One On One With Richard Wagoner, Chairman & CEO, General Motors
Wednesday, May 31, 2006
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SUSIE GHARIB: Shares of General Motors bounced back today, up more than a percent, as GM`s CEO says that talks between the auto maker, its top supplier, Delphi and the United Auto Workers continue quote, in earnest. Rick Wagoner also said that negotiating a bail-out deal is his top priority, especially since the United Auto Workers union is threatening a strike at Delphi. I sat down with Wagoner a short while ago and asked him whether GM will be forced into bankruptcy if there`s a strike at Delphi.
RICHARD WAGONER, CHAIRMAN & CEO, GENERAL MOTORS: It`s possible that a plant or whatever goes on a short strike. We`ve built up a bank of parts to perhaps protect against those circumstances. We have to see, but our view is that their is such a community of interest in coming to a solution in a reasonable time frame that I don`t think it adds any value to speculate on the worst, worst-case scenario.
GHARIB: When will GM stop shrinking and start growing again?
WAGONER: We`re trying to grow every day. Last year, -- or last year, our volume was the second highest in our history, unit volume globally. In the first quarter it was our highest first quarter ever, so we`re actually growing in a lot of parts of the world, but what we need to do is shrink the costs in the countries that we`re uncompetitive currently and those tend to be countries that we read about every day, the U.S., some of the traditional European markets and so, we`re trying to do that in a sensitive way, but at the same time, a lot of focus on growth. GHARIB: Mr. Wagoner, you said that you were not going to offer incentives any more. So what is it going to take to boost sales?
WAGONER: What we need to do is stick with what is a very disciplined marketing strategy that`s built around strengthening our brands, leveraging the competitiveness of our products both from a features and a value and a quality perspective, continue to focus on some areas of technology where we have a great position, whether it`s our Onstar systems or our leadership in areas like ethanol-e85 or upcoming hybrid launches. We need to keep selling the value in our product, keep a good discipline around our marketing effort. If we do that, I`m confident we`ll get retail sales moving in the right direction. We have to be patient, not too patient.
GHARIB: We have high interest rates. We have high gas prices. How are these factors impacting SUV sales?
WAGONER: We`ve seen some shift from truck to car and given our relative stronger position in truck, that does hurt us a little bit. Our large SUVs, which are new as of earlier this year, continue to sell very well. We`re seeing some lower sales of mid-sized SUVs, for example, but I think over time, if gas prices stay high, we are going to see some more shift to either crossover vehicles, or cars and we think with the product we have coming, we`re going to be ready to compete in that new world.
GHARIB: As you know, May auto sales come out tomorrow. Will we see a bump-up in GM`s market share?
WAGONER: This month is I`d say another month where the industry is a little weaker as we see it and our own sales are going to still be a little bit weaker as we continue to roll the strategy out. I suspect over the next several months, you`re going to see year-to-year comparisons still being pretty tough.
GHARIB: Is 2006 going to be the year that we see GM back in the black?
WAGONER: We haven`t published a bottom-line forecast for the year. We need to get some other important things done. We need to get the Delphi transaction finalized. We`re just going to affect our results this year. We need to finish up the big early attrition program that we have with the unions and see the ramifications of that. But certainly, first quarter was back in the right direction and I think we can continue to improve our results each quarter. We have to see whether we can get back in the black.
GHARIB: Let`s talk a little bit about GM stock. We`ve seen the reaction to brokerage upgrades. We`ve seen the reaction to brokerage downgrades. Do you think that investors are fairly valuing the stocks? WAGONER: Let`s be honest. As of a year ago or so, we announced a plan which had significant modifications, changes in our business, and I think people were saying, gee, can you really accomplish all that? I think and believe investors are seeing, hey, these guys are making progress and there`s more things that we need to do. So the jury is probably still out, but I think there`s growing confidence that we are moving in the right direction and I hope we can pick up the pace.
GHARIB: Now that Kirk Kerkorian is one the biggest shareholders in General Motors and his advisor Jerry Wurth (ph) is on your board, has he been a catalyst for change? Has he been helpful to you?
WAGONER: I found his views, very supportive, strong belief in GM and we`ve welcomed his thoughts and Jerry as a board member. I don`t think to be honest it would be appropriate for me to comment on what goes inside the board room, but this has been a busy year for all of our directors and all have contributed and we appreciate all of their contributions, including, of course, jerry`s.
GHARIB: In a lot of turnarounds, especially where there`s an entrenched culture, the conventional wisdom is that it takes an outsider to really overhaul a company. And there are some people who believe that in the case of GM, it`s going to take an outsider to turn it around. What are your thoughts on that?
WAGONER: Obviously I think it`s wrong and I don`t agree with it, but to be perfectly honest, I`m driven every day by doing the right things for the business of General Motors. It takes some fairly intense knowledge, good relationships and a pretty clear vision to drive them, and we`ve made a lot of progress and certainly I`ve played a role in that and got a lot of support. So I think we`re moving in the right direction and well, obviously, we listen to critics. I think in fairness, the actions of the last year, truly show that we know exactly what we need to do and we`re moving at a pace that I believe is pretty fast and very much in the right direction.
GHARIB: Has the GM board given you a deadline?
WAGONER: The GM board is very actively informed, engaged. They`ve been very supportive and I appreciate it. And they are as interested as I am in getting the business turned around.
GHARIB: Mr. Wagoner, thank you very much for your time.
WAGONER: Thank you, appreciate it.
