Fritz Henderson Makes The Weirdest Career Move Ever

When Fritz Henderson was named CEO of General Motors in March 2009, John Gapper of the Financial Times argued that the veteran auto industry had ” a 50-50 chance, which is not bad given the odds on GM as a whole.”   Gapper called that one correctly since Henderson was fired eight months later.  But losing control of North America’s largest automaker is not the career killer it used to be.

Sunoco Inc.  (NYSE:  SUN) announced Friday that Henderson would be the new head of  SunCoke, Sunoco’s metallurgical coke manufacturing operations, that the Philadelphia-based refiner is spinning off.  Coke is used to make steel.   Sunoco Chief Executive  Lynn L. Elsenhans offered her enthusiastic backing of Henderson.

“Fritz is an exceptionally gifted and highly experienced executive with the business and financial expertise needed to lead SunCoke Energy as an independent company and drive its global growth strategy.,”  Elsenhas said in a press release. “His broad global experience managing businesses in many of the world’s major markets will be invaluable.”

What Elsenhas did not do is talk about was how Fitzgerald’s background in helping GM pile up debt and lose market share was relevant to Suncoke.  An auto industry executive running a raw material supplier makes as much sense as a chef becoming a farmer. The problem is that  Sunoco wanted a brand name because to assure investors ahead of the spin-off.  It’s a understandible strategy but a misguided one.

For one thing, just because you can manage one kind of company doesn’t mean you can manage every kind of company.  Like any investment, past performance is no guarantee of future returns.  Some CEOS fail to grasp the nuances of other industries while others are so arrogant that they think they know their businesses better than the people who built the company. One successful CEO who jumped industries is Alan Mullaly.  He was well-respected by Wall Street when he ran Boeing’s commercial aviation division and won further kudos as the head of Ford Motor Co.  (NYSE:F).  Mullaly is the exception rather than the rule.

Consider what happened to General Electric Co. (NYSE:  GE) veterans Robert Nardelli and W. James McNerney.  Both were highly sought after losing the GE CEO job to Jeffrey Immelt.  Nardelli went to Home Depot Inc.  (NYSE:  HD) where his strategy proved to be a disaster and his contemptuous attitude toward shareholders was legendary.  After being pushed out of the retailer, Nardelli was hired to turn around troubled automaker Chrysler  LLC. when it was taken private by Cerberus Capital Management.  That flopped and he was eventually replaced by Sergio Marchionne, the head of Italian automaker Fiat which acquired the beleaguered automaker. In 2005, McNerney was considered to be an inspired choice to head Boeing.   He was a member of the planemaker’s board and was the former head of GE’s aerospace business.    Unfortunately,  his tenure was a disaster marked by delays in the 787 Dreamliner.

The lesson that Sunoco will learn is that there are limits to CEO competence.  Not all companies are the same and that to be a manager you have to know something.

–Jonathan Berr