Akerson Prepares for IPO as Auto Sales Slow

Aug 13th, 2010 | By businessnews | Category: Business

August 13, 2010, 12:28 AM EDT

By Tim Higgins, Keith Naughton and Jeff Green

Aug. 13 (Bloomberg) — Dan Akerson, General Motors Co.’s fourth chief executive officer in 18 months, has to convince investors the automaker’s turnaround has staying power.

Announced yesterday to succeed Ed Whitacre on Sept. 1, it’s Akerson who will be the face of the automaker as it embarks on a public stock offering to repay the U.S. Treasury for its $50 billion bailout. He will be selling a company that posted two straight quarters of profit after $88 billion in losses in the four years before it declared bankruptcy 14 months ago.

“He’s got one more good run in him,” said Steven Rattner, who led GM’s reorganization when he ran President Barack Obama’s Automotive Task Force and served on the Ziff-Davis Inc. board with Akerson. “As someone who has lived in the corporate world, this is as exciting an opportunity as there could be.”

The IPO, which may be filed as soon as today, may raise as much as $16 billion, making it the second-largest in U.S. history, said a person familiar with the plans. Akerson got the job after the board and bankers pressed Whitacre, 68, to commit to spending several more years at GM in order to help promote the IPO, three people with direct knowledge of the talks said.

The 61-year-old Akerson, who was born in California and grew up in Minnesota, graduated from the Naval Academy and served on Navy destroyers before working for telecommunications companies.

“He would tell you to this day that the defining experience of his life was the four years he spent at the Naval Academy,” said Todd Wolfenbarger, who worked for Akerson as a spokesman at XO Communications Inc. “He looks at General Motors as something that is deeply embedded in who the country is, and that will always have a huge appeal to Dan.”

Cadillac CTS

Wolfenbarger described Akerson, whom he expects will move from suburban Washington to Detroit, as a family man. He is married with three grown children. He also owns a Cadillac CTS, according to GM.

He spent a decade at MCI Communications Corp., according to data compiled by Bloomberg. He was chairman and CEO of General Instrument Corp., Nextel Communications Inc. and Nextlink Communications Inc., which became XO Communications Inc.

“Dan is a guy who is more a person you would want when you want to change things a lot,” said Craig McCaw, chairman of Eagle River Holdings LLC. “When I wanted to make big changes in the way Nextel worked, I did come to Dan and ask him to do it. And I think he did that.”

High Expectations

Akerson expects competence, preparation and opinions, Wolfenbarger said.

“If you brought those things, I think people did pretty well with him,” he said in a telephone interview. “If you didn’t, it’s tough. He’s tough. He’s demanding. He has high expectations.”

Akerson was at the head of XO, a seller of business phone and Internet services, when it filed bankruptcy in 2002.

In 2003, he switched to private equity, joining the Carlyle Group, where he is a managing director and member of its executive committee.

Akerson’s experience in private equity makes him a good choice as a Whitacre replacement, said Joe Phillippi, principal of AutoTrends Inc., a consulting firm in Short Hills, New Jersey.

“He’s a P.E. guy, and the function of a P.E. guy is cash flow and cash out, as in taking a company public,” Phillippi said.

Challenge Ahead

The IPO won’t be easy, given that GM has a track record of two profitable quarters, rather than two or more years. The offering is coming “perhaps a tad earlier than people would like it in an ideal world,” Rattner said in an interview on Bloomberg Television’s “InBusiness With Margaret Brennan.”

Auto sales in the U.S. ran lower than analysts expected last month, raising concerns about the slow pace of consumer spending.

While GM has earned $2.6 billion in the first half of the year, Ford Motor Co. has earned $4.7 billion, even though it is a smaller automaker and didn’t benefit from the cost-cutting of bankruptcy reorganizations.

GM probably will file an IPO registration statement with the U.S. Securities and Exchange Commission today or possibly on Aug. 16, said a person familiar with the plan who asked not to be named because the discussions are private.

GM’s IPO would be the second-largest in U.S. history, behind Visa Inc.’s $19.7 billion initial offering in March 2008.

Board’s Decision

The final decision to appoint Akerson to both positions — he’ll become chairman by year’s end — was made Aug. 10, and the Treasury was informed the same day, said one of the people. GM may say Akerson will stay at least three years, the people said.

One of his key jobs will be to groom a successor and build a strong management team, said two other people familiar with the matter. Chief Financial Officer Chris Liddell, 52, and North America President Mark Reuss, 46, are both viewed as potential CEOs, those people said.

“I remember him being able to cut right to the heart of the matter, no B.S., very insightful judgments and no preconceived notions,” Rattner said in an interview.

Akerson brought that private-equity experience to the GM board, which he joined after last year’s bankruptcy. Akerson was said to be one of the three directors behind Fritz Henderson’s exit as CEO in December and strategic shifts to keep GM’s German unit Adam Opel GmbH.

“Dan Akerson has been actively engaged in and supportive of the key decisions and changes made at the new GM,” Pat Russo, GM’s lead director, said in a statement.

Rising Profit

GM reported a second-quarter net income of $1.54 billion yesterday as vehicle sales and production increased. Profit rose 44 percent from $1.07 billion in the first three months of the year.

“Results like these make it clear that the new GM is on the right track with good momentum behind us and a bright future ahead of us,” Whitacre said. “And also it gives me a lot of confidence to begin transitioning in new leadership at General Motors.”

Akerson will make a good “caretaker” during the IPO, said Jim McTevia of Bingham Farms, Michigan-based McTevia & Associates.

“I do not view him, with all due respect, as the real GM leader for the future,” said McTevia, a restructuring and turnaround expert. “I think this is another interim step, and I think they eventually groom people from inside the company to move up.”

Like Whitacre

Akerson brings similar skills to the job as Whitacre, who had been CEO at AT&T Inc., said Jeffrey Sonnenfeld, associate dean of the Yale School of Management and head of the Chief Executive Leadership Institute.

“You’re trading off a 68-year-old telecom guy for a 61-year-old telecom guy,” Sonnenfeld said. “Akerson is a smart, honest guy who has been well thought of as a turnaround artist. But we’ve been told the turnaround is behind them and I don’t think telecom is the most threatening frontier for GM.”

Akerson, an avid golfer who took up the game as an adult, knows the challenges that lay ahead, said Wolfenbarger, who hears from his former boss regularly.

“He told me this morning that his handicap was going to take a severe beating because of this job,” he said yesterday.

–With assistance from Bill Koenig and Jeff Green in Southfield, Michigan, Cristina Alesci, Jon Erlichman, Jeffrey McCracken and Margaret Brennan in New York. Editors: Kevin Orland, Jamie Butters.

To contact the reporters on this story: Tim Higgins in Southfield, Michigan at thiggins21@bloomberg.net; Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

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