GM's Akerson: Another Outsider for Detroit

Ford and General Motors are flourishing with CEOs from outside auto industry.
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DETROIT (

TheStreet

) -- Once again,

General Motors

has reached outside the auto industry for its top leadership.

Former telecom and turnaround executive

Dan Akerson

will replace telecom exec Ed Whitacre at GM, while

Boeing

(BA) - Get Report

veteran Alan Mulally will continue to run

Ford

(F) - Get Report

. Of the Detroit three, only Chrysler is run by a car guy, Sergio Marchionne. He got there because, with government help, he bought the company.

GM's incoming CEO, Dan Akerson

At one point during the industry's dramatic 2009 restructuring, all three were

run by outsiders. Chrysler's CEO was Bob Nardelli, who had spent three decades at

General Electric

(GE) - Get Report

and six years as CEO of

Home Depot

(HD) - Get Report

.

What's driving the outsider focus? "What they were doing before was not working," said Bruce Belzowski, associate director of the University of Michigan's Transportation Research Institute. "You want to find out if new people will do something different." Moreover, Belzowski said, Mulally's success at Ford and Whitaker's success at GM underscore the benefit of bringing in outsiders.

"It's a good thing," said Rebecca Lindland, director of research firm IHS Automotive. "The industry realized there are some fundamental business operations that don't require specific industry knowledge."

Given his experience with the Carlyle group, "Akerson is ideal for getting the company through the IPO," Lindland said. After that, "you need to have the recognition that you don't know everything. " she said. "Directly below you, you need people who know the nooks and crannies of the industry."

Whitaker set an example worth following, Lindland added. "He put some really terrific people in place, and got rid of some other people -- he made appropriate decisions and he set a good precedent for having a tough manager in place," she said. Arguably, those decisions were more easily made because an outsider was making them.

During the time that it directly presided over GM in 2009, the federal government embraced the concept that outside management was needed. Looking from the outside in, the industry was a total mess: its longtime practice had been to build too many cars at too high a cost and then to sell them at too many dealers for too low a price. The model embodied the old joke: lose money on each vehicle, but make it up on volume.

GM's Rick Wagoner and then-successor Fritz Henderson were both

forced out because they were not making changes quickly enough. It was a big shift. Historically, "virtually everybody at GM was homegrown," said consultant Joe Phillippi of AutoTrends Consulting.

Generally, Phillippi said, GM's top executives were groomed in the finance department. "You would start in the treasurer's office in New York and you would work your way up," Phillippi said. "You punched your various tickets by running operations around the world for a two-year-tour, and then you ended up back in the treasurer's office as EVP of finance. And then, bingo, you were chairman."

It wasn't surprising that the top executive was from finance, Phillippi added, because the biggest challenge in the decades following World War II was to manage the cash that just kept flowing in. Unfortunately, however, "the finance guys were largely disconnected from the car business," he said. That was one reason GM began to lose touch with consumers in the 70s.

Van Conway, an auto supplier restructuring expert based in Detroit, said he has found that industry experience constitutes only about 10% of the reason for selecting a turnaround CEO.

"The reason my clients are troubled is that they're not well run," he said. "They need to get the best guy they can get. In the areas where they don't have experience, they can rely on others and learn the job."

In the airline industry, Conway said, the same is true.

United

(UAUA)

cut costs in bankruptcy, boosted revenue, improved operations and now is on its way to a merger that will create the biggest airline in the world under the leadership of CEO Glenn Tilton. He prepared for the job by spending 32 years at

Chevron

(CVX) - Get Report

.

As an example, under Tilton United became the first major airline to charge a bag fee. No, the CEO was not in the working group that

came up with the idea. But obviously, this major enhancement to airline industry pricing came on his watch. Said Conway: "Part of not being brought up in an industry is that you might drill into something that people never thought of before."

-- Written by Ted Reed in Charlotte, N.C.