Tuesday, June 06, 2006

GM to tout its progress to investors

Tuesday, June 06, 2006
GM to tout its progress to investors

Shareholders miffed at $10B loss, market share cut will hear upbeat assessment at annual meeting.

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- Before today's annual meeting begins, General Motors Corp.'s shareholders will see the company doesn't harbor any doubts: "We will succeed," the annual report's cover reads.

"While 2005 was an extremely difficult year for GM, we have absolute clarity about the road ahead," the report says.

While the company is expressing confidence, its leaders should expect some tough questions from shareholders during the meeting in Wilmington, Del. They will hear from some who are angry about the company's $10.6 billion loss in 2005, its declining market share and its embarrassing accounting missteps now under federal investigation.

The board will face a half-dozen shareholder proposals on topics ranging from greenhouse gases, ending stock options and corporate governance.

GM Chairman and CEO Rick Wagoner isn't expected to make any major news in his 20- to 30-minute address to shareholders, but will review the company's progress on its turnaround plan over the last year. For the first time, GM will also broadcast live on the Internet Wagoner's press conference with reporters after the meeting.

"He's going to reinforce this past year's progress that we've made on the North American turnaround plan" -- and talk about the future, said GM spokeswoman Gina Proia.

Gerald Meyers, a former chairman of American Motors Corp. and now a business professor at the University of Michigan, said he expects "a continuing of the PR blitz and the 'We are making progress' line, and 'I am the guy to run this place,' " Meyers said. "There aren't enough chairs at the meeting for a strong revolt."

Rob Hinchliffe, an auto analyst at UBS Securities Inc., said he also doesn't expect any bombshells.

"The union and Rick have a good working relationship, and I'm not looking for an imminent change," Hinchliffe said.

GM's proxy also notes that GM Vice Chairman Bob Lutz's contract expired in December, raising questions about when he might eventually step down.

"I serve at the pleasure of the Board. At this juncture, there is no reason to assume my departure anytime soon," Lutz wrote in an e-mail Monday. "I want to stay around and enjoy some of the glory that I know will be ours when the depth and breadth of our upcoming product introductions becomes manifest."

An influential investment advisory firm, Institutional Shareholder Services Inc., endorsed several shareholder proposals designed to improve corporate governance at GM.

Catholic Healthcare West, which owns 35,200 shares of GM stock, called on the board to split the positions of CEO and chairman of the board. GM opposes the proposal, noting that less than 10 percent of Fortune 500 companies "truly have an independent chairman."

ISS supports the proposal. "A company of this size should be able to find two qualified people willing to serve in the separate positions," the report said.

It endorsed a shareholder proposal to recoup unearned incentive bonuses for executives if they don't meet performance targets. The automaker said it would be unfair and "place GM at a competitive disadvantage in recruiting critical talent."

ISS also supports a cumulative voting system for directors that allows shareholders to cast all of their votes for one director, rather than a slate, making it potentially easier to elect a candidate with a specialized expertise. Another proposal requires a majority, not plurality, of votes for directors.

GM noted that similar proposals on cumulative voting have been voted down 19 times.

A longtime shareholder activist, Evelyn Y. Davis, has called for ending all stock option grants -- a proposal opposed by ISS.

GM said it has already reduced planned stock options to executives by 35 percent since 2002. Wagoner received 400,000 stock options worth $2.9 million in 2005.

GM plans to reduce options by 65 percent in 2006. It eliminated its broad-based option plan that provided annual option grants from 1998 to 2004. Proia said GM won't disclose the results of voting on the resolutions until its second-quarter financial statement, sometime in late July or August.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.


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