GM Chairman Whitacre Has Angel in One Ear, Devil in the Other

(MoneyWatch)  Like the rest of us, General Motors Chairman Ed Whitacre has an angel on one shoulder and a devil on the other.

Lately the angel is winning some rounds, but the devil is never far away.

The angel is "Mr. Long-Term." The angel whispers in Whitacre's ear that sustainable profitability is more important than quarter-by-quarter results; that rebates destroy resale value and the credibility of GM's sticker prices; that production should match demand, even if GM surrenders market share.

Mr. Long-Term voted recently for GM to keep Opel, even though it still needs fixing, and even though the move ticked off the German government, because as Whitacre said in an appearance at Texas Lutheran University last week, you can't be a global player unless you're present around the globe.

Mr. Long-Term spoke in favor of GM killing a small Buick crossover in August. The car was a rebadged Saturn, but GM is dropping Saturn.

The would-be Buick didn't fit the Buick brand, and focus groups didn't love it. However, GM had a lot of money invested in it. In the past, GM would have stretched the brand to fit the product. That way, on paper it could spread the cost to develop a new car across the biggest possible volume. The old GM philosophy produced some pretty strange outcomes in the past, like a ho-hum minivan for the Pontiac "We Build Excitement" division. Whitacre last week cited killing the Buick crossover as an example of the new GM.

However, Mr. Long-Term shouldn't get complacent.

The devil is "Mr. Short-Term." He pokes Whitacre with his little pitchfork and reminds him that he better start putting up some positive numbers, if GM hopes to go public again any time soon; that money-back guarantees are nice, but rebates move the metal; that Ford (F), Toyota (TM), Honda (HMC) and Nissan (NSANY.PK), not to mention Hyundai (HYMLF.PK) and Kia (KIMTF.PK), are ready to snap up any market share GM leaves lying around.

Like it or not, Whitacre needs to keep Mr. Short-Term happy, too.

GM's recent announcement that it will repay its government loans early offers something to both angel and devil.

Mr. Short-Term likes the fact that getting started on repaying GM's government bailout helps clear the way for GM's initial public offering, even though you could argue that repaying the loans early comes at the expense of other short-term uses for the money. At the same time, Mr. Long-Term likes the public image benefit.

Repaying a government bailout helped make Lee Iacocca a folk hero a couple of decades ago. Repaying the government won Iacocca a lot more praise than Chrysler ever got criticism for needing the money in the first place.

Even pious Mr. Long-Term likes public praise - if it's in a good cause.

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