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Henderson to the rescue at General Motors

A new boss faces the tough task of revamping the troubled US carmaker. David Welch reports

The clock is ticking for Frederick "Fritz" Henderson. Tapped by the US Treasury to run General Motors, the new chief executive understands that he needs to take a wrecking ball to the carmaker's rigid culture or he could be history, too. "I know I have to re-prove myself," he says.

Henderson, who joined GM in the 1980s as a financial analyst, vows he will make the company nimbler and less bureaucratic. But his government minders are determined to provide adult supervision. They have installed as chairman former AT&T boss Edward Whitacre, considered a pragmatic change agent by Treasury officials for his successful reign at the telecoms giant. And they're pushing Henderson to recruit other outsiders who can bring dramatic change to an organisation that has long resisted it – and may still push back despite the near-death experience of bankruptcy.

Whitacre declined to discuss his new role, but Treasury officials say they are counting on him to help Henderson to turn GM into a more consumer-focused company, much as Whitacre did at AT&T. Kent Kresa, who will be the interim chairman until GM emerges from bankruptcy and Whitacre takes over, says the former AT&T boss was so keen to fix GM that he volunteered for the job. "He's the kind of guy who will assess what's wrong, what should be done, and how we will get there," Kresa says.

Washington wants Henderson and Whitacre to lure the kind of talent that will help GM to reach consumers the way it did when legendary chairman Alfred Sloan turned the company into one of the best carmakers in the world. Task-force insiders say they don't want to pick who stays and who goes. But they have suggested that GM find new people who can help it get a quicker read on consumer tastes and build on the handful of recent hit models. "It's about Fritz and Ed picking a winning team," says an administration official. "There will be a talent search."

In the meantime, Henderson is tackling GM's glacial decision-making process. A couple of four-hour meetings have been cut in half. Gone are the "pre-meetings", when the agenda for the real meeting was set. "I don't have time for that," Henderson says. Delegation, never GM's strong suit, is now an imperative. In early April, just after the treasury made him chief executive, Henderson and several executives were discussing whether to add pricey features to a future Buick model. Some wanted to save a few bucks while others figured they needed to show consumers that the brand is truly upscale. After some debate, Henderson turned to Buick-GMC boss Susan Docherty. "You're the vice-president of Buick," Docherty recalls him saying. "Make the call." She opted to spend the money, and that was fine with the boss. "Fritz is creating a culture where we don't need 17 meetings," Docherty says. "In the old GM, we would have to hear from everybody."

Henderson hired Booz & Co consultant Jon R Katzenbach last month to help to make GM's middle managers less risk-averse and more willing to make decisions. Katzenbach and his team are scouring the company for mavericks adept at getting ideas past a recalcitrant bureaucracy. He asked each department chief to name five candidates. In most cases, he says, they aren't top managers or people on the fast track. The plan is to make their attitudes and habits the norm, not a rarity.

Henderson may ditch one managerial bottleneck, a star chamber known as the Automotive Strategy Board. Its 16 members decide where money is spent, what strategy every business unit should take, and who gets promoted. In the past, the group has convened monthly. So if the carmaker needed to make big calls, like cutting checks for a new car or slashing production, those decisions languished until meeting time. GM insiders say Henderson may replace the strategy board with smaller teams that meet weekly and make decisions further down in the company.

Henderson has been careful not to criticise former GM boss Richard Wagoner. But he has begun dismantling some of his mentor's initiatives. Wagoner was a data geek who used nearly 10 metrics to measure his executives' performance. Not all were particularly relevant. Henderson says he has boiled those down to the five most vital for each department, with a much bigger emphasis on sales and profits. Under Wagoner, people were focused on minute details that meant more to their own departments than the overall company. "We got a little crazy with metrics," says Chris Oster, GM's organisational tsar. So far so good. But is Henderson willing to do what it takes?

GM's new chief restructuring officer, Al Koch, previously advised the company as a consultant and has an outsider's perspective. "Fritz is more hands-on in enforcing decisions than Rick was," he says. But old habits endure. In a 1 June blog post to employees, Henderson asked for suggestions and criticism. Several workers said people are afraid of challenging the status quo. When pressed in an interview on the culture of fear, Henderson said he gets criticism all the time, and then added: "I've never had a situation where people were afraid to speak up." Maybe so, but that doesn't mean managers further down won't discourage ideas from underlings.

Henderson says GM's product planning group is just fine. Yet it has routinely missed trends and rarely sets them. GM's Chevrolet division, for example, is just this year launching decent crossover sports utility vehicle (a car with SUV features). It's not that GM's designers can't work fast. They often wait for the "numbers dummies", as GM product adviser Robert Lutz calls them, to hash over the research. By the time the green light comes on, GM has missed the moment.

Fixing that is one of Henderson's biggest tasks. Lutz, the company's maverick-in-chief, is scheduled to retire this year. He's the one who did an end run around or bulldozed over the bureaucracy, says James Hall of 2953 Analytics, a Detroit consulting firm. But Lutz never created a formal system to replace his product savvy. That, say GM insiders, is why Lutz may stay on past his 31 December departure date.

Either way, Henderson will have to make the product planning group – GM's most vital department – work faster and read the market better. He'll also have to prove wrong the critics who think GM needs not a company man as chief executive but an outsider like Ford's Alan R Mulally. Right now it's fair to say that Henderson is moving faster than his predecessor. For the foreseeable future, his fate will rest in the hands of government minders who expect dramatic results – and quickly.

This story also appears in the latest issue of BusinessWeek