Showing posts with label CEO. Show all posts
Showing posts with label CEO. Show all posts

Tuesday, September 04, 2012

GENERAL MOTORS: SUCCESSION

 An IPO in the pipeline means that the US government could be well on its way to make a swift exit from running GM. This portends positive tidings for GM, which is recovering on the numbers. But a far more daunting challenge is looming up on the horizon. By Pawan Chabra

The company has also said in its S-1 filing sent to B&E, “Operating in a large number of different regions and countries exposes us to political, economic, and other risks as well as multiple foreign regulatory requirements.” There is no denying that the strategy of dumping brands like Pontiac, Saturn, Saab and Hummer has fetched success to the company in no time. While the IHS Global Insight research report forecasts global vehicle sales to increase at a compound annual growth rate (CAGR) of 6.0% from 2009 to 2015, GM has returned to profits even after the vehicle sales are running about 25% below the recent historical trends. In fact, it is expected that when the consumer sentiment improves further, the auto major will scale new heights in the coming times. Similarly, the rating agency, Moody’s has remarked in its global automotive outlook update, “Compared to where the industry was a year ago, when General Motors Corp. and Chrysler Corp. were in the throes of bankruptcy protection, and when many economies were still in recession, the turnaround in volume sales, demand, and to a lesser extent in pricing, has been faster than we anticipated.”

But the challenges that GM faces today is even beyond getting its IPO right on the bourses. Ensuring a sustainable sales performance will be a relatively easier task with the launching of fuel-efficient and competitively priced models; but the larger problem of succession planning is what could be a much more daunting concern in the coming time. The appointment of Dan Akerson on September 1, 2010 got the fourth CEO for GM on board in the past 18 months (see table). Akerson has taken control to ensure a smooth comeback of the company from Ed Whitacre Jr., a former telecom executive despite the fact that the telecom executive turned PE expert has never run a heavy-industrial company in his career so far (forget about one of the size GM’s operations).

The major problem that GM has been through is to find a suitable leader to run GM successfully. Whitacre was selected by the US Treasury, and apparently wasn’t planning to be there for the long term. So it was decided that the company should pitch a more stable leader before the IPO. Even auto czar Steven Rattner, who led the Treasury Department’s auto task force, has written a book ‘Overhaul: An insider’s Account of the Obama Administration’s Rescue of the Auto Industry’; mentioning the difficulty of finding someone to manage the world’s largest automaker.

For the ones who haven’t heard about Rattner’s role in the scheme of things that often, he was the one who went through, among other things, the daunting task of finding GM’s next CEO; a job that was rejected by the likes of Nissan CEO Carlos Ghosn. Rattner fired Rick Wagoner as the Chairman and CEO of GM, and promoted Henderson as his replacement and eventually appointed Whitacre as the Chairman & CEO of the auto major. However, after Whitacre’s unexpected exit in August, Rattner was pushed again in a tight spot. And as finding an outsider would have taken much more time with the IPO development looming, Rattner decided to go with Akerson as he was one of the most promising names on the board of the company. In the book to be published on October 14, Rattner points out that Akerson himself had declined the offer of being the CEO of GM twice (as he neither wanted to leave his PE job at the Carlyle Group nor move to Detroit); before he finally opted to take up the role. GM may be back to learning the ways of the market, but it’s hard to say that all is well with a hesitant General at the helm, and little view on the leadership. Where in heavens is Plan B?


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Friday, August 31, 2012

INDIA’S 100 MOST PROFITABLE COMPANIES

John Danner, Senior Fellow, Lester Center for Entrepreneurship, Haas School of Business, UC Berkeley
 
Conversely, big company managers need to understand what it takes to really listen to customer’s needs and wants, be willing to improvise as well as maintain high quality consistency, and give their people freedom to explore as well as execute new ideas. These are precisely the skills and culture that entrepreneurs relish, whether by personal style or market necessity or both.

But, today’s business schools train students to manage the enterprises of yesterday’s successful entrepreneurs. Classes focus on the issues involved in running large, established companies. Indeed, many MBA graduates see their future careers in the offices and cubicles of these firms. The crucible for both entrepreneurship and innovation usually requires experimentation, failure, reformulation and resilience. Reality is probably the best teacher for this.

Even business schools can provide such a crucible, by encouraging students to “creatively collide” with one another’s ideas, and experiment with their business visions early and often knowing that failures are highly likely but also represent superb learning opportunities to improve strategies for later efforts. The more interdisciplinary the crucible, the better opportunities for experimenting and learning at an early stage.

Profound economic growth, not to mention meaningful improvements in global security and environmental sustainability, will not come from today’s markets in the developed world; it will come from new ventures, products and services focused on the needs and aspirations of the four billion people who now live on less than $10 a day. This is where the future and fate of capitalism resides.

That’s the entrepreneurial challenge for which B-schools need to prepare their students, whether as future CEOs and business managers responsible for ensuring their large corporations survive for another generation, or as would-be entrepreneurs courageous enough to create the next “Power 100s” of the world.


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Saturday, July 28, 2012

The Domestic Airline Business

Inorganic Activity is Inevitable in The Domestic Airline Business, given The Huge Overdues, debt load and losses. The Skies are open for Consolidation and pe activity. Sellouts or mergers – what will happen? 

Given the strong promoter backing of SpiceJet, JetLite and IndiGo, these three cannot be counted as takeover targets. Not for now. But cash infusion through the PE route is a strong possibility. In this regard, the spotlight is on the two profitable SpiceJet (PAT: Rs.0.61 billion during FY2010) and IndiGo (Rs.5.5 billion).

Acquisition of controlling stakes in Indian carriers by foreign carriers cannot be ruled out either. Though the government has not taken a decision on this, since March 2010, discussions have been on to increase the FDI limit in aviation to 74%. [Given that Air India is in trouble, it is expected to become a candidate for such a case soon!] So we could well see a repeat of the Emirates-SriLankan Airlines deal where Emirates bought over 40% of SriLankan to take control of the airline and bring about a significant improvement in the financial & operational performance of SriLankan. There could even be a PE firm interested in one of the larger Indian airline companies, whose huge debt load ($13 billion in total – the highest in Asia) and poor financials automatically would make it a steal, as Port Washington-based airline industry expert Robert Mann (CEO of R. W. Mann & Co.) tells B&E, “Where barriers to entry have risen, consolidation has stabilised pricing and airline fortunes. Barriers to entry remain low in India, thus there has been limited success of M&As to date in India. In this case you could see a pure financial player – a PE firm – buying a huge stake in an airline over the next few quarters.” It is not to be forgotten that PE investor Texas Pacific Group’s entry into management and restructuring of Continental Airlines and its simultaneous board-level involvement with America West helped the merged entity bounce back. Though it is always considered better if the suitor is an airline, for selling airline seats may be selling hotdogs, but running an airline is no driving around fast-food stall. And the domestic circuit would hate to see another failure, whether an airline-airline or a PE-airline deal. In the past there have been many instances of non-airline investors having largely failed in airlines such as Malev, Mexicana and other Asian airlines. And many-a-time, the accrued debt has overwhelmed the airline and its revenue-generating potential.

So the forecast is – over the next 24 month, there will be some notable inorganic activities in the sector. At the same time, it is important that the government gives the domestic airline industry a chance to behave rationally. Someone has to be allowed to fail. Air India’s failure in July 2011 to gain entry into Star Alliance indicates that there is no clear way ahead for the carrier and that it continues to operate under short-term begging measures. With airlines on perpetual financial life-support, the industry cannot invest in a successful business model. Similarly, ailing companies will continue to deter new market entrants whilst at the same time, plead for protection to maintain their presence (like the shield being put in place to restrict Lufthansa’s A380s entering the Indian market). This neither benefits the industry nor the investment community. Creating ‘zombie’ carriers and merging them – both are fruitless. The failed merger between Pan Am and TWA in the 1980s is a lesson. Fundamentals have to improve to have a healthy business environment – and then will consolidation make sense for Indian carriers.


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