Wednesday, January 17, 2007

GM: No. 1 spot at risk

Friday, January 05, 2007
GM: No. 1 spot at risk
But Wagoner won't concede sales crown to Toyota without a fight
Bill Vlasic / The Detroit News

He's not conceding the race, but Rick Wagoner seems ready to accept that General Motors Corp. may lose its ranking as the world's largest automaker.

With Toyota Motor Corp. expecting to sell 9.3 million vehicles this year, GM is in danger of falling from the No. 1 position for the first time in 75 years.

Wagoner, GM's chairman and chief executive, said Thursday that GM sold 9.1 million vehicles last year, but the automaker will not chase unprofitable sales volumes just to stay in first place.

"If as a result of that we get passed, well, it won't be a happy day for me," Wagoner told reporters at a media briefing in Detroit. "But I've lost basketball games before in my life. You've got to get ready and you learn and you go back to play the next day."

After a tumultuous year that included a further drop in its U.S. market share, Wagoner said GM is more committed to building shareholder value than staying ahead of Toyota, which sold an estimated 8.8 million vehicles in 2006.

"It's not something where we would sit back and let somebody pass us by," he said. "But the other side of it is we're going to fight for every sale and do it in a way that's consistently building the value of the enterprise from a shareholder perspective."

If that means GM falls behind Toyota, Wagoner promised that the competition between the two will remain spirited. "We're going to fight to keep the (No. 1) position. If one day we lose it, we'll fight to get it back."

Last year marked a period of retrenchment for GM as it launched a huge restructuring of its money-losing North American operations.

GM saw its U.S. sales fall 9 percent in 2006 after cutting back on expensive consumer incentives and low-profit sales to rental-car fleets. Overall, GM's U.S. market share slipped to a historic low of 24 percent.

The drop in sales in its home market, however, was offset by a 7 percent increase in sales outside the United States.

Wagoner said the surge in sales in markets such as China and Latin America represents GM's best opportunity for long-term growth.

"In 2006, about 55 percent of our sales were outside the U.S. and that's going to continue to grow," he said. "That's where the growth is in this industry and we're participating pretty well."

He was more circumspect, however, about GM's prospects in the United States. GM has not posted a quarterly profit in North America since 2004, and Wagoner once again declined Thursday to predict when the division will be back in the black.

Even though GM is on pace to cut $9 billion in annual structural costs, industry analysts are skeptical that its North American turnaround issolid .

One analyst, Ronald Tadross of Bank of America, downgraded GM's stock from "neutral" to "sell" Wednesday on concerns that its U.S. market share will decline again this year. "Vehicle overpricing and inventory levels are worse than the first quarter of 2005 when the company last missed earnings expectations," Tadross wrote in a report.

But Wagoner said he thought GM did a "good job" in 2006 of steering its U.S. auto business away from costly rebates and a dependence on fleet sales.

"We started out the year with a very clear vision of what we wanted to do from a sales and marketing perspective," he said. "We went through the year with what I thought was a lot of discipline in executing that plan."

He said GM expects to increase revenues this year with new-model introductions. While he would not rule out more cost-cutting, Wagoner said there won't be any "big bites" from employee rolls.

Wagoner also said that next summer's contract talks with the United Auto Workers will focus on "tough issues" needed to improve the competitiveness of GM and domestic rivals Ford Motor Co. and the Chrysler Group of DaimlerChrysler AG.

You can reach Bill Vlasic at (313) 222-2152 or

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