Politics-as-usual in choosing GM's new chairman?
DON'T BE HARD ON GM'S NEW CHAIRMAN EDWARD WHITACRE for confessing during
an interview last week that he knows nothing about cars. He simply
suffered a Joe Biden moment. Texans often tumble over their tongues when
taking a stab at humility. In fact, few car companies, let alone their
CEOs, know how to build cars, which is why so many of them are conking
out. The Obama administration, in my view, picked Whitacre to run
General Motors (ticker: GM) because he has a more important talent: He
knows how to play Chicago-style politics.
Whitacre predominantly donates money to GOP causes, but he is no party
purist. While serving as chairman and chief executive of SBC, the
regional Bell that grew under his leadership into AT&T, Whitacre helped
a couple of influential Chicago Democrats -- both friends of President
Barack Obama -- enrich themselves between political gigs. He gave former
commerce secretary Bill Daley a very sweet job and White House Chief of
Staff Rahm Emanuel a very sweet investment-banking opportunity.
I have written about the Emanuel deal before ("Unraveling Rahm Emanuel's
Fast Fortunes," Dec. 22, 2008). In short, SBC picked up a residential
security outfit in acquiring telecom Ameritech and was ordered in 2000
by the Federal Communications Commission to divest itself of the
property. Ameritech had sunk $1.4 billion into the subsidiary --
SecurityLink -- and SBC thought it could sell it for about that much.
Instead, it ended up selling the unit in 2001 to an investment group
represented by Emanuel for $479 million. Whitacre and the SBC board
signed off on the deal. The investment group, which was made up of GTCR
Goldner Rauner and Covert & Whall, sold the property six months later to
Dennis Kozlowski's Tyco for $1 billion.
An investment banker familiar with the deal claims there were no other
buyers for SecurityLink, owing to both the tech wreck and mismanagement
of SecurityLink by Ameritech, which had left its customer-billing system
in shambles. The investment banker says the new owners had the knowledge
to quickly repair the problems.
It was Emanuel's largest payday since he had left politics in 1998 for a
stint as an investment banker. In two years, he amassed more than $16
Neither White House Deputy Press Secretary Bill Burton nor GM responded
to queries about the selection process.
Bill Daley, Bill Clinton's commerce secretary and brother of Chicago's
popular Democratic mayor, was named SBC's president by Whitacre in 2001.
His responsibilities, according to the official release, included
regulatory matters, governmental initiatives, and external and
international affairs. In other words, he became a lobbyist/door-opener
for the corporation. He got a $1.1 million signing bonus from Whitacre,
a starting salary of $600,000 and a bonus of no less than $600,000 in
2002, plus stock options, a country-club membership and a monthly car
allowance, including free fuel and maintenance.
We will be watching closely to see which of the current crop of
Washington bigwigs end up working for Whitacre at GM.