CASE APPLICATION

Too Big to Change?

No one could have imagined it. After all these years, many thought it was too big to fail. Yet, on June 1,
2009, General Motors Corporation (GM) filed for Chapter 11 bankruptcy protection, the second-largest
industrial bankruptcy in history (WorldCom was the largest). GM, which hadn’t made a profit since 2004,
declared in its filing that it had $172 billion in debt and $82 billion in assets. As any competent business
student could tell you, that ratio doesn’t make a balance sheet balance, especially when the company’s
equity is worth little.
Fritz Henderson, who was named CEO of GM on March 30, 2009, was a numbers guy, but he knew the
company’s culture had to change. His vision of the new organizational culture revolved around four
guidelines: risk taking, accountability, speed, and customer-product focus. The problem was that GM had
tried before to reinvent itself, with mixed success. “GM’s past is littered with the buzzwords of culture
change…. It has struggled to impose cultural change across the highly bureaucratic company in which
brands, departments, and regions operated like self-governing and competing states within a federation.”
But, GM’s executives said, this time would be different. After all, there was the bankruptcy and the
selective elimination of entrenched leadership. Were things really changing, though? Despite his well-
intentioned plans, Henderson was fired by the board on December 1, 2009. Some felt he wasn’t radical
enough to change the company. His replacement was the person appointed by the Obama
administration’s car czar to oversee the automaker’s revival after bankruptcy, Ed Whitacre, the well-
respected retired chairman and CEO of AT&T.

GM’s former CEO Ed Whitacre celebrates with employees during his announcement
that the company repaid its government loans in full and ahead of schedule because
of management’s efforts to change GM’s bureaucratic culture.
The challenges Whitacre faces, in changing GM’s “plodding” culture, are vast. A recent meeting of the CEO
and other top executives illustrates why. The meeting was called to approve plans for a new generation
of cars and trucks. Before the executives could go through all the pictures, charts, and financial projections
they had prepared, Whitacre stopped them to ask why they were having the meeting in the first place.
“You all have checked all this out pretty thoroughly. I imagine you’re not going to approve something
that’s bad or unprofitable, so why don’t you make the final decisions?” He let the plans stand and
suggested that the group disband its regular Friday sessions. And it’s not just the top executives who did
this. In the past, even minor decisions were mulled over by committee after committee. Whitacre’s trying
to change that. Pushing authority and decision making down into GM’s multilayered organization and
slicing away at the bureaucracy are big parts of the cultural changes Whitacre is attempting. Changing
GM’s entrenched corporate culture isn’t going to be easy, but it is necessary if GM is going to become the
automotive icon it once was.
With the changes Whitacre initiated, GM achieved profitability in the first two quarters of 2010. As was
his intent all along, Whitacre stepped down as CEO in early August 2010 and was replaced by Daniel
Akerson, a member of the company’s board of directors.

Discussion Questions
1. How would you describe the organizational culture at GM? Why was decision making so slow –
“plodding” as one analyst described it?
2. Why do you think the previous CEO’s (Mr. Henderson) attempts to change the organizational culture
might have been lacking?
3. What changes is Mr. Whitacre making to the culture of GM?
4. What types of resistance is he likely to encounter? Using Exhibit 6-5, what would be the best ways to
address that resistance? Be specific.