Monday, June 05, 2006

GM execs to face investors at annual meeting

Sunday, June 04, 2006
GM execs to face investors at annual meeting

Dee-Ann Durbin / AP Auto Writer

DETROIT -- After a tumultuous year in which General Motors Corp. announced thousands of job cuts, lost billions of dollars and cut its dividend in half, the automaker's executives will face shareholders at its annual meeting in Delaware.

One shareholder is pushing a proposal that would require the company to give back executives' bonuses if they don't achieve performance targets, while another has nominated a slate of candidates to replace the board of directors.

"A lot of us are just beside ourselves with frustration about the downfall of our company," said John Lauve, a GM retiree and shareholder from Holly who wants to see the board replaced. "They have the wrong people on the Titanic. They've hit the iceberg and it's sinking."

But others suspect shareholders will be mollified by GM's aggressive efforts to raise cash and streamline operations, including the sale of a majority share in its finance arm, General Motors Acceptance Corp., the sale of stakes in Suzuki Motor Corp. and Isuzu Motors Ltd., an agreement with the United Auto Workers to cut retiree health care expenses, and a buyout offer to GM's 113,000 U.S. hourly workers.

"I guess my general sense is that they're pulling the right levers, and what we've seen so far is very encouraging, but they have a lot left to do," said Pete Hastings, an analyst with the investment company Morgan Keegan & Co.

At last year's annual meeting, also held in Wilmington, Del., GM's chairman and chief executive, Rick Wagoner, laid out a plan to cut 25,000 jobs and close an unspecified number of plants by 2008. As the automaker's losses mounted later in the year, GM increased the number of cuts to 30,000 and named 12 plants it plans to close by 2008.

Wagoner said he'll focus this year on the company's actions since then.

"I think we owe it to report on how we've done because we put out a very ambitious agenda last year, and I think it would be inappropriate for me not to spend some significant amount of time talking about how we've done and what will be the ramifications of that," Wagoner said in a recent interview.

GM earned $445 million in the first quarter of this year compared with a loss of $1.3 billion in the January-March period a year ago. It was the first quarterly profit since 2004 for GM, which lost $10.6 billion in 2005.

But GM continues to face some significant hurdles. The company is in talks with its former parts division, Delphi Corp., and the UAW on a deal to lower wages at the supplier, which has filed for bankruptcy protection. Delphi is seeking a judge's approval to cancel its labor contracts, a move that could provoke a strike and devastate GM, its largest customer.

GM also continues to struggle in its home market. U.S. sales fell 8 percent in the first five months of this year as high gas prices took a toll on trucks and GM pulled back on sales to rental fleets. The company has pledged to stick to its strategy of cutting prices instead of relying so heavily on incentives, but some analysts question whether that can continue.

"GM seems to be sticking with its price over volume in a bid to improve margins. We believe this is unsustainable though beneficial to earnings in the short term," auto analyst Ron Tadross of Banc of America Securities said Friday in a note to investors.

GM is facing several federal investigations into accounting practices and was recently forced to restate five years of earnings. Wagoner has called the accounting errors "extremely disappointing and embarrassing," and the company has hired an outside accounting adviser.

Also, GM and its unions will begin negotiating a new contract with the UAW next year. The talks could be contentious as the automaker tries to get its labor, health care and pension costs under control.

Hastings said GM's appointment of Troy Clarke as president of North American operations last week was a good step, since Clarke was GM's chief negotiator for the 2003 labor contract.

"He's got the experience to help them take on the challenges that they're going to face over the next couple of years," Hastings said.

Wagoner had been overseeing North American operations since last April, an arrangement he said made sense since he was so closely involved in the company's turnaround. But even with Clarke in place, Wagoner said he has no plans to leave despite some calls for his resignation.

"If there was a time to bail out, that was a while ago, because the last year's been tough," he said.

GM shares fell 41 cents to close at $26.49 on the New York Stock Exchange.


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