General Motors opened up the incentives spigot in March. But Rick Wagoner, president of North American Operations, makes no apologies.
GM had to stay competitive on price, and GM's market share is growing, he says. But now the company faces a huge changeover to a new full-sized pickup.
He was interviewed May 13 in Detroit by Editor Peter Brown and News Editor Charles Child. What follows is an edited transcript.
Regarding the merger of Chrysler and Daimler-Benz, is bigger better?
It's been our theory for 70 years. It would be a little hypocritical of us to criticize their move. We believe in multibrand strategy, geographic diversity and size. All that's in their mind as they did what they did. The key is how you integrate.
There are some synergies, but it's not obvious that there are a whole lot.
I think there are opportunities. Let's face it, ideas are important, but execution is the game. It's going to take a lot of work.
Do you imagine this scares the pants off automakers who aren't large?
If you don't have a certain size, it's going to get tougher.
Are you more interested in expanding your investment in your international automotive partners, such as Daewoo or Isuzu?
We've greatly expanded our working relationship with Isuzu over the last five years. The progress have been very favorable. It doesn't appear bigger equity pieces are necessary.
Where do you see the market going this year?
The market looks good. This far into an expansion, you keep
wanting to say the end has got to be close. But the data don't suggest that is the case.
Why has the market been flat for these past years? It has never been like that before.
Vehicles are lasting longer. Some say there are more competing interests for consumer dollars - high-end electronics and computers. Vehicles are less of a fashion item to a lot of people. And the whole lease thing. The theory is that leases take some of the cycle out it, dampen the ups and downs.
After February you got into incentives big-time. Are you prepared to stay in them indefinitely?
We'll be in the game. I don't particularly want to lead the parade, but by the same token we're not going to sit around and let people just take or keep share of products that aren't better than ours just because they're willing to pay more.
Are you determined to hold share this year?
We can gain share this year. We'd like to do it. For the calendar year to date, we've gained share. And I don't see any reason why we'll back off of it. We're running into a risky period. We have a massive changeover with the C/Ks. The tradition when everyone else has made that same switch - they've lost a lot of volume, share and profits. Our challenge this year is: Can we run against that trend? Right now it looks good.
In February, your sales were not good. You decided to put a lot of rebates on. Did you change strategy?
There was no big change of strategy. In February where we did particularly poorly was in small cars, and that's where we just got off the market too much.
How is the dealer rationalization coming along?
Good. If anything, we want to move faster on it. In some parts of the country, our distribution network isn't what it should be. It suffers from our history. In some places where we've moved and got it cleaned up, like Atlanta, we see the positive impact. In other markets, we still need to do a lot of work.
Do you like the operations of your dealerships that Republic has taken over?
It's too early to say. There's been no dramatic change. Their focus has been buying stores. Now they are doing more work on how they operate them.
The consolidation of dealerships in Los Angeles - is that a one-time thing, or are we going to see a lot more? How many might we see?
For now it's a one time thing. I guess I'd never say never. We fortunately don't have many areas that are like that one as far as very low penetration.
That's not going to be the last kind of experiment or initiative like that that you'll see from us. I don't think we'd profit a lot by talking about where next. Stay tuned.
I'm not sure they will be that scale. There'll be some more.
Is Saturn going to become a full-line car company?
We'll play it out one step at a time. There are clearly market opportunities. We want to exploit those. Saturn has got good data which show that the vast majority - in excess of 70 percent - of their buyers are conquest buyers to the GM family. That's important to us.
Does Saturn have a different mission today?
I think the challenge for them today is (to) declare victory and move on. Their mission is to grow that brand.
Will you be taking more risks in the future with products?
Hopefully they won't look like risks when they are done.
Are we going to see some things that now would be unusual in the next couple of years?
I think you'll see us stretching out some.
Is the hybrid sport wagon trend significant?
I think it could be. I'm not sure anybody has hit it exactly right yet. But what we're clearly going to see is a fragmentation in the sport-utility market. The (Lexus) RX 300 - interesting product. We'll see how that plays out. Certainly the (Mercedes-Benz) M class seems to be selling pretty well. I think we'll see more and more of that kind of stuff.
Are you going to be there?
Can one field guy represent all of the product divisions?
We're taking a look at what's the right structure. We don't have any final conclusions yet.
When do you no longer need divisional general managers?
You're going to need people who basically are responsible for the brands, and I'm not sure we'd call them anything different. I can't imagine the world where we're not going to have people responsible for the Pontiac brand or Cadillac brand. If that's your question, general managers are not going away.
If your question is, Will the general manager of today always be like today? I doubt it. Someone responsible for the brand is very important to us. That's not going to change.
What have you learned about brand management?
It's been great for us to take a big company and break it into bites and delegate authorities. Do incentives mean that brand management doesn't work? No. Incentives just simply mean that you are playing, you are part of a market and you're measured relative to the market.
The Camaro and Firebird - which one is going away?
At this point both of them will be with us for a good while.
Could you be more specific?
They're going to be with us at this point for several years. I don't see any value to us right now in discontinuing the products.
It's clear that the demand in that segment is lower than when we initially planned those products. Given that the cost has (been) sunk, we're going to keep running them. It is going to be hard to justify a repeat of that product. Maybe it's cooler to have a sport-utility or something. We've got to find the right concepts for those products in the future.
You're backing off on marketing support for the cars?
We're going to ease off that a little bit. We think there is a pretty steady demand flow at least. At this point we haven't found that the higher level of advertising, incentives, and general promotion support has really helped to grow the volume very much.
Are the old trade wars over? Can you envision yourself as president of GM North America urging the government to lean on Japan?
I'm not too crazy about the yen valuation. So I wouldn't be shy to speak up about that.
I think things have evolved a little bit. The government has a responsibility to keep the playing field level within reason.