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

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.
Written by Mitch Ratcliffe, Contributor

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.

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