Wednesday, May 31, 2006

GM taps labor expert to lead U.S. operation

Wednesday, May 31, 2006
GM taps labor expert to lead U.S. operation

Brett Clanton / The Detroit News

General Motors Corp. Chairman Rick Wagoner's life is about to get a little less complicated.

Wagoner announced Tuesday he will shed his second job as president of GM North America in July and named a successor for the key post in a sign the automaker's turnaround is effort is entering a new phase.

Troy Clarke, president of the automaker's Asia Pacific region and a company veteran with a background in manufacturing and labor negotiations, will take the reins from Wagoner, who assumed day-to-day control of North America last year amid stunning losses.

The appointment of Clarke puts a seasoned labor negotiator at the helm of GM's largest sales region -- a year before the company renegotiates a critically-important labor contract with the United Auto Workers.

It also signals that GM, after completing a series of restructuring moves in North America including a massive buyout program, is prepared to entrust the unit to someone other than Wagoner.

"While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year," Wagoner said in a statement. "This is the right time to turn over the day-to-day operations to Troy, who has the experience and skills to lead the GM North America team as it continues this unprecedented restructuring."

Also Tuesday, GM said Vice Chairman and former CFO John Devine, who said in December he would retire this year, will leave the company on June 1.

The personnel moves were largely overshadowed by a Wall Street report that cast doubt on GM's turnaround prospects.

In a report Tuesday, Deutsche Bank analyst Rod Lache downgraded GM shares to "sell" from "hold" on signs that GM's vehicle sales are softening, pickup demand is weakening and that the company's recent cost-cutting moves don't go far enough in addressing its staggering cash burn.

"The turnaround plan GM articulated last October still doesn't appear sufficient to turn the company around," Lache said.

Investors responded by pushing GM shares down 5.4 percent Tuesday to $26.57 a share after a rally last week.

The report came in contrast to recent optimism that the automaker is rebounding from a $10.6 billion loss in 2005, which propelled a 40 percent increase in GM's stock price in recent months. Yet many challenges remain.

GM needs to reach a resolution with bankrupt auto supplier Delphi Corp. and the UAW that avoids a strike, which could tip the world's largest automaker into bankruptcy. It also must stop its U.S. market share slide, deal with several federal investigations into its accounting practices and complete plans to close or downsize 12 factories and cut 30,000 jobs by 2008.

"The turnaround is making progress, but there's still a lot of wood to chop," said Jon Rogers, analyst with Citigroup Global Markets in New York.

Wagoner and his senior leadership team will remain involved in the North American turnaround plan after Clarke takes over July 1.

Clarke's plate will be plenty full.

GM's North American automotive division, which accounted for $8.2 billion of the automaker's $10.6 billion loss last year, has struggled under high labor costs, a shift away from its hugely-profitable SUVs and intensifying competition from Asian rivals. In the first quarter, the region's losses narrowed to $462 million from $1.5 billion a year ago.

Clarke's varied experience -- manufacturing and labor negotiations to sales and marketing -- will be an asset, GM says.

Clarke has been president of GM Asia Pacific since 2004, but most of his career has been spent in less exotic locales. Clarke, 51, joined GM at the Pontiac division in 1973 and spent more than a decade there in several manufacturing and engineering jobs.

He was named director of manufacturing for GM de Mexico in 1997, and president and managing director in 1998. Three years later, he was appointed vice president of labor relations in Detroit, and in 2003 he presided over contract negotiations with the UAW.

Clarke's appointment suggests that GM still sees labor issues as a key piece of its restructuring plans and is looking to the 2007 renegotiation of its union contract as a chance to reduce costs.

"It's clear that the 2007 negotiations are a big part of the turnaround and that they're putting emphasis there, as they should," Rogers said.

Though Clarke has a reputation as a tough negotiator, the 2003 UAW contract was not considered a big victory for GM. With GM hemorrhaging money and losing sales, there may be more pressure to wrest concessions from the union next year.

GM officials who know Clarke say he has an intellectual demeanor that belies his factory floor background, and that he is very demanding of his staff.

He is a protégé of Gary Cowger, the former president of GM North America, who also came up through GM's manufacturing and labor ranks. Cowger was abruptly replaced in April 2005 when Wagoner took control of the region, and was promoted to group vice president of global manufacturing and labor relations.

Following the move and a reorganization of top officers, the role of GM's regional presidents has been diminished. Rather than operating as stand-alone companies, the operations now function more as sales and marketing arms, with manufacturing, product development and other tasks being carried out by global officers.

In that capacity, Clarke will be charged with ensuring a smooth launch of 20 new vehicles this year and shoring up the company's withering market share.

Through April, GM's U.S. sales were down 6.8 percent, and its market share was 23.8 percent, down from 25.4 percent a year ago, according to Autodata Corp.

Clarke's will be replaced at GM Asia Pacific David "Nick" Reilly, a GM vice president and president and CEO of GM Daewoo Auto & Technology Co. in South Korea. The move is also effective July 1.

You can reach Brett Clanton at (313) 222-2612 or bclanton@


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