Just five months into his new job as CEO, Rick Wagoner, 47, has set lofty 'vision objectives' for General Motors.
'Some of them, I think, we can do nearer in,' Wagoner told Automotive News. 'Some of them are going to require a lot of plotting and scheming. But I wanted to set a tone for people. This is what we need to think about if we're going to be a top-performing company and the leader in our industry.'
Wagoner's goals include a 20 percent share of the world automotive market, annual revenue growth of 6 percent to 8 percent and net profit of 5 percent of sales. Currently, GM's world market share is about 15 percent, its revenue growth from 1997 to 1999 was just 2.3 percent, and its net profit margin for 1999 was 3.4 percent.
Wagoner was interviewed by Executive Editor Peter Brown and Staff Reporter Joe Miller.
Why is everybody plunking $3,000 in incentives on the hood of everything in an 18-million-unit year? And how do you stop that?
Our economists tell us the fundamentals are strong. Everybody thinks they have good products or have good products coming, and nobody seems to want to give up any share. I think the other thing is a good dose of nontraditional competitors. By that I mean Volkswagen and the Koreans running pretty strong. I think we feel that we'd rather put out some incentives, keep the market going and keep our piece of the market than have to crank things down. Then we might be the only one to crank it down while everybody else keeps getting share.
So we're in this funny circumstance, and I don't think anyone wants to blink.
Do you see a way out of it, or does there need to be a way out of it?
It's not all bad. We don't like not getting any price. But we do like the strong market. There is another way: Keep working the cost side. If you can keep running good volumes and keep improving your costs, you can achieve the desired financial results. And if we get the right product, it can be pretty profitable to us.
Industrywide, what are you budgeting for sales to be?
This year we're at 17.5 to 18 million (counting heavy trucks). Next year we see it easing, but I would say not radically. I think we're talking 16.5 to 17 million.
If 1 million units come out of the market next year, and 1 million more a year later, who wins and who loses?
For some reason, what we've seen in market growth has actually been in small vehicles. We think that's because of some very competitive prices from the Koreans. The booming economy and the growth in income have brought a lot of new people into the market. I think logic would suggest that in weaker times, the market shrinks more disproportionately at the bottom.
I don't see any reason why we need to lose share if the market slides down. Part of the reason it's been tight so far for us this year and others, we've just been tight on availability, in particular on the truck side. If the market eases a little, and I'm not hoping that happens, it will give us a chance to test whether (availability) was the problem or not.
Saturn now has become at least as big as Oldsmobile, and it's about to be significantly bigger with a sport-utility. Does that change your marketing strategy?
I don't think the fact that Saturn would be bigger than Oldsmobile would be a key factor. What we look at is where the growing segments of the market are, what kind of product concepts we need to fit those segments and what brands those products fit best with. I think we do it better today than we used to, and it's going to lead to more distinctive products in each franchise system and up to this point has led obviously to somewhat fewer products.
We have about the right-size portfolio for Oldsmobile. We have a small portfolio for Saturn, and that's why we're trying to grow Saturn.
What's the problem with Oldsmobile?
We're trying to reposition the brand, and I think we've had some success. The demographics of Olds buyers today are moving well in the right direction. But when I talk to dealers, they say not enough people know what Oldsmobile is about today, and we haven't gotten Olds on the consideration list enough.
Our challenge is, are we doing the right kind of work on the brand positioning and advertising? My sense is that we're doing better now in that area. I think we're on the right track.
It is one of the biggest dilemmas I scratch my head over because we've done a darn good job on the product lineup, not perfect. But we just haven't been able to get the thing juiced and running.
Are you committed to Oldsmobile for the long term?
We're committed to make every brand a success. Commitment comes from us delivering the right products, working on the right brand positioning, working with our dealers. Ultimately, the continuation of that commitment depends on: Do we have a business here? How many can you sell? And can you make money selling them? The point: All the brands we've got, we plan to keep. But I don't think any of our brands has a free ride forever.
For GM, what are the potential benefits of Daewoo, its factories and its dealer networks?
Our initial point of interest has always been that the Korean market is a big market and we don't play in it. Second, Daewoo has developed very nicely over the years. It has capabilities to develop vehicles, and it can help us achieve other strategic objectives around the world. An example would be (that) we will, over time, need more capability to design and produce product for the Asia region. Daewoo could play a nice role.
It looks like Daewoo and the Korean authorities are more willing to break up the company now. Is that an advantage for GM?
This is going to be a challenging thing to put together. So the more flexibility both sides have, the greater the opportunity to come up with something that works for both.
The new Internet joint venture with the dealers, what's your vision of what it's going to be?
Nobody's really sure what model will work. Our strategy on the Internet has been that we need to get out and be active in it, and we've got to be comfortable with the fact that we're probably not going to get it perfectly right the first time. But by being engaged in it, we have a better chance to continue to evolve to whatever models are going to be the ultimate success models.
As we talked to dealers, a lot of them would like to be integrated in the whole process. So we came up with this idea: Why don't we create a venture between the two of us and take it all the way from the initial click to the sale?
To do that, do you need a fixed price?
There has to be an 'e-price.' It's got to be based on the local market and regularly updated. So they're working on various ways to do that, and that's one of the reasons we're running the (Oldsmobile Internet) pilot in Minneapolis.
We're seeing individual products coming from GM that are almost category breakers - Pontiac Aztek, Chevrolet SSR and Chevrolet Avalanche. But when will you show your innovation in mainstream vehicles?
I think you'll see it in different forms. In some cases it's functionality and features versus design. When you get out two years, you'll see some different kind of features in mainstream products with probably more traditional designs.