GM CFO Dan Ammann Believes The Auto Giant Has A Narrow Window To Fundamentally Change
Dan Ammann was hired as the Senior Vice President and Chief Financial Officer of General Motors in April 2011. Before that he was the Vice President of Finance and Treasurer. GM appointed him to the Opel Supervisory Board in November 2011. He was previously a managing director and head of industrial investment banking at Morgan Stanley, a position that he held until 2004. He worked at Morgan Stanley for 11 years and primary worked on M&As, raising capital, and restructuring.
He advised GM on their 2009 restructuring. At GM, Ammann wants to make it clear that he was not one of the “bean counters” that once dominated and destroyed General Motors. This is one of the reasons why he tested a gray-metallic Corvette Z06 on a three-mile test track at 150 miles per hour.
“You have to have a point of view on how the organization actually goes about making cars,” Ammann said in an interview with AutoNews. “You’ve got to be out there and really immerse yourself in the business before you can make a difference.”
Ammann acknowledge that GM was once known for having a corporate culture that was arrogant and bureaucratic on top of the ongoing losses that the company is facing in Europe. The company also has to deal with $134 billion in pension obligations as of the end of 2011.
“They have not wrestled their management challenges to the ground,” stated Steve Rattner, who is the former head of the U.S. auto task force. “GM is making a lot of money. It’s just not making quite as much as Ford on a percentage basis because it still has some inefficiencies that need to be wrung out.”
GM reported a record profit of $7.6 billion last year, but their operating margin was at 3.8%, which is less than Ford’s 5.4%, Volkswagen’s 7.1%, and Hyundai’s 10.4%. Since GM needed a $50 billion bail-out from the government, the spotlight was put on the company’s finance team in a negative way.
Ammann is on a mission to restore the reputation of the finance team at GM. “We have a window of opportunity to bring some fundamental change to this company,” said Ammann, “and it’s a relatively narrow window.”
Shareholders fear that if Ammann, GM CEO Dan Akerson, and other top management employees at the company fail, it would lead to a repeat of the mistakes that led to GM’s $50 billion bail-out. Akerson said that you cannot change the culture of a 100-year-old company in 2 years. He said it takes arguably 5-10 years, but you have to start with a first step.
Ammann is often considered a potential successor to Akerson. Ammann knows how much is at stake, which is why he changed around half of the 15 executives that report directly to him. He poached executives from General Electric, United Technologies, and John Deere. This past Wedmesday, GM brought in Michael Lohscheller from Volkswagen to become the CFO of the company’s Opel unit in Europe.
Ammann also restructured GM’s 4,200 person global finance team. Last month Ammann spoke to 20,000 product development employees for 30 minutes about the company’s operations, pensions, and the importance of their stock price. He used three slides total to drive his points.
When GM went public, their stock price started at $33 per share. Now it is trading at $20 per share, which cut the company’s market cap by over one-third.
GM started in 1908 and was founded by Alfred Sloan. By the mid-1950s, GM had 514,000 employees and accounted for around half of the U.S. car production. Their sales were twice as large as Standard Oil. Former U.S. presidential candidate Ross Perot sold his company Electronic Data Systems (EDS) to GM in 1984, but left the board out of frustration. He once said ”revitalizing GM is like teaching an elephant to tap dance.”
Ammann is at the forefront of change at the auto giant and he is destined for great things.
“Dan Ammann is the ‘real deal,’ and has already done a lot to strip stupid thinking and analysis out of the finance group,” stated former GM Vice Chairman Bob Lutz. “But ‘bean counter-itis’ and short-term thinking are ever present, at many levels, and in all functions.”