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The Deal: General Motors Turnaround Still Has a Ways to Go

NEW YORK (TheStreet) -- General Motors GM in a 24-hour span shed the "government motors" moniker and named its next CEO, but the resurgent automaker still must navigate a host of potholes if it is to stay on course and complete its turnaround.

Detroit-based GM on Tuesday named Mary Barra, head of product development, purchasing and supply chain management, to replace CEO Dan Akerson. The automaker also promoted CFODan Ammannto president, and said one-time Cummins Inc. CEO Theodore Solso would replace Akerson as chairman of the board.

The announcement came just hours after the U.S. Treasury said it has sold its remaining shares in GM, closing a difficult chapter in the automaker's history that included the government providing $49.5 billion in funding to help GM survive a 2009 bankruptcy restructuring.

Barra, a 33-year GM veteran who has steadily advanced up the corporate ladder after starting as an 18-year-old intern at the company, will take over on Jan. 15 when Akerson formally steps down to be with his ailing wife. Barra is an engineer by training, a significant departure for a company that in recent decades has mostly been run by executives with a background in finance.

Barclays plcanalyst Brian A. Johnson in a note said that having an engineer in charge should benefit the automaker, comparing her to bothFord Motor Co.'s much praised CEO as well as one of GM's most famous former executives.

"We see Barra as more of a 'process architect' than a 'car guy (or gal)' - not a bad thing considering the success ofAlan Mulallyin that role at Ford, or the original success of Alfred Sloan at GM in the 1920s-50s," Johnson wrote. He said that the elevation of Ammann, who is popular among investors, should minimize any market concerns about the moves.

While the appointment of the first female CEO in the U.S. auto industry was the more historic milestone, the government's exit figures to pay a more immediate benefit to shareholders.S&PCapital IQanalyst Efraim Levy notes that with the divestiture complete, GM is not only free from certain executive compensation limits, but the move also "allows certain shareholder friendly actions such as initiating dividends and buying back stock."

Analysts have predicted that GM in the first half of 2014 will announce a campaign to use its huge balance sheet - which as of Sept. 30 housed $27 billion in gross cash and $38 billion in total liquidity - to buy back shares, restore a dividend and initiate a refinancing at investor-grade rates.

But challenges remain. General Motors is still battling to stop the cash bleed in Europe, where the company's affiliates have burned through more than $18 billion since 1999. The automaker during its restructuring had planned to sell its Adam Opel GmbH unit but reversed course soon after and earlier this year pledged to invest 4 billion ($5 billion) to try to streamline the brand and restore it to profitability.

Morgan Stanley analyst Adam Jonas in a note said another big challenge facing General Motors post-Treasury is continuing the process started under CFO Ammann to reduce the sprawling automaker's complexity, noting that "being big and having scale are two very different things."

Jonas said that as of 2011, GM had 27 vehicle platforms but generated just 35% of global volume from its top three. Volkswagen AG, by contrast, has just 13 platforms and gets 61% of sales from its three largest.

The company is working to simply its structure, with plans to reduce its number of platforms to 17 by 2019 and to spread more design and engineering work across platforms by using common designs.

Jonas also said progress has been made eliminating issues at the old GM of "powerful regional 'fiefdoms' that stagnated within the company's lack of internal financial transparency, battling with each other and Detroit," noting the company's recent decision to shut down Chevrolet in Europe as an example of progress.

Another area of focus is on logistics, with Akerson famously complaining that the company spends billions shipping parts and equipment to factories around the globe.

"GM is showing signs of finding its cultural magnetic north," Jonas said. "The process will take many years, but the stakes have never been higher."

--By Lou Whiteman in Atlanta.

General Motors Co. in a 24-hour span shed the "government motors" moniker and named its next CEO, but the resurgent automaker still must navigate a host of potholes if it is to stay on course and complete its turnaround.

Detroit-based GM on Tuesday named Mary Barra, head of product development, purchasing and supply chain management, to replace CEO Dan Akerson. The automaker also promoted CFO Dan Ammann to president, and said one-timeCummins Inc.CEO Theodore Solso would replace Akerson as chairman of the board.

The announcement came just hours after the U.S. Treasury said it has sold its remaining shares in GM, closing a difficult chapter in the automaker's history that included the government providing $49.5 billion in funding to help GM survive a 2009 bankruptcy restructuring.

Barra, a 33-year GM veteran who has steadily advanced up the corporate ladder after starting as an 18-year-old intern at the company, will take over on Jan. 15 when Akerson formally steps down to be with his ailing wife. Barra is an engineer by training, a significant departure for a company that in recent decades has mostly been run by executives with a background in finance.

Barclays plcanalyst Brian A. Johnson in a note said that having an engineer in charge should benefit the automaker, comparing her to both Ford Motor Co.'s much praised CEO as well as one of GM's most famous former executives.

"We see Barra as more of a 'process architect' than a 'car guy (or gal)' not a bad thing considering the success ofAlan Mulally in that role at Ford, or the original success of Alfred Sloan at GM in the 1920s-50s," Johnson wrote. He said that the elevation of Ammann, who is popular among investors, should minimize any market concerns about the moves.

While the appointment of the first female CEO in the U.S. auto industry was the more historic milestone, the government's exit figures to pay a more immediate benefit to shareholders.S&P Capital IQanalyst Efraim Levy notes that with the divestiture complete, GM is not only free from certain executive compensation limits, but the move also "allows certain shareholder friendly actions such as initiating dividends and buying back stock."

Analysts have predicted that GM in the first half of 2014 will announce a campaign to use its huge balance sheet which as of Sept. 30 housed $27 billion in gross cash and $38 billion in total liquidity to buy back shares, restore a dividend and initiate a refinancing at investor-grade rates.

But challenges remain. General Motors is still battling to stop the cash bleed in Europe, where the company's affiliates have burned through more than $18 billion since 1999. The automaker during its restructuring had planned to sell its Adam Opel GmbHunit but reversed course soon after and earlier this year pledged to invest 4 billion ($5 billion) to try to streamline the brand and restore it to profitability.

Morgan Stanleyanalyst Adam Jonas in a note said another big challenge facing General Motors post-Treasury is continuing the process started under CFO Ammann to reduce the sprawling automaker's complexity, noting that "being big and having scale are two very different things."

Jonas said that as of 2011, GM had 27 vehicle platforms but generated just 35% of global volume from its top three.Volkswagen AG, by contrast, has just 13 platforms and gets 61% of sales from its three largest.

The company is working to simply its structure, with plans to reduce its number of platforms to 17 by 2019 and to spread more design and engineering work across platforms by using common designs.

Jonas also said progress has been made eliminating issues at the old GM of "powerful regional 'fiefdoms' that stagnated within the company's lack of internal financial transparency, battling with each other and Detroit," noting the company's recent decision to shut down Chevrolet in Europe as an example of progress.

Another area of focus is on logistics, with Akerson famously complaining that the company spends billions shipping parts and equipment to factories around the globe.

"GM is showing signs of finding its cultural magnetic north," Jonas said. "The process will take many years, but the stakes have never been higher."

Read more:http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005919667#ixzz2n73Thp6n

General Motors Co. in a 24-hour span shed the "government motors" moniker and named its next CEO, but the resurgent automaker still must navigate a host of potholes if it is to stay on course and complete its turnaround.

Detroit-based GM on Tuesday named Mary Barra, head of product development, purchasing and supply chain management, to replace CEO Dan Akerson. The automaker also promoted CFO Dan Ammann to president, and said one-timeCummins Inc.CEO Theodore Solso would replace Akerson as chairman of the board.

The announcement came just hours after the U.S. Treasury said it has sold its remaining shares in GM, closing a difficult chapter in the automaker's history that included the government providing $49.5 billion in funding to help GM survive a 2009 bankruptcy restructuring.

Barra, a 33-year GM veteran who has steadily advanced up the corporate ladder after starting as an 18-year-old intern at the company, will take over on Jan. 15 when Akerson formally steps down to be with his ailing wife. Barra is an engineer by training, a significant departure for a company that in recent decades has mostly been run by executives with a background in finance.

Barclays plcanalyst Brian A. Johnson in a note said that having an engineer in charge should benefit the automaker, comparing her to both Ford Motor Co.'s much praised CEO as well as one of GM's most famous former executives.

"We see Barra as more of a 'process architect' than a 'car guy (or gal)' not a bad thing considering the success ofAlan Mulally in that role at Ford, or the original success of Alfred Sloan at GM in the 1920s-50s," Johnson wrote. He said that the elevation of Ammann, who is popular among investors, should minimize any market concerns about the moves.

While the appointment of the first female CEO in the U.S. auto industry was the more historic milestone, the government's exit figures to pay a more immediate benefit to shareholders.S&P Capital IQanalyst Efraim Levy notes that with the divestiture complete, GM is not only free from certain executive compensation limits, but the move also "allows certain shareholder friendly actions such as initiating dividends and buying back stock."

Analysts have predicted that GM in the first half of 2014 will announce a campaign to use its huge balance sheet which as of Sept. 30 housed $27 billion in gross cash and $38 billion in total liquidity to buy back shares, restore a dividend and initiate a refinancing at investor-grade rates.

But challenges remain. General Motors is still battling to stop the cash bleed in Europe, where the company's affiliates have burned through more than $18 billion since 1999. The automaker during its restructuring had planned to sell its Adam Opel GmbHunit but reversed course soon after and earlier this year pledged to invest 4 billion ($5 billion) to try to streamline the brand and restore it to profitability.

Morgan Stanleyanalyst Adam Jonas in a note said another big challenge facing General Motors post-Treasury is continuing the process started under CFO Ammann to reduce the sprawling automaker's complexity, noting that "being big and having scale are two very different things."

Jonas said that as of 2011, GM had 27 vehicle platforms but generated just 35% of global volume from its top three.Volkswagen AG, by contrast, has just 13 platforms and gets 61% of sales from its three largest.

The company is working to simply its structure, with plans to reduce its number of platforms to 17 by 2019 and to spread more design and engineering work across platforms by using common designs.

Jonas also said progress has been made eliminating issues at the old GM of "powerful regional 'fiefdoms' that stagnated within the company's lack of internal financial transparency, battling with each other and Detroit," noting the company's recent decision to shut down Chevrolet in Europe as an example of progress.

Another area of focus is on logistics, with Akerson famously complaining that the company spends billions shipping parts and equipment to factories around the globe.

"GM is showing signs of finding its cultural magnetic north," Jonas said. "The process will take many years, but the stakes have never been higher."

Read more:http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005919667#ixzz2n73Thp6n

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