DETROIT (Reuters) - General Motors Corp on Tuesday took a step toward restructuring its widely criticized board by naming former AT&T Inc CEO Ed Whitacre to become chairman of the reorganized automaker when it emerges from bankruptcy under U.S. government oversight.
Whitacre, an engineer by training who guided Texas-based Southwestern Bell through a decade of transformative mergers, will take over as chairman when a new GM is launched out of bankruptcy, the company said.
GM, which filed for bankruptcy on June 1, plans a quick sale process that would allow a much smaller automaker to emerge from court protection in as little as 60 days under the majority ownership of the U.S. Treasury.
By picking Whitacre as chairman for the new GM, the White House-appointed autos task force took the first step toward establishing a restructured board to oversee the government’s $50 billion investment in reshaping an American industrial icon.
“He is coming into an industry that is accustomed to heavy regulations. He knows how to grow a company. He gives a lot of credibility to GM’s restructuring,” said Stephen Spivey, an auto analyst with Frost & Sullivan.
Former GM Chairman and Chief Executive Rick Wagoner, who had staked his reputation on keeping the company out of bankruptcy, was ousted by the Obama administration at the end of March.
In announcing Whitacre’s selection, GM also confirmed that the longest-serving board members and those most closely associated with Wagoner’s tenure would be leaving.
Kent Kresa, former chief executive of Northrop Grumman Corp who has been serving as GM’s interim chairman, will stay on in that position until Whitacre takes over, GM said.
Whitacre and Kresa, along with current board members Philip Laskawy, Kathryn Marinello, Erroll Davis Jr, E. Neville Isdell and Chief Executive Officer Fritz Henderson, will serve as the “nucleus” of the restructured board, GM said in a statement.
GM’s board has come under fire before as efforts to restructure and turnaround a long-running slide in its business faltered. In the late 1980s, Texas tycoon Ross Perot dubbed his fellow GM directors “pet rocks” who sat silently by then-CEO Roger Smith.
In 2006, Jerry York, a director representing billionaire investor Kirk Kerkorian, resigned from the GM board and said that directors were unwilling to challenge Wagoner.
York had urged GM without success to drop unprofitable brands such as Saab and Hummer, steps that it only took later as its financial crisis deepened.
Three of the GM outside directors staying on at the reorganized company — Marinello, former chief executive of Ceridian Corp; Davis, a former chief executive of Alliant Energy Corp, and Isdell, a former chief executive at Coca-Cola Co — joined the board after that dispute.
Davis and Marinello joined in 2007. Isdell joined in 2008. Laskawy, former chief executive of Ernst & Young LLP, joined the GM board in 2003.
Other board members with more than a decade of experience were expected to retire in the coming weeks, GM said. That includes George Fisher, a former Eastman Kodak chief executive, who had been a steady ally of GM management under Wagoner.
GM has retained executive search firm Spencer Stuart to find four more directors to serve on the board of the new GM. Those directors will be approved by the U.S. government.
The Canadian government and the United Auto Workers union will each nominate a single director. That will bring the total number of directors of the reorganized company to 13.
GM currently has 12 board members.
Whitacre, 67, retired from AT&T in 2007 after seeing the largest U.S. telecommunications service provider through seven large acquisitions over a decade.
The Texas-born executive was the telecommunications industry’s best-known dealmaker during a period of rapid consolidation in the late 1990s that remade Southwestern Bell into a national provider of services ranging from cell phones to cable television under the AT&T brand.
Kresa said Whitacre’s track record had appealed strongly to U.S. officials overseeing the government’s investment in GM led by former investment banker Steve Rattner.
Other board appointees will have similar experience in leading companies through turnarounds or turbulence, said Kresa. “We are looking at candidates that have been involved in companies where there has been a dramatic change in the marketplace,” Kresa told reporters in a conference call.
“Those are the qualities that we’re looking for — and I believe have found,” he said.
The U.S. Treasury was “the ultimate decider” in the decision to appoint Whitacre as chairman, Kresa said. A small group of candidates were considered for the role but Whitacre had been under consideration from late March, he said.
Compensation for GM board members will be “restored to a more normal level of pay” once the company emerges from bankruptcy, Kresa said.
GM board members, who had previously received $200,000 per year, have been working for $1 per year since the company took U.S. government loans late last year.
Obama administration officials have said they intend for the government to leave key operational decisions to GM’s management once the new board is in place.
Additional reporting by Kevin Krolicki, editing by Matthew Lewis and Carol Bishopric