by Peter Latona

Created on: June 15, 2009

Ed Whitacre: Poor Choice for General Motors

As a staunch supporter of President Obama, I still cannot help but express disappointment in some of his economic decisions. I am skeptical that we can borrow and spend our way out of a calamity that was largely caused by over borrowing and spending. Yes, I know that stock market has been rising and 90% of economist say recovery is around the corner, but beware! These are the same economist who did not see the meltdown coming and this market rally is driven by professional investors afraid of missing the next up tick. In other words, greed and fear are the key drivers and not economic data.

President Obama's automobile task force announced this week that the former CEO of SBC/AT&T, Ed Whitacre, would become the Chairman of GM. I have the same concern in this matter as stated above. How can we expect to fix problems created by the good old boy system of CEOs with another good old boy? As a manager in Mr. Whitacre's organization for nearly 20 years, I say the American tax payers should be very nervous.

Mr. Whitacre has acknowledged that he knows little of the automobile industry. Perhaps this should be a concern, but it is not my concern. His claim to fame is creating the world's largest telecommunication company, but is large necessarily good? How did it get so large? Did it make life better for customers, employees and stock holders? Let's look at this before turning over the keys.

In the case of SBC/AT&T, large gave Mr. Whitacre great bullying power in the market place. He could bully vendors and suppliers into better deals that were not win/win. He could bully competition by forcing them into court battles that drained them of their available capital. In other words, he could win the poker game not because of his skills, but because he had so much more money to blow. Size does wield power and this power was used at every opportunity. While this tactic was effective, today's GM is in no position to employ it. Ed, GM cannot bully anybody.

Mr. Whitacre's creation of AT&T was a man building an empire. He enriched himself and senior management, but not customers, employees and stock holders. The new AT&T was created predominantly by purchasing Pacific Bell and Ameritech. Many financial analysts felt that Mr. Whitacre vastly over paid for these acquisitions and based on today's stock price they are correct. The company still trades at only 67% of its enterprise value. As employees, we knew each

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