New General Motors Co. (NYSE: GM) CEO Mary Barra has barely been in her job four months, but she could be gone almost immediately. There are several reasons, but the primary ones are first that she has no experience running a company in terrible crisis, and second she was named Vice President of Global Manufacturing Engineering in February 2008. Many of the problems that triggered recalls occurred on the watch of a management team headed by then CEO Rick Wagoner. For part of his tenure, that team included Barra.
The worse the GM recall crisis becomes, the more the board needs a scapegoat. The board has just hired its own attorneys to examine why it heard about product safety complaints so late. As part of that probe, it is without question that the entire chain of command from GM’s CEOs to its senior engineers will be examined. The odds that no one in management knew about the product trouble until this year are long, and getting longer.
Barra almost certainly did not know about the faulty parts, but did anyone who reported to her know? If so, the question is bound to arise about whether she supported or was part of the long-term bureaucracy at GM that has been blamed for lack of communication and slow decisions.
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More likely, the pressure to fire Barra is based on the size of GM’s problems and the fact that she has been CEO for such a short time. There are a number of current and former CEOs that GM’s board could turn to who have the gravitas to take on such a massive disaster and regain the confidence of the federal government, customers, employees and investors.
Among these former CEOs are certainly former International Business Machines Corp. (NYSE: IBM) CEO Lou Gerstner or retired Verizon Communications Inc. (NYSE: VZ) CEO Ivan Seidenberg.
GM has just recalled another 2.7 million cars. The write-offs for the recalls already stretch into the hundreds of millions of dollars. GM’s shares are down 15% so far this year. There is a still a chance that auto buyers will turn away from GM cars. And liability suits against GM have just started and will range into the billions of dollars. GM may be able to use its Chapter 11 filing to wall off some of these suits. Whether it can wall all of them off is uncertain.
Mary Barra will have trouble keeping her job for more than a few weeks.