Sunday, June 11, 2006

GM chief trumpets progress

Wednesday, June 07, 2006
GM chief trumpets progress

CEO delivers upbeat message; shareholders aim to change the way board members are elected.

David Shepardson / Detroit News Washington Bureau

WILMINGTON, Del . -- General Motors Corp. Chairman and CEO Rick Wagoner told feisty shareholders Tuesday the automaker is making "significant progress" in turning around its North American unit and shoring up the company for the long run.

"Our goal is not just to fix GM for today but to change GM for tomorrow, and that's really been the story of this company for 98 years," Wagoner said at the company's annual meeting.

But GM investors also made a statement, approving two shareholder-sponsored proposals that would change the way the board is elected, according to preliminary vote totals.

It was the first time in the company's history that such shareholder initiatives won majority votes, but any changes still would have to be approved by the board.

"We do not feel that General Motors has done a good job at looking out for the shareholders," said Nell Minow, editor of Corporate Library, which tracks governance issues. "I think the shareholders agree, which is why they voted the way they did" on the board-election issues.

Neither shareholder proposal should have a big impact. A proposal to require board members to receive majority votes of stockholders -- and not a plurality -- was tentatively approved by 59 percent of shareholders. GM pointed out the company's board won re-election this year with 97 percent of the vote.

A second resolution to allow for cumulative voting -- which would allow a shareholder to cast 12 votes for a single candidate, rather than a slate of 12 to fill GM's board -- was preliminarily approved by 54 percent of voters.

Wagoner delivered a largely upbeat message to shareholders after one of the toughest years in the company's history. He said he is still optimistic about negotiations with the United Auto Workers and Delphi Corp. over wage cuts for hourly workers. He also firmly denied GM would ever become a Toyota Motor Corp. subsidiary.

Wagoner acknowledged some financial cost-cutting had taken longer than he'd like.

"With the benefit of hindsight, we can say that was the right approach to going after things, and sometimes we have to be a little bit patient to get the results we want," Wagoner said.

Despite persistent speculation, Wagoner said he was not worried about his own standing with GM's board. "I'm not worried about security; I'm just trying to do the right thing."

One shareholder at the Hotel du Pont who called for Wagoner's firing last year said Tuesday he should be indicted because of GM's accounting issues.

Others praised the company's efforts, with one predicting the stock would more than triple to $100 a share -- a suggestion quickly embraced by Wagoner.

One suggested GM could become a pariah like Big Tobacco if it didn't quickly respond to the dangers of global warming and emission of greenhouse gases

"We think we can be part of the solution," Wagoner said, saying the company would double its flexible-fuel fleet over the next five years.

GM promised an aggressive rollout of new vehicles in the coming year. The company said its new car launches would account for 40 percent of its sales by next year, versus 30 percent this year and 20 percent last year.

Vehicles like the Chevy HHR, Saturn Sky, Buick Lucerne and Cadillac DTS accounted for nearly one-third of total sales in the first quarter.

"Despite our financial difficulties, we backed up our commitment to great cars and trucks and new technologies by raising our annual capital spending by about $1.5 billion over the last two years," Wagoner said.

This expense comes as GM expects to cut its total spending by $7 billion annually.

Wagoner declined to directly address whether the worst was over for shareholders or address specific questions about the federal investigations into the company's accounting.

GM, which lost $10.6 billion last year, reported a first-quarter profit despite declining North American market share, which stood at 23.7 percent through the end of May. He suggested this quarter could be rough as GM moves away from heavy discounting and large fleet sales.

"There will be some challenging months in total sales as we shift our approach," Wagoner said.

On the Delphi negotiations -- in part, over how much of the former GM parts unit's pension and other liabilities the company should accept -- Wagoner said he had a lot of "first team" negotiators in talks.

"There are days that you feel great, feel like you could get this thing done pretty quickly and there are days you go, 'Oh this is pretty tough,' " Wagoner said. "It is going to take some time to get all the details nailed down. But on balance, I think the vast weight of the interests on everyone's part is to come to a reasonable resolution."

Several shareholders criticized board member Jerome York because he owns no GM stock.

York joined the board in February and is a consultant for Tracinda Corp, a private investment firm owned by billionaire Kirk Kerkorian. Through Tracinda, Kerkorian owns 10 percent of GM's stock.

Wagoner reminded the shareholders that GM's senior executives and board members -- who have access to sensitive earnings information -- are the subject of a year-old self-imposed trading ban. That isn't likely to be lifted until the company again starts providing earnings guidance -- and that isn't likely to occur until at least next year.

Wagoner said the company didn't plan to shutter any of its brands, but added: "All brands aren't created equal." He reiterated that the company didn't endorse a suggestion from York to sell Saab or Hummer.

Several Catholic nuns addressed the meeting to talk about corporate governance issues of the impacts of global warming. Catholic West had proposed splitting the positions of CEO and chairman -- both held by Wagoner -- and noted its proposal had won the support of an investor advocacy group.

Its proposal failed, but got 18 percent of the vote in a preliminary tally.

Sister Susan Vickers, a nun in San Francisco, said the company needed to do a better job responding to global warming. "They need to respond to climate change and not pretend it doesn't exist," Vickers said.

That didn't impress one shareholder, Joe Baker from Mississippi.

"I think the Catholic Church is in favor of people going to church, and families need large vehicles and SUVs to get everyone to church," Baker said.

You can reach David Shepardson at (202) 662-8735 or

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