his senior managers to their budget targets and for them to limit reports to the CEO at one page or less.
I was hugely, hugely skeptical when Akerson came aboard GM. What did he know about running a global car company? By his own admission, not enough. But Akerson is a very smart guy and he’s tough. Tough and smart seems like the correct recipe for a GM CEO at this stage.
No one should underestimate the fervour and dedication of a truly committed patriot. I am led to believe Akerson is just such a CEO. He is, after all, at the end of his career – “I’m not 40 anymore,” he told me. But he says he took the job because GM is a “strategic asset” for the U.S., not just a car company, and he suggested he’s doing his duty as an American who has lived well and profited richly in the U.S.
We know this: Akerson can leave GM at any time. He’s already rich and he can quickly and easily return to the world of investing and profiting. Instead, he’s living in Detroit, no doubt using all the deep and wide contacts he has in U.S. society to further the GM cause. This is a man who can pick up the phone and get current and former presidents on the line – not just because GM is a big company that is still significantly owned by taxpayers, either.
No, Akerson can talk to president and prime ministers because he knows a lot of them personally. I left our conversation thinking he’s a rich and experienced businessman stoked with patriotic fervour and brilliant contacts. Now that’s a formidable combination.