Wagoner: GM plan is working

DETROIT -- Rick Wagoner will stick to his plan. General Motors' CEO will continue to cut costs and boost revenues. But he has no intention of taking drastic steps to goose sales, even if that means Toyota becomes the world's largest automaker, Wagoner said in an interview Friday, Nov. 17, with Automotive News.Wagoner concedes that trends indicate that Toyota will surpass GM in global vehicle sales in the near future."Is it inevitable?" Wagoner said. "No. No it's not inevitable."Trends don't last forever. The only question is -- when do they change, and who's involved in the change? I don't think it's inevitable, but I can't argue that if you keep drawing the trend lines, your conclusion is correct."Wagoner said GM's first priority is to get the company profitable and generate cash. That "dominates everything we think about."One way to do that is to grow in profitable markets such as China, while cutting structural costs companywide and maintaining GM's market share in North America.What Wagoner is unwilling to do is return to heavy incentives and fleet sales to stimulate sales. GM has successfully boosted residuals and profits per vehicle by $579 in the third quarter, compared with the year-ago period by lowering sticker prices and limiting sales to daily rental fleets.'The right way'"If Toyota passes us, I guess they pass us," Wagoner said. "Do I like it? No. Am I willing to take us off our plan or to sacrifice our profitability or the implementation of our marketing strategy here?"No, I'm not willing to do that. If we're going to stay ahead, we're going to stay ahead doing it the right way and a sustainable way."In five years, Wagoner envisions GM enjoying the benefits of its globally integrated operation with diverse products and flexible manufacturing. GM will have lower fixed costs -- his goal is to drop them to 25 percent of revenue from 35 percent -- and GM will be "more profitable." Fixed costs are the expenses that remain constant regardless of the level or production, such as rent, interest and executive salaries."Most importantly, we'll be a company that really is viewed as having hot products, strengthening brands and really good technology, particularly in fuel economy," Wagoner said. GMAC, DelphiWagoner said GM will get two major issues off its plate soon. The first will be to close the sale of 51 percent of its captive lender, GMAC Financial Services, formerly General Motors Acceptance Corp. He is optimistic that the sale to a consortium led by Cerberus Capital Management for $14 billion will happen before year end."We don't have all the regulatory approvals yet, but the list has gone from really long to really short, and there are some business issues that need to be put on contract, but the progress is good," Wagoner said.GM also must resolve its role in its largest supplier, Delphi Corp., which is seeking to emerge from bankruptcy reorganization. GM has about $4 billion in claims for the buyout of some 20,000 hourly Delphi employees. Typically, claims can be bought and sold as part of reorganization."It's very important that the Delphi that comes out of all this is a competitive one that can be a profitable supplier and supply us at world-class prices," he said.Wagoner said a conclusion could be reached reasonably soon.Wagoner said another issue GM will confront next year during UAW contract negotiations is the Jobs Bank, which pays laid-off workers. "We'd like to reduce the cost of the Jobs Bank, yes," Wagoner said. "There are plenty of ways to do that."A lot of times people want to jump to the sort of extreme answer and that very well might not be acceptable to the UAW. If we've learned anything over the last decade, it's that if we sit down and work over the tough issues, most of the time we can make some progress."You may e-mail Jamie LaReau at jlareau@crain.com

Wagoner: GM plan is working

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