WASHINGTON – Outgoing General Motors Chairman Dan Akerson on Monday painted a bright picture of the company’s future only five years after it collapsed into a bankruptcy that involved a $49.5 billion bailout from U.S. taxpayers.
While short on specifics when asked about GM facilities such as the former Delphi facility in Lockport – as well as about a long-standing controversy involving Delphi salaried retirees who lost many of their benefits after the bailout – Akerson said the company is now free of government ownership and poised for success.
“The end of the ‘Government Motors’ era has cleared the runway for the team to soar,” Akerson said in a luncheon speech at the National Press Club. “And soar we will, because we are building a GM that America can be proud of.”
Thanks to a management shake-up that changed GM’s culture and its relationship with its workers, the company is now putting consumers first and winning quality awards while running a profit for 15 consecutive quarters, Akerson said.
“All of our plants turn a profit,” he said.
That’s no doubt good news for the 1,900 people who work at GM’s Powertrain plant in the Town of Tonawanda as well as the 1,700 who work at the former Delphi facility in Lockport.
And it’s good news coming at another time of transition for GM. The federal government last week announced that it had sold the last of the GM shares it acquired in the bailout of the nation’s largest automaker, leaving taxpayers with a loss of about $10.5 billion. Meantime, Akerson announced he is retiring and leaving longtime GM executive Mary Barra in charge as the first female CEO of a major U.S. automaker.
That left Akerson free to deliver a wide-ranging and unusually blunt assessment of how troubled GM was five years ago and how far it has come.
“I categorize the problems we faced into three broad buckets,” he said. “There were out-of-control costs, wasteful complexity and diminished quality – all funded by ruinous debt.”
In the midst of the financial crisis, GM had no choice but to seek government help, said Akerson, who took over as GM’s CEO after the government-led bankruptcy five years ago.
“Thanks to the swift and courageous action by two different administrations, the entire U.S. auto industry is back,” Akerson said. “Rather than allowing the industry to collapse and turn the Great Recession into another Great Depression, our nation stood with us.”
Of course, the auto industry bailout remains hugely controversial. Some, for example, have said GM should pay the government back the $10.5 billion it lost on the bailout, but Akerson said that just wouldn’t work.
“There would be shareholder suits that would be difficult to defend” if GM voluntarily decided to give that much money back to the government, he said.
Besides, he stressed that the government would have had to pay out far more if it had not bailed out GM and Chrysler. Citing a study from the Center for Automotive Research, he said those costs – to cover the unemployment benefits and pensions of employees at defunct or teetering automakers, as well as other social costs – would have totaled between $36 billion and $38 billion.
Still, the bailout leaves a particularly bad taste in the mouths of Delphi’s salaried retirees, who lost much of their pension and health benefits even though most of GM’s unionized retirees did not.
Asked about the plight of the Delphi retirees, Akerson appeared to shift blame to the executives who ran Delphi in the 10 years between when it was originally spun off from GM and when it came back under the GM fold after the bankruptcy.
“I wasn’t there when Delphi was spun out, but I know it was spun out with a fully funded pension plan at the time 10 years prior to bankruptcy,” he said.
Akerson focused most of his remarks on what happened after the bailout: a five-year period in which GM agreed to a new “two-tier” wage system with the United Auto Workers, entirely reworked everything from its tech operations to its financial systems and spun out a host of new products that have resulted in GM becoming the first U.S. automaker to ever top J.D. Power’s Initial Quality Study.
A common thread ran through all those changes, Akerson said.
“The bailout allowed us the opportunity to change the culture of the company, to put the customer at the center of everything we do,” Akerson said.
Nevertheless, he acknowledged that Barra still faces some serious challenges as she takes charge at GM.
“The truth is we are still in the early chapters of our comeback story, and we have a lot to prove, especially to people who left us for other brands,” Akerson said. “The only way to bring them back is to keep making cars, trucks and crossovers with world-class quality, reliability, durability and compelling design.”