Postcards
The new boss at Old GM
June 1, 2009: 2:41 PM ETby Patricia Sellers
You might call Al Koch the world's biggest trash collector. As bankrupt General Motors (GM) splits into two parts -- New GM, containing Chevrolet, Cadillac, Buick, and GMC, and Old GM, containing designated bad assets such as Pontiac, Saturn, Hummer, Saab -- Koch is the hired gun who's supposed to create value from that latter lot.
Bringing "New GM" out of bankruptcy will be difficult enough. Why would anyone take the tougher slog at "Old GM"?
This is what Koch does -- the toughest turnarounds. He's vice chairman at restructuring consultancy AlixPartners, which works on saving sick comapnies globally but has been a Detroit mainstay for decades. AlixPartners' clients have included DeLorean's creditors in 1984, Detroit (the city itself) in 1994, and Kmart in 2002.
Koch, now 67 and a 14-year veteran of the firm, has served as interim CEO of crippled companies such as video-game distributor Handleman (HDLM) and manufactured-home builder Champion Enterprises (CHB). But his most memorable job was at Kmart in 2002. Kmart was the largest retail restructuring in history and, as it turned out, one of AlixPartner's big successes.
As Kmart's interim CFO through its bankruptcy, Koch got lucky. When I interviewed him in late 2005 for a story about investor Eddie Lampert, he said that he and his restructuring-expert colleagues had never heard of this young investor who had swooped in and bought Kmart bonds at 40 cents on the dollar. "To most people, Kmart looked like a pile of trash," Koch said. "We were told that this hedge fund guy had bought a huge portion of Kmart and wanted to get it out of bankruptcy fast."
Lampert pressed Koch and the other restructuring pros, who were earning $10-20 million a month during Kmart's bankruptcy, to exit Chapter 11 quickly. Lampert argued that neither customers nor management talent would be attracted to a bankrupt Kmart. The company emerged from bankruptcy in May 2003, a year ahead of schedule. Lampert, who had invested some $800 million for a 54% ownership stake, merged Kmart with Sears two years later to form Sears Holdings (SHLD).
Old GM won't be as smooth or as quick as Kmart was. As my colleague Alex Taylor notes, "new GM" will have an incentive -- from the U.S. government, new owner of a 60% stake --Â to exit Chapter 11 rapidly, possibly in 60 to 90 days. The Old GM restructuring, meanwhile, could take years.
As Old GM's chief restructuring officer, Koch will be negotating separation agreements with New GM and commandeering efforts to unload or liquidate those dud brands such as Saturn and Hummer.
His influence could turn out to be broader than his marching orders designate. After all, he's worked with GM several times over the years. These past few months, he's helped negotiate the sale of New GM assets to the government. Now he's reporting to CEO Fritz Henderson and to GM's board as well. As a guy who lives and dies by finding value in junk, Koch surely won't take his shot at making history lightly.
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Hope amid retail's rough week
It was, to steal a Malcolm Gladwell term, a "tipping point" in my outlook on the cratering economy. I call it my "That Girl" moment.
It was the fourth Monday in November last year. I was at a Thanksgiving party at the home of Cathie Black, the president of Hearst Magazines. Marlo Thomas was there, too. "Saks is selling shoes for 75% off. It's incredible!" TV's onetime Ann Marie was crowing, MORE
Patricia Sellers - Feb 27, 2009 1:01 PM ETPosted in: Amazon, Cathie Black, CEOs, consumer goods, earnings, economy, Eddie Lampert, FORTUNE MPWomen, Hearst, Home Depot, Ken Bronfin, Kindle, Lowe's, management, media, mike duke, Postcards, Power Shift, publishing, retail, Saks, Sears, telecom, Wal-Mart -
Power Point: Don't lowball to get by
"When you are leading a large organization, you need to lead by example and appreciate that this includes having targets that generate value, not simply targets that can be easily hit."
-- Sears (SHLD) Chairman Eddie Lampert from his annual letter to shareholders, posted on Sears' web site Thursday. The good news: Sears reported a fourth quarter profit of $190 million, beating analyst estimates. The bad news: That's a 55% drop MORE
Jessica Shambora, Writer-Reporter - Feb 26, 2009 7:24 PM ETPosted in: consumer goods, earnings, Eddie Lampert, Leadership by Geoff Colvin, Postcards, Power Point, retail, Sears, SHLD, Wall Street -
In defense of the expense-account lunch
I went out to lunch today. Really. Even as you've read this week about the slashing and shrinking inside my company, Time Inc. (TWX), and across the magazine industry (even Conde Nast, the proud, privately-held protector of privilege and perks is axing), I have to eat. I have to schmooze. My job depends upon it.
Allow me to defend the expense-account lunch. Here are my rules of (lunchtime) engagement, honed over MORE
Patricia Sellers - Oct 31, 2008 3:56 PM ET -
Power Point: Be ready to shoot the ball
"Two of the players I used to watch are Bill Bradley and John Havlicek. They were both known for moving without the ball--working to get into a position where you're ready to shoot the ball. In contrast, most people spend a lot of time standing around."
- Eddie Lampert, billionaire hedge fund boss and chairman of Sears Holdings (SHLD). After a stunning rise, which I wrote about in 2006, Lampert is MORE
Patricia Sellers - Aug 27, 2008 3:51 PM ET -
Welcome to Postcards
Greetings from the pinnacle! As I launch this blog, Postcards, I'm perched on the 15th floor of the Time & Life Building in the center of Manhattan -- overlooking Rockefeller Center, to be precise. I have a sense, though, that I'm scanning the entire universe -- wanting to share with you the most fascinating, most fun, and most valuable ideas about super-achievers and other powerful people.
I have lots of ideas MORE
Patricia Sellers - Jul 10, 2008 8:20 PM ETPosted in: Andrea Jung, Arianna Huffington, CEOs, David Neeleman, Eddie Lampert, Fortune, FORTUNE MPWomen, Hank Paulson, Leadership by Geoff Colvin, management, Martha Stewart, Melinda Gates, Most Powerful Women, MPWomen, MPWomen Go Global, Oprah, Pattie Sellers, Personal Power, philanthropy, Postcards, Power, Power Point, Ted Turner -
Power Point: Companies don't stumble; people do
"The companies acquired the usual encumbrances of success--among them arrogance and bureaucracy--and they devised new ways to fail as well. Or, precisely, their executives did. Companies don't stumble; people do. As Peter Drucker has said: 'Every failure is a failure of a manager.'"
-- Carol Loomis, Fortune senior editor at large, wrote this in a legendary 1993 cover story, "Dinosaurs?," about General Motors (GM), Sears (SHLD), and IBM (IBM). The article MORE
Patricia Sellers - Jul 3, 2008 2:26 PM ETPosted in: auto industry, Carol Loomis, CEOs, Eddie Lampert, Failure, General Motors, GM, IBM, Leadership by Geoff Colvin, management, Peter Drucker, Postcards, Power Point, Power Shift, Sears, Success -
Why Starbucks is hitting the wall
The news that Starbucks (SBUX) will close 600 stores and lay off as many as 12,000 employees is not only the news that Wall Street was waiting for. It is inevitable. One thing I've learned from my 24 years following retailers for Fortune is this: Every retailer that expands across the U.S. hits the wall on growth eventually. And every retail entrepreneur, no matter how talented, is eventually exposed as MORE
Patricia Sellers - Jul 2, 2008 12:35 PM ETPosted in: 1-800-got-junk, Arthur Blank, Bernie Marcus, Blockbuster, Bob Nardell, CEO, CEOs, Chevron, Circuit City, Dow, Eddie Lampert, FORTUNE MPWomen, Frank Blake, GE, General Electric, Home Depot, Howard Schultz, IBM, Jim Donald, Kmart, Launi Skinner, Leadership by Geoff Colvin, management, McDonald's, Postcards, Power Shift, retail, Sam Walton, Sears, Starbucks, Wal-Mart, Wall Street -
Eddie Lampert's latest bid to lift Sears
Eddie Lampert used to be the smartest investor in retailing, if not the best investor of his generation. That was the case last summer when shares of Sears (SHLD) hovered above $170. In his recent letter to shareholders, Lampert presented a chart showing that even as Sears stock collapsed in the latter half of last year, his five-year return on investment in Sears Holdings, the combination of Kmart and Sears, MORE
Patricia Sellers - Jun 24, 2008 4:17 PM ET
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Fortune senior editor at large Pattie Sellers has written some of Fortune's most talked-about cover stories, including "Marissa Mayer: Ready to Rumble at Yahoo," "Oprah's Next Act," "Can Meg Whitman Save California?" "The $100 Billion Woman" (Melinda Gates), and "Remodeling Martha" (Martha Stewart). She has helped oversee Fortune's "Most Powerful Women in Business" package every year since its launch in 1998. Pattie is Executive Director of the Fortune Most Powerful Women Summit, the preeminent gathering of women leaders in business and beyond. She oversees MPW programs that enable women leaders to extend their influence and empower the next generation—such as Fortune MPW Entrepreneurs and the Fortune-U.S. State Department Global Women Leaders Mentoring Partnership. Beyond her Fortune duties, she is also developing Live Content across Time Inc. Pattie grew up in Allentown, PA, graduated from the University of Virginia, and started at Fortune in 1984. Her blog, Postcards, is about how power players lead, manage others, and navigate their careers.
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