Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

Summary: Ed Whitacre, who built SBC, one of the babies Bell, back into "The New AT&T" has been tapped by the Obama Administration's auto task force to be chairman of the "reinvented General Motors."Seriously.

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Ed Whitacre, who built SBC, one of the babies Bell, back into "The New AT&T" has been tapped by the Obama Administration's auto task force to be chairman of the "reinvented General Motors."

Seriously. Think about that.

AT&T is the template for the future of the American automotive industry.

This may be the worst business decision ever. It will surely come back to haunt the Obama team. AT&T is monolithic and has grown increasingly less innovative since the 1990s. Whitacre has only confirmed his indifference toward customers with repeated decisions on privacy, net neutrality and executive compensation that defied a commitment to delivering the best service at a reasonable price.

As an example of an egregious lack of corporate fiscal discipline, his $158 million retirement package from AT&T, which included country club memberships, makes plain that Whitacre is the wrong leader for GM's business today.

At AT&T, Whitacre led a company that under-performed compared to its industry and the S&P 500 during his term as CEO. AT&T shares are trading in the same range today as they did earlier this decade, before Whitacre took over, and in the 1990s. Today, the company trades for 67 percent of its enterprise value.

All those strategic merges that Whitacre's supporters tout have not paid off.

AT&T, a company Whitacre said is "all about scale and scope," which was rebuilt largely on limiting customer choice, is not what Detroit needs. What the automotive industry needs is innovation and streamlining of every aspect of its logistical and manufacturing systems, in addition to a healthy dose of transparency. Those are not Whitacre's strengths. From deals to that rebuilt most of Ma Bell, reducing local competition in many regions of the United States, to locking sales of Apple's iPhone to the AT&T network—as well as the generally lousy quality of AT&T service—he has emphasized big and unresponsive as the basis of his business. Whitacre has subdued more innovation than he's enabled, relying on his ability to bully regulators on behalf of AT&T, which he insisted was under attack from all sides. In his home state, Texas, Whitacre's companies, SBC and AT&T, have consistently attacked public wireless initiatives, trying to prevent them from operating through legislation instead of trying to compete with or enhance those services.

Additionally, Whitacre fought shareholders seeking to limit his compensation throughout his years at AT&T, ultimately being forced by the SEC to allow a shareholder vote on a watered-down board proposal.

I ask you, again: Is this the right model for a revived GM? Instead, it's is a fairly complete description of the dying GM.

Whiteacre is an engineer who has built his reputation and wealth through leveraged buyouts of companies, always paying a premium price and, ultimately, paying the cost with a poor stock performance compared to other telecommunications companies. Forbes called him "tall, smart, driven, and sturdy as a telephone pole." He obviously does have a high estimation of himself, and the clout to get board members to go along with his self-assessment. His pay rose dramatically while he slashed more than 30,000 jobs at AT&T. This pole looks unconnected to economic reality from any angle.

Because the government owns the majority of GM, each of us should have our say about it. This is my two cents. Appointing Whitacre on the recommendation of a hold-over GM board member is not a smart move by the Obama team. They wanted outside perspectives on the automotive industry, but hired the ultimate insider regardless of what industry he's in.

In fact, this is a decision the courts probably should review, because of the public investment involved. Informed shareholders should not buy off on Ed Whitacre running General Motors. Let's see some real breaking of boundaries, not an executive shuffle based on insider connections.

Correction: Thanks to reader Jim Gillan for pointing out that I misquoted Forbes, writing "seasoned as a phone pole." The corrected quote, "sturdy as a phone pole," is now in the story.

Topics: Enterprise Software, CXO, Legal, AT&T

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17 comments
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  • Maybe they will put the ice cream man in charge of Citigroup next

    i know
    lets put an oil guy in charge of Time Warner
    we can play all kinds of tricks Barry
    Oh what fun!
    zmud
  • Court Review

    Hmmm. You make some good points, but... GM already has the executive appointing its top personnel. Do you really want the judicative to review it on top of that? That doesn't sound like a nimble company waiting to happen.

    I suspect we would probably both prefer a GM with no government involved in running it.
    dunraven
    • I'd prefer no government intervention

      Yes, I agree that getting more government involved isn't good. But, I
      think the decision process here was remarkably opaque, despite
      government money and a promise of transparency both by the
      administration and the auto industry. If, as citizens whose government
      owns most of this company, we can't get a voice in the decision about
      GM, maybe the courts would be useful in this case.

      At the minimum, I'd say we should be able to ask by what standards
      Whitacre qualifies to rebuild GM. His record at AT&T was dismal.
      Mitch Ratcliffe
      • Political Donors rule the day.....

        Nothing new, no change. This administration is just as bad as previous ones and is no different. Government control is scary and needs to be controlled, but our society is screwed and can't see the bad side of big government. Freakin A, I need a bailout to, but no I get up and work hard every day. WE are becoming a cry baby pathetic nation.
        OhTheHumanity
        • Nanny State

          We (the ppl of this nation) have no power and neither does congress they abdicated power many years ago, sure they have apparent power to jail citizens and enforce local laws... But real power resides in the Federal Reserve. Period. What remains is simply a farce facade media of the Wacko Jacko "We are the World" weird. You don't believe me... The Fed signed off on a 103 BILLION spending bill for the IMF that never saw the light of day in the press or first whisper debate in Congress.
          Lucky7Star
  • This is the whole problem with corporate America...

    ...recycled CEOs.

    Screw up one company...leave with a huge golden parachute...then move on to the next company for more millions of dollars, and start the process all over again.
    IT_Guy_z
    • And now....

      We have government involved. Also another problem is not letting bad companies fail. It would be hard to deal with but its the basis of our system, but not so much anymore. As you see secure debt holders get screwed while the ones that caused the mess get to take charge even more. Unions owning the company is just crazy. Its like I am living in the twilight zone. So much for our Bond market now too. Not too much confidence that it will be repaid in the future if the government can come in and just deny you what legally was yours. Sad state just getting more sad. All hale the King or god(according to Newsweek)!
      OhTheHumanity
    • Rope!

      Thats why we have rope. To hang these people.
      ronphlf1
  • ATT/SBC Is A Giant Intransigent Bureaucracy

    ATT/SBC is a giant bureacracy that is incapable of
    innovation. It took the velvet sledge hammer of Steve Jobs
    to drag ATT into the 21st century.

    If you don't believe me, just call ATT and get caught up in
    their endless voice-mail/auto-attendants.

    As a business customer of ATT (not by choice), I can attest
    that ATT is completely out-of-touch with it's customer
    base. No account representatives, no one in charge,
    always get some other person when there is a problem. It
    is undoubtedly one of the worst companies I've ever dealt
    with.

    Putting this bozo in charge of GM is like putting an insane
    person in charge of an asylum.

    Thank GOD I don't own GM stock or any GM vehicle.
    ronphlf1
  • RE: Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

    From my consumer standpoint, ATT has rebounded with excellence in regards to consumer satisfaction, and isn't that what the consumer wanted from the beginning? No micro management... no cutting corners... great quality and service... and they offer the best cell connection service in the country. I'm not saying Obama's choice was the best available... but I would watch it "run it's course" before passing judgement on the Communication Giant's number one guy.
    FourLegged
    • I don't see great quality and service

      Just look at the headlines in recent days, where people are petitioning
      about iPhone upgrade pricing at AT&T, the price of AT&T data services
      and so forth. The evidence doesn't support a return to "excellence in
      regards consumer satisfaction." My personal experience with the network
      has been miserable -- I have not paid as much for phone service and
      received such poor connections, with bad audio quality and constantly
      dropped calls since before AT&T was broken up in the 80s.
      Mitch Ratcliffe
  • RE: Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

    I've recently become of the opinion that if a giant company like GM is headed for complete collapse without constant bailouts, let them fail and let other companies fill the void, both for the consumers and the workers. Bailing out GM is really just rewarding bad financial management and draining the already bad economy.
    Tony Agudo
  • RE: Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

    Nice piece by a guy who gets paid by Time Warner, one of AT&T's chief competitors. Hmmmm...
    billymo2
    • Former client, dude

      If you read my disclosure page carefully, you will find that I did work for
      Time Warner in the past. I don't "get paid" by Time Warner now.

      As for the accuracy of the piece, I stand by every word. How about,
      instead of trying to imply I am doing a hit piece, you actually respond the
      to facts described?
      Mitch Ratcliffe
  • Chairman doesn't run the company, but still a bad idea

    The chairman of the board certainly doesn't run the company. They push the CEO and executive team to perform and (are supposed to, anyway) hold them accountable.

    That said, I doubt he has his finger on the pulse of what Joe and Jane car-buyer are looking for. So, this clearly isn't a guy who is going to bring great new ideas to the board room discussions, or even be able to call BS if management has bad ones.

    He also doesn't have a great track record on making operations more efficient or effective in ultra an ultra-competitive market. So, I'm not sure how good he will be at determining whether Management is doing a good job or proposing changes that are likely to be successful.
    hoop1a
  • RE: Bad Idea Dept.: AT&T's Ed Whitacre to run General Motors

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