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Wagoner's grades: Some A's, some nays

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Northstar    11

Wagoner's grades: Some A's, some nays

Jamie LaReau | Automotive News / March 27, 2006

DETROIT -- Rick Wagoner may not yet be in a tailspin as he wrestles with the controls at General Motors, but all the red lights are on in the cockpit and the damned thing is starting to shake.

Is GM's CEO about to go down? In fact, Wagoner's job may be in jeopardy. GM's board of directors became agitated when the company restated its 2005 earnings - an embarrassing adjustment that increased the net loss by $2 billion, to $10.6 billion.

"He feels threatened," said a GM executive last week.

But is Wagoner truly on the same path to destruction as Jacques Nasser was at Ford in 2001 and Robert Stempel was at GM in 1992? Is he out of touch? Ineffective? Can Rick Wagoner survive 2006?

Not so fast. When Wagoner took personal control of North American operations a year ago, he had a long list of headaches. He still does. But for all the fuss, the 53-year-old CEO is methodically solving problems, one by one.

Recent events offer more evidence that Wagoner is still at the controls. Last week GM announced agreements to offer early-retirement buyouts to hourly workers and to sell some GMAC assets. "My belief is that he is in the process of surviving," said the GM insider. "If we have some quarters that exceed expectations, his tenure will be quite secure."

How's Wagoner doing? Here's our scorecard.

Trim health care costs

In October the UAW agreed to have hourly retirees pay an annual health care deductible of as much as $752. Active workers also gave up a scheduled pay increase of $1 an hour. The result: A $3 billion pretax savings.

And in February GM said it would cap its contribution to salaried retirees' health care costs at 2006 levels. Future health care liabilities will be cut by $4.8 billion, and savings in annual administrative costs will total about $900 million before tax.

Grade: A. Getting the UAW to budge? Priceless.

Eliminate jobs

Last November GM announced plans to cut 30,000 manufacturing jobs. Last week the company explained how that will happen. GM said it will offer buyouts and early-retirement packages ranging from $35,000 to $140,000 to all of its 113,000 unionized workers in the United States who agree to leave the company.

GM may achieve its goal of eliminating 30,000 jobs even faster than it expected. Some analysts say it could exceed that goal. The company also plans to trim its U.S. white-collar staff by as much as 7 percent this year.

Grade: A. In fact, he may have overachieved.

Cut production capacity

In November GM announced plans to close nine North American assembly, stamping and powertrain plants and three parts distribution sites by the end of 2008. The shutdowns, which include four assembly plants, will eliminate 1 million units of capacity.

Current production capacity is 5 million units, but that will drop to 4.2 million units by early 2008. That would be a 30 percent decline since 2002.

Grade: B-. Wagoner is improving the capacity use at his assembly plants, but it's a moving target. GM's market share continues to fall.

Raise retail sales

Wagoner has to kick-start sales - and he has to do it fast. Market share plunged last year, forcing GM to go on a fleet sales binge after it ended its summer blowout sale.

GM's retail sales rose 1 percent in February compared with the same month a year earlier. The increase is small, but the trend is encouraging. Fleet sales declined 11 percent, which explained some of the 2.7 percent dip in GM's February sales.

The market share crisis is real, and it's getting worse. GM has to connect with new customers. It can't simply cost-cut its way to prosperity.

Grade: D+. The February retail/rental mix was promising, but this is where Wagoner really needs to knuckle down.

Slash incentives

Total spending on spiffs is down, says Incentives averaged $2,638 per vehicle in February, down from $3,420 in February 2005.

So far this year, incentive spending is down $1,000 per vehicle compared with a year ago, a GM spokesman says.

Wagoner's earlier push to preserve market share at any cost is the main cause of GM's present misery, say GM insiders. Wagoner is trying to fix that.

Grade: B. Shows willingness to learn.

Avoid a Delphi strike

Last week's early-retirement deal has reduced the threat of a walkout at Delphi, but the situation remains perilous. The UAW has not yet accepted Delphi boss Steve Miller's demands for big wage cuts for Delphi's 24,000 UAW workers.

But the deal should make it easier for Delphi to negotiate a new contract. GM will pay 13,000 Delphi workers up to $35,000 apiece to retire. In addition, up to 5,000 Delphi workers could return to GM.

Grade: B. The deal could still blow up, but prospects have improved.

Launch the SUVs smoothly

So far, so good for the new GMT900 line of full-sized SUVs. The launch of the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade has gone flawlessly - no small achievement, since the launch was pulled ahead several months.

And buyers are responding. According to the Power Information Network, the new Tahoe's average transaction price in February was $41,233, up from $34,546 for the previous Tahoe in February 2005.

Grade: Incomplete, but looking good.

Boost transaction prices

The new Tahoe helps get that done. According to the Power Information Network, GM's sales-weighted average sale price in February was $28,070, up from $27,423 in the same month last year.

Meanwhile, GM is trying to squeeze more revenue out of each sale. For example, it is capping production of the Chevrolet Impala at 250,000 units for sale in the United States and Canada this year, sacrificing about 60,000 sales of its best-selling car to hold down incentives. It also is emphasizing higher trim levels.

Grade: B+. Last year's lousy mix was as big a problem as GM's loss of market share. Wagoner understands that.

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enzl    0

Wagoner's grades: Some A's, some nays

Jamie LaReau | Automotive News / March 27, 2006

He's a bean counter and the General has had repeated current reporting errors and a potentially embarassing SEC investigation regarding previous financial issues. For this alone he should be canned, since it is supposedly his area of expertise.

But the biggest reason he must be fired is because he failed to recognise that the light at the end of the tunnel was an oncoming train. Everyone knows the General is too big to change direction quickly...his attempt to change direction has a 'too little, too late' vibe that GM may not shake.

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I agree..

I think he's done relatively well given what he started with.

The product will (Hopefully) really start to connect and pick up (If the media will allow it) as the new 'no compromise' models hit showrooms. GM has SO much potential!

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evok    0

He has misled investors, employees and dealers. He should be fired, possibly arrested.


And you my friend should be committed. After a year of blabbering on the boards about the same old nonsense, you have yet to learn what really troubles GM.

Are you still calling for DPH to strike GM?

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Croc    268

He has misled investors, employees and dealers. He should be fired, possibly arrested.


Time for your enema!


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turbo200    6

with product being the number one issue facing GM for years now, i'd say it's safe to say his hands had nothing to do with the current mess GM finds itself in. If they'd figured out how to make relevant product, at all levels and not just Caddy and with the trucks, that strikes a chord design-wise and gets people motivated to drive thier cars, then they wouldn't be in this mess. It took Wagoner, Lutz, and a shake-up to get them to the product investment level they needed to be at. Look at the cohesiveness of the Enclave for a picture of what a quality Buick should be, and who produced it?

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