Financial errors spur GM shake-up
Thursday, May 18, 2006
Financial errors spur GM shake-up
2 execs out, carmaker hires outside overseer in wake of SEC probe into accounting errors.
Bill Vlasic / The Detroit News
DETROIT -- General Motors Corp. shook up its financial staff Wednesday in the wake of a series of accounting errors that have drawn the scrutiny of the U.S. Securities and Exchange Commission and a federal grand jury in New York.
GM said two of its top finance officers will be leaving the company, and their jobs will be combined in an effort to improve the automaker's internal financial controls.
Paul Schmidt, GM's corporate controller, will retire later this year, and Peter Bible, the company's chief accounting officer, will resign on June 1, GM said in a statement.
Their two positions will be combined and filled by an outside candidate before the end of the year, GM spokeswoman Toni Simonetti said.
GM also said it had retained high-profile turnaround experts AlixPartners of Southfield to help assess its internal accounting systems and financial controls.
GM has been under investigation by the SEC since last fall, when the company disclosed that it had been subpoenaed in a broad inquiry into payments made by suppliers to retain GM contracts. The formal investigation stemmed from an SEC subpoena issued in April 2005 in connection with the probes into GM's former parts unit Delphi Corp.
The formal SEC probe has since widened to include a federal grand jury in Manhattan, which subpoenaed GM records in early March relating to supplier credits.
The probe is led by the U.S. Attorney's Office for the southern district of New York, because the company has Treasury operations there.
GM has hired attorneys to represent some current employees in the investigation. Some employees have been questioned in the wide-ranging accounting probe.
Last year, GM hired prominent Washington attorney Thomas Newkirk, the former associate director of enforcement at the SEC, to assist it.
In March, the automaker delayed the filing of its 2005 annual report because of a mistake in accounting at its mortgage unit. When it was filed, the report said GM would restate five years of earnings because of accounting errors.
The staff changes are part of an overhaul of GM's internal accounting led by Fritz Henderson, who took over as GM's vice chairman and chief financial officer in January.
"We have had some accounting missteps that we have identified and corrected," said Simonetti. "Combining the control position and the chief accounting officer helps to improve the internal infrastructure of the department."
AlixPartners has been involved in numerous prominent bankruptcy cases in recent years. Clients included Troy-based Kmart Corp., auto-parts maker Dana Corp., trading firm Refco Inc., energy giant Enron Corp. and telecommunications company WorldCom Inc.
GM has said it has no plans to file for bankruptcy and has plenty of money to operate its business.
Schmidt's retirement after 37 years with GM was expected, the company said. Bible, 48, is leaving the company to "pursue other career options" and was not considered a candidate for the combined job of controller and chief accountant.
The cloud of SEC investigations over the company appeared to be a prime factor in the shake-up, according to one auto analyst.
"It looks like these are the scapegoats," said David Healy of Burnham Securities. "The public's confidence has been shaken in GM, and this is part of the response."
Healy said that GM's earnings restatements were "insignificant in terms of dollars," but had created a climate of suspicion about its financial controls.
"The accounting problems are really a mouse when the public thinks it's an elephant," Healy said.
GM is also the target of a class-action suit that alleges the company and several of its top officers made false and misleading statements to investors that inflated the value of its stock. The company has denied the charges.
GM Chairman and CEO Rick Wagoner, in a letter to shareholders last month, apologized for the series of accounting errors and promised the automaker was "working diligently to get things moving in the right direction -- quickly" following a huge loss of $10.6 billion last year.
In the letter, Wagoner vowed that GM had "a renewed commitment to excellence and transparency in our financial reporting."
Detroit News Staff Writer David Shepardson contributed to this report. You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
Financial errors spur GM shake-up
2 execs out, carmaker hires outside overseer in wake of SEC probe into accounting errors.
Bill Vlasic / The Detroit News
DETROIT -- General Motors Corp. shook up its financial staff Wednesday in the wake of a series of accounting errors that have drawn the scrutiny of the U.S. Securities and Exchange Commission and a federal grand jury in New York.
GM said two of its top finance officers will be leaving the company, and their jobs will be combined in an effort to improve the automaker's internal financial controls.
Paul Schmidt, GM's corporate controller, will retire later this year, and Peter Bible, the company's chief accounting officer, will resign on June 1, GM said in a statement.
Their two positions will be combined and filled by an outside candidate before the end of the year, GM spokeswoman Toni Simonetti said.
GM also said it had retained high-profile turnaround experts AlixPartners of Southfield to help assess its internal accounting systems and financial controls.
GM has been under investigation by the SEC since last fall, when the company disclosed that it had been subpoenaed in a broad inquiry into payments made by suppliers to retain GM contracts. The formal investigation stemmed from an SEC subpoena issued in April 2005 in connection with the probes into GM's former parts unit Delphi Corp.
The formal SEC probe has since widened to include a federal grand jury in Manhattan, which subpoenaed GM records in early March relating to supplier credits.
The probe is led by the U.S. Attorney's Office for the southern district of New York, because the company has Treasury operations there.
GM has hired attorneys to represent some current employees in the investigation. Some employees have been questioned in the wide-ranging accounting probe.
Last year, GM hired prominent Washington attorney Thomas Newkirk, the former associate director of enforcement at the SEC, to assist it.
In March, the automaker delayed the filing of its 2005 annual report because of a mistake in accounting at its mortgage unit. When it was filed, the report said GM would restate five years of earnings because of accounting errors.
The staff changes are part of an overhaul of GM's internal accounting led by Fritz Henderson, who took over as GM's vice chairman and chief financial officer in January.
"We have had some accounting missteps that we have identified and corrected," said Simonetti. "Combining the control position and the chief accounting officer helps to improve the internal infrastructure of the department."
AlixPartners has been involved in numerous prominent bankruptcy cases in recent years. Clients included Troy-based Kmart Corp., auto-parts maker Dana Corp., trading firm Refco Inc., energy giant Enron Corp. and telecommunications company WorldCom Inc.
GM has said it has no plans to file for bankruptcy and has plenty of money to operate its business.
Schmidt's retirement after 37 years with GM was expected, the company said. Bible, 48, is leaving the company to "pursue other career options" and was not considered a candidate for the combined job of controller and chief accountant.
The cloud of SEC investigations over the company appeared to be a prime factor in the shake-up, according to one auto analyst.
"It looks like these are the scapegoats," said David Healy of Burnham Securities. "The public's confidence has been shaken in GM, and this is part of the response."
Healy said that GM's earnings restatements were "insignificant in terms of dollars," but had created a climate of suspicion about its financial controls.
"The accounting problems are really a mouse when the public thinks it's an elephant," Healy said.
GM is also the target of a class-action suit that alleges the company and several of its top officers made false and misleading statements to investors that inflated the value of its stock. The company has denied the charges.
GM Chairman and CEO Rick Wagoner, in a letter to shareholders last month, apologized for the series of accounting errors and promised the automaker was "working diligently to get things moving in the right direction -- quickly" following a huge loss of $10.6 billion last year.
In the letter, Wagoner vowed that GM had "a renewed commitment to excellence and transparency in our financial reporting."
Detroit News Staff Writer David Shepardson contributed to this report. You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
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