General Motors is clearly making progress. Fourteen new vehicles were introduced for the 1997 model year, and GM received J.D. Power and Associates' first Chairman's Award last year for getting the top ranking in initial sales satisfaction for the last five years.
But strike-related losses reduced the company's earnings by $1.2 billion last year, and UAW unrest is slowing GM's momentum again this year.
Rick Wagoner, president of North American Operations, talked with Automotive News staff reporter Kathy Jackson and associate publisher and editor Peter Brown May 15 at NAO headquarters in Warren, Mich.
Where are we now in the evolution of General Motors - from being a big lumbering company to the kind of powerhouse that you envision it to be?
It's somewhere north of 50 percent from the basis that (Chairman) Jack (Smith) set years ago. It's remarkable to see that the business objectives have moved from being basically run from the top of the company to run on each team. The result is that we get a much better focus around the whole business and around specific products.
Will you see market share up at the end of the year, and where will you get it?
The bulk of the improvements this year will drive off the availability of the newer products. Clearly, we're picking up share with minivans. Park Avenue is picking up share. Grand Prix is picking up share. Malibu is off to a terrific start. The way to get share is (to) execute good products and (provide) good value.
Are the new products significantly more profitable?
Their relative profitability is better. But in fairness, because of startup costs, they may not move into the black this year. We should be able to achieve savings in two areas: the vehicles are easier to assemble and (from) more effective utilization out of capacity.
What kind of cost reductions are you seeing?
It varies from product to product, but a good rule of thumb is a 25 percent improvement in the required hours to assemble a product.
Will these labor problems hurt your ability to produce as efficiently and cost effectively as you'd like?
Obviously in the case of Malibu, we're going to lose volume, and that will have an impact.
How would you characterize the strike issue at Oklahoma City, and what principle are you defending?
The principle that we follow is that we need to continue to improve our competitiveness. We're willing to recognize that we don't do everything perfectly. If we have to make adjustments, we will. But we can't make moves that fundamentally reverse the direction of becoming competitive. If we can match up on hours per vehicle against Toyota Georgetown, we've got a chance to be pretty competitive in this business.
Is your work force about where it should be now?
There are some specific businesses where we're not competitive, but by and large we need the people that we have. While we've significantly downsized our work force, most of it has been through attrition and buy outs. We haven't put people out on the streets.
So will there be a stare down between GM and the UAW for the rest of the year?
What usually happens is that there is some sort of compromise. We need to set in place a business that can be successful 10 years from today. Part of the problems we have today is that we did not deal with these issues to the satisfaction of all parties in the past, so more of them are bubbling up now.
What about Oldsmobile? Their sales continue to dive?
Within two years their oldest product will be the Aurora, so they'll have a dramatically transformed product. They're going to have more credible products in segments where there is a lot of volume. On the truck side, they have a van and a sport-utility.
The biggest challenge that they have is to attract the target customer which pretty much is not in the GM family today. That's not easy.
How do you reach consumers?
We're into a little bit of everything. Just the other day we signed as the major sponsor of the new women's basketball league. The Internet will be a new world for us.
Brand management has really helped us focus in on a product-by-product basis to do marketing. I think you're going to see, depending on the products, some very different types of marketing strategies.
Are you allowed to make a mistake in the new GM?
Yeah. I don't like to make them, but when we make them I like people to learn from them. In our culture, we've built a premium around whatever you do, don't screw up. Be slow, be conservative, be a year late to the market, but whatever you do, don't screw up.
We don't want to purposely make mistakes, but we're letting our people do things. That's part of the game, and we need to keep that up. When we screw up, let's own up to it.
Would you ever consider anything as extreme as what Ford is looking at in Indianapolis?
I'd say the developments in the last three years would teach you never to rule out anything. We do feel like the best chance we have to succeed in brand distribution is to try to drive to more exclusive single-line stores. We think that works better.
Why is Republic Industries Inc. so congenial to GM? How does their strategy coincide with yours?
Their primary focus of growth is around the (West) Coast, where we are weakest, and we have a say on who runs the stores. We have some dealers who want out; that's a way to get them out in a way that's helpful to us.
Are you confident that Republic can manage what they have?
They have a good strategy. The principals have a good track record of doing different stuff in different kinds of businesses, and they obviously have lined up a lot of capital. So I'm not sure what we'd gain by fighting that.
How much is NAO working with the international operations on global platform consolidation?
A lot - on powertrain, on cars and on trucks. More of it is being done between the chassis engineers and the product planners. Product development cross country is a big deal.
The big driver of value is to drive the common systems. We have not had common engineering release systems in different parts of the world, so that stuff is being put in place now. If we don't have common systems, we'll never be able to do what we need to do in speed and responsiveness and cost and leverage.
Is it a big investment?
The big investment is in human capital and training. There is some investment in systems and computer systems, but the big one is in training people.
What steps are you taking to diversify your work force?
Our thoughts have moved from a compliance issue to it's the right thing for society to it's the right thing for the business. We can't expect that we can service these diverse markets with a homogeneous management team with all white males.
We see women and minorities moving up. The challenge is can they move all the way up to the top of the organization - what are the barriers, and how do we address that? And I think many more people now accept philosophically that it's the right thing to do.
Why the strong sales with Cavalier?
It's strong where they're targeting the vehicle to be strong - to a high percentage of young female buyers.
People say the truck business is great. One of the reasons you make so much money on trucks is because you build 800,000 of them. Is it going to be that way in 10 years? No way. I'd love the truck business to stay like it is, but it absolutely will not. It's going to fragment.
That tells me we've got to improve our profitability on the car side because I don't think trucks will carry the day forever.