Wednesday, April 05, 2006

GM'S Rick Wagoner: We can do it

Wednesday, April 05, 2006

GM'S Rick Wagoner: We can do it

'The future of the company is held in balance by the actions that we all take in a relatively short period of time.'

Bill Vlasic and Brett Clanton / The Detroit News

DETROIT -- Wall Street is trashing his stock. Analysts are predicting a bankruptcy. Critics in the media say he should be fired as chairman of General Motors Corp.

But Rick Wagoner is not about to give up the wheel at GM -- or deviate from the plan he believes can restore it to greatness.

"I'm doing what I'm doing because I love General Motors," Wagoner said Tuesday. "I think it's very important what we're doing in the company, and I think I'm by far the most qualified person to do it."

Wagoner occupies the hottest seat in corporate America, a 53-year-old GM "lifer" under fire for decades of decline by the world's largest carmaker.

Yet as he presides over the most dramatic restructuring in GM history, Wagoner has neither the time nor patience for outsiders who say GM is destined to fail.

"It's easy to stand back and come up with great ideas, OK?" he said. "It's not so easy to do this stuff."

In an interview with The Detroit News on Tuesday, Wagoner said that the massive overhaul of GM operations will produce markedly improved results in 2007.

He also expressed confidence that a costly strike will be avoided at bankrupt parts maker Delphi Corp., and that many GM and Delphi hourly workers will take early retirements or buyouts as the automaker downsizes.

Wagoner admitted that investors, employees and other stakeholders have a right to be nervous about GM's future. Last year's $10.6 billion loss, combined with GM's shrinking share of the U.S. new-vehicle market, have spurred speculation that GM may yet have to follow Delphi into bankruptcy.

And while GM's board on Monday made a public show of support for Wagoner, he remains in the crosshairs of critics calling for his ouster.

"There's blood in the water, and a lot of people are looking to tear (Wagoner) apart," said George Magliano, an industry analyst with Global Insight in New York.

Wagoner is keenly aware of what he calls the "assaults" on his performance by media outlets such as The Wall Street Journal. "That can wear on you," he said.

Tough talk isn't enough

But his low-key manner fades quickly at suggestions that he is not tough enough to tackle hard issues involving GM, Delphi and the United Auto Workers.

"It's easy to talk tough," he said. "But I would invite anybody in who says you should play hard-nosed with the union. Yeah, you come sit in this chair the third week into a strike and see how that feels."

If GM is the beleaguered giant of the U.S. auto industry, Wagoner is its face, the personification of a proud but troubled company determined to come back despite huge odds stacked against it.
Sitting in his shirtsleeves at a conference table in his Renaissance Center office, Wagoner ticked off the milestones so far on GM's road to recovery: health care cost cuts for salaried and hourly workers, a dozen plant closings, the planned elimination of 30,000 factory jobs and the sale of a controlling interest in GM's prized finance division.

He is particularly pleased with the agreement reached last month by the UAW that will offer buyouts ranging from $35,000 to $140,000 to every one of GM's 113,000 hourly employees and another 13,000 workers at Delphi.

"What could be better?" Wagoner said. "We have a number of people who would like to retire. We provide them a reasonable, but not excessive incentive to retire. It's not a comprehensive solution, but it's a very important piece of the puzzle."

Buying out older workers, he said, is critical to opening GM jobs for workers who may be displaced in Delphi's reorganization plan. Beyond that, the buyouts can create space for idled workers in the controversial "jobs bank" program, which provides full pay and benefits for laid-off workers.

More importantly, the attrition program was negotiated and accepted by the UAW. While Wagoner has come under fierce attack from outside the company, he has gained an unusual measure of respect from the union's leadership.

UAW expresses support

In an interview Tuesday on WJR-AM, UAW Vice President Richard Shoemaker praised Wagoner for his sensitivity to workers whose livelihoods are on the line in GM's restructuring.
"I do think that Rick Wagoner is trying very, very hard to do what he believes is necessary to make General Motors a viable company for the long term," Shoemaker said. "And I think he is sensitive about the impact these things have on employees."

That level of trust between Wagoner and the UAW is vital to negotiations over Delphi's restructuring.

With Delphi Chairman Robert S. "Steve" Miller petitioning the bankruptcy court for sweeping cuts in union jobs and wages, the UAW is bracing for a fight and possibly a strike that would cripple the delivery of parts to GM.

Wagoner has become the pivotal figure in talks between GM, Delphi and the UAW to solve how Delphi can downsize its operations without brutally slashing factory jobs and paychecks.
He downplayed the possibility of a long, damaging strike, saying that all sides have too much to lose. "It would be a significant failing on the part of all three of us -- the unions, Delphi and GM -- if we can't come to a resolution without a major strike," Wagoner said. "It would be a good example of doing the worst for all of us."

He said he would be surprised if Delphi's reorganization is not resolved peacefully "over the next couple of months." Still, the prospect of a Delphi strike is the most unsettling factor in GM's immediate future.

"The one variable that could throw this whole thing in the trash basket is if Delphi workers walk," said Magliano.

Wagoner said skeptics need to appreciate the intricate, interdependent relationship between GM and the UAW, and the challenges that global competition have thrust upon both.
"We're in a tough time, and if GM's not successful, (the UAW) will have to help with the solution," he said. "There's no solution to this without their engagement."

Time is running short

But Wagoner knows the clock is ticking on GM. The automaker is losing millions of dollars a day, and GM's board is feeling its own pressure to push Wagoner and his team to move faster.
"He's got the right team of executives in place that can execute the changes," said Kevin Reale of AMR Research in Detroit. "The challenge is can he make it fast enough that the board is going to think he's the right guy."

The pressure, Wagoner said, is both wearing and exhilarating.

"We're at an epochal time in the history of GM. The future of the company is held in balance by the actions that we all take in a relatively short period of time," he said. "You want to make sure you do it right."

Wagoner and his deputies have steadfastly refused to offer specific guidance on when GM will return to profitability. However, he said that $7 billion in cost-cutting measures should transform the company's bottom line by next year.

In the interview, he sketched out on a yellow legal pad how GM identified its strategic alternatives in 2005, is implementing them in 2006, and expects the payoff in 2007.
"I have a high degree of confidence that we will show improved results," he said.

"We can't continue with the kind of losses we had last year. We need to get it turned. But to me, we will."

While Wagoner's unflappable optimism irks some investors, analysts and journalists, members of the GM corporate family have rushed to his defense.

Wagoner supporters step up

News reports predicting GM is heading toward an inevitable bankruptcy have galvanized support for Wagoner from dealers across the country.

"It gets a little tiresome to read articles from people who don't understand the situation and continue to pick on someone who is working so hard," said Carl Sewell, a major GM dealer in Dallas.

Wagoner takes offense at what he termed "backward looking financial analysis" that judges GM's future based on its past.

"We are at a juncture right now doing things that haven't been done in the history of GM," he said. "And I'm the guy who knows more about it than anybody because I'm right in the middle of it. And I feel pretty sure about it."

Some of the financial problems GM is facing are not Wagoner's doing, but have accumulated over GM's 100-year history. Yet he is blamed for everything, said David Fischer, who has 10 dealerships in Michigan.

"Rick Wagoner is not the type of guy to say, 'It's not my fault.'"

Pushing his team harder

GM insiders say that Wagoner is driving people harder than ever, forgoing sleep and time with his family to lead a historic transformation of the company.

"Time is the big enemy," said one GM executive close to Wagoner. "Does GM have enough time to do what it needs to do?"

Wagoner won't set a time limit on his own tenure as chairman and chief executive. He politely refused to discuss his future, except to say that he has paced his own "bet" on a successful GM revival.

"People are putting their bets on the table. And what I say is, we'll see how this plays out."

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


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