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Bill George
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Bill George

Bill George is a management professor at the Harvard Business School, the former Chairman and CEO of Medtronic, Inc., and the author of several best-selling books on leadership. His latest release is 7 Lessons for
Leading in Crisis
.

The U.S. auto revivers: Alan Mulally and Ed Whitacre

Question: Considering all spheres of endeavor, who would you nominate as Leader of the Year in 2010? Why?

The top business people of 2010 are Ed Whitacre of General Motors and Alan Mulally of Ford for restoring the U.S. automobile industry.

In a single year, Whitacre took an organization with $131 billion in revenues and 209,000 employees from bankruptcy to $8.5 billion EBITDA. In the process he created $50 billion in market capitalization, completing the largest IPO in history. And he restored a healthy balance sheet: GM currently has $33 billion in cash and only $9 billion in debt.

Ford's Alan Mulally is a worthy competitor for the top ranking. Since taking over Ford's top job in 2006, Mulally has done a spectacular job in restoring Ford to greatness, bringing fuel-efficient cars and trucks with updated designs to market, and increasing its revenues and market share.

So let's call it a draw between Whitacre and Mulally for the No. 1 slot.

The two of them deserve enormous credit for restoring America's automobile industry, just when it appeared that American-owned auto companies were a thing of the past. They are doing it "the old-fashioned way": not with short-term moves and financial gimmicks, but by making better vehicles that American consumers are eager to buy. Small wonder that after 30 years of declining market shares, these two giants are gaining share on the Japanese, Germans, Koreans and even the Italians (think of Fiat that owns Chrysler).

At a time when leading policymakers and economists think that American cannot compete anymore in the manufacturing business, Ford and GM are showing that it can be done--right here in our back yard, and with union labor and U.S. health care costs, no less. Who says we can't turn around manufacturing in the U.S.?

Both Whitacre and Mulally are masters at facing reality and then organizing people to fix current problems while creating growth for the future. Whitacre inherited an organization in complete denial that it had a problem with the competitiveness of its autos, in spite of the fact that its market share slid steadily from 53 percent of the U.S. market to a paltry 19 percent. The former CEO said in October 2007--a month before he flew to Washington on a private jet to plead for the Bush administration to bail his company out--that the only problem GM had was its mounting health-care costs.

Whitacre was recruited to take over as chairman in July 2009 when GM emerged from bankruptcy. He inherited a weak executive team that wouldn't face reality and preferred shared responsibility through committees and endless Power Point presentations, rather than to focus on car design. It didn't take him long to remove several layers of management and build a team of people who love the car business more than finance.

Whitacre, who came into GM with an amazing reputation from his days of building AT&T, had the courage to go on television ads and challenge consumers to give GM cars a second look, putting his money on the line with a "30-day money back guarantee." Although GM was owned by the government and the unions, he never once complained about interference from either the Obama administration or the UAW--although Obama's pay administrator, Kenneth Feinberg, limited him to a $500,000 total compensation package in recruiting a new CFO.

For half a century GM CEOs have been backing down to the power of the UAW, in order to avoid a strike. In the process they created an impossible set of financial obligations, including 100 percent health-care coverage for employees and retirees, a generous company-funded retirement plan, and a jobs bank that paid laid off employees for not working. Whitacre took a different tack: he met privately with UAW president Ron Gettelfinger and reached an agreement to work out solutions that enabled the company to compete on a global basis and the workers to keep their jobs.

Mulally, who left the top commercial aerospace job at Boeing, was equally courageous at Ford. Within 90 days he leveraged Ford's entire balance sheet to borrow $23.5 billion to give Ford a cushion against further problems and an economic downturn. That gave him the cash position to avoid running to the government for a bailout when the auto market collapsed in the fall of 2008.

To his credit, he used his strengthened balance sheet to get his lineup of cars and trucks more competitive. When Toyota experienced quality problems in early 2010, Mulally was ready to respond with an attractive product lineup that has enabled Ford to achieve consistent U.S. sales increases, and which have exceeded 40 percent in some months.

At a time when corporate leaders are being criticized at every turn, these are remarkable examples of what top leaders can do to turn around America's great companies. Let's give Whitacre and Mulally the top award for turning around an entire industry and showing Americans that authentic leadership really does matter.

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By Bill George

 |  December 22, 2010; 4:24 PM ET
Category:  Accomplishing Goals , CEOs , Crisis leadership , Economic crisis , Managing Crises , Organizational Culture Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Comments

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Great choices! They are on the right track here, but there’s much work to be done. Our automakers could benefit from watching this video on creating a superior culture of service (http://www.upyourservice.com/video-theater/how-do-you-build-and-sustain-a-superior-service-culture). That’s going to be the key to their longevity.

Posted by: Julie-Ann1 | December 30, 2010 1:37 PM
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While I agree that Alan is the better of the two managers, I would definitely not downplay Whitacre's role in reviving General Motors. I am assuming all of the above negative comments are coming from persons with no direct knowledge of the auto industry, no direct knowledge of the dynamics involved with the UAW (which will never be given the fair amount of credit deserved for the sacrifices made at all of the D3 companies), and in truth probably no direct knowledge of the Midwest in general where most of the American plants are located. I'd remind the good readers of the Post that while Ford did not receive government loans, Mulally arranged for loans from private sources that are still being repaid, and he did have the foresight to do so before Rick Wagoner and GM perceived and admitted to what was going on. That was to Mullaly's credit. And while I agree that Whitacre is not on the same level as Alan, and I too disliked "the commercial" I think that he did a wonderful job of shepherding GM through the post-bankruptcy period, acting as much as a caretaker of GM in comparison to what Alan did at Ford with his bold moves. Both did what was required. And for all of you non-automotive folks who seem to know so much about the industry, remember this: GM, with all of its leadership problems, with all of its outmoded corporate culture, still had the parts in place before bankruptcy for the Volt, the Cruze, the Malibu, the Regal, the Camaro (outselling Mustang, btw) and the Lacrosse, cars that are worthy competitors in today's marketplace, cars that can and are going head-to-head with the best that Ford and the imports have to offer. And those cars were brought about under names like Wagoner and Henderson and Lutz. I'm not here to defend GM's old corporate culture, but I am saying that there was, and is, a lot more to the story than the average person with no connections to the industry gets from this newspaper, CNBC with Kudlow or Fox News.

Posted by: rtinindiana | December 27, 2010 11:57 AM
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Bill George has a short memory, and this vote had similar dishonesty as Ed Whitacre, who I had no intention of voting for. I voted for Alan Mulally, the only Automotive CEO name appearing on the ballot. It was Mulally who mortgaging Ford's entire balance sheet and then systemically turned around a foundering bureaucracy, and in the process, probably pulled off the largest and most prophetic business turnaround ever.

And what of Ed Whitacre? I lost trust for him and hope for GM he got on TV and deliberately mis-led the public is an attempt to make up for the hard-earned public awe that Ford and Mulally earned by not accepting bailout money. Whitacre said GM "repaid our government loan in full." Rep. Paul Ryan (R-Wis.) noted that GM used government funds to pay back the government: It "simply transferred $6.7 billion from one taxpayer-funded TARP account to another." As a result of this advertisement, George Will in his 5/13/10 article wrote "CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears."

So comparing Ed Whitacre to Alan Mulally and "calling it a draw" is so wildly unacceptable and illogical that it gets me to wonder what interests Mr. George represents

Posted by: laugust | December 25, 2010 10:00 PM
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Bill George has a short memory, and this vote has similar dishonesty as Ed Whitacre himself, who I had no intention of voting for. I voted for Alan Mulally, the only Automotive CEO name appearing on the ballot. It was Mulally who mortgaging Ford's entire balance sheet and then systemically turned around a foundering bureaucracy, and in the process, probably pulled off the largest and most prophetic business turnaround ever.

And what of Ed Whitacre? I lost trust for him and hope for GM he got on TV and deliberately mis-led the public is an attempt to lie in order to make up for a hard-earned public awe that Ford and Mulally earned by not accepting bailout money. Whitacre said GM "repaid our government loan in full." Rep. Paul Ryan (R-Wis.) noted that GM used government funds to pay back the government: It "simply transferred $6.7 billion from one taxpayer-funded TARP account to another." As a result of this advertisement, George Will in his 5/13/10 Washington Post article wrote "CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears."

So comparing Ed Whitacre to Alan Mulally and "calling it a draw" is so wildly unacceptable that it gets me to wonder what interests Mr. George represents.

Posted by: laugust | December 25, 2010 9:22 PM
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This piece is an insult to Alan Mulally. A draw? Ed Whitacre was installed, did what he was told to do and then retired. His accomplishment is to complete the running of the Titanic into the iceberg, and today, the only reason the ship isn't on the bottom of the proverbial business ocean is because the Federal government continues to prop it up. Alan Mulally remarkably led Ford through the economic catastrophe without bailout funds, shore up Ford's balance sheet, and has amazingly shifted the company's focus from trucks to attractive, fuel-efficient cars in just a few short years. A brilliant job of management under astounding financial and public pressure. How is Whitacre even mentioned in the same discussion?

Posted by: bruuklin | December 24, 2010 12:27 PM
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Mulally a worthy competitor for Whitacre... does not come even close in providing the kudos due to Alan Mulully, CEO of Ford Motor Company who steered Ford clear of Federal bailouts, saw the financial disaster coming and positioned Ford to weather the Great GOP Recession of 2007. A true leader that made it all happen by himself.

Ed Whitacre, CEO of GM had a tremendous amount of help. This is like comparing eagles to pidgons. Not even close...

Hats off to Alan Mulally who has created jobs, kept his company out of the GOP's financial ditch, and destined Ford to be a great automobile that the world is clamoring to own!!!

Posted by: danglingwrangler | December 24, 2010 9:07 AM
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It's astounding that a Harvard management professor could so profoundly misunderstand (or deliberately mischaracterize) what has happened and continues to happen in the US automotive industry.

Ed Whitacre presides over a company that is worth less today than the US government, together with Canada and the UAW, put into it just over a year ago when it was nationalized, to say nothing of the money that will never ber returned to GM's bondholders or original shareholders. He has not begun creating value yet, nor is it clear that he will.

He has "restored a healthy balance sheet" only in the sense that he shirked billions of dollars in obligations through bankruptcy. I don't think that's what comes to most people's minds when George says "they're doing it the old-fashioned way".

It's Mulally who is doing it the old-fashioned way: preparing to survive hard times without government bailouts, repaying lenders on mutually agreeable terms, and truly creating value for shareholders, with the share price nearly doubling over his tenure - which, by the way included the worst recession in generations and a flat stock market overall.

Mulally a worthy competitor for Whitacre? Whitacre, who has had all the "successes" above handed to him by the Obama administration, is not worthy to drive Mulally's car.

Posted by: etymologue | December 23, 2010 4:39 PM
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