GM going down??
03-13-2005, 08:06 PM
#1
Above n Beyond
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GM going down??
http://www.nytimes.com/2005/03/11/business/11auto.html?
How Long Can G.M. Tread Water?
By DANNY HAKIM
Published: March 11, 2005
ETROIT, March 10 - Since the Depression, General Motors has reigned as the world's largest automaker and a pillar of American economic might. But now the company is broadly struggling and facing the humbling possibility that it will be displaced by Toyota at the top of the auto industry within a few years.
General Motors, which controlled nearly half the American market as recently as the late 1970's, held about one-quarter in February. Last week, the company said that it would produce 300,000 fewer cars and trucks in North America in the first half of this year, a 10 percent drop from a year ago.
Its European operations have lost money for five consecutive years and rising interest rates are expected to cool its lending division. With its shrinking profits dwarfed by those of Nissan and Toyota, G.M.'s debt is threatened with a downgrade to a junk bond rating, a move that could force it to pay more to borrow money.
The company's financial health is no trivial matter. With 7,600 dealers across the country, its eight brands, from Chevrolet to Cadillac, have long been American icons. The company has operations in 32 states; in Michigan and Ohio, both G.M. and Delphi, its struggling former parts subsidiary, are top 10 employers. G.M. is also the nation's largest private health care payer, giving coverage to 1.1 million Americans. Hundreds of thousands of retirees depend on the company's pension checks.
G.M. might be in better shape than it was when it lost $23 billion in 1992 and was on the brink of bankruptcy, but many analysts say it will be treading water for years to come and extending economic distress across the industrial heartland around the Great Lakes.
Company executives, while acknowledging that G.M. faces serious problems, say they are confident they can weather any storm. "We've been ahead for 73 years in a row," Rick Wagoner, G.M.'s chief executive, said in response to a question at a January news conference about Toyota's looming presence. "I think the betting is we'll be ahead for the next 73 years."
"Is it a birthright?" he added. "Absolutely not. Could we blow it next year? I doubt it. Could we blow it in 10 years? For sure. We could do anything in 10 years."
Mr. Wagoner declined to be interviewed for this article. With the company's stock down about 50 percent on his watch, his legacy is on the line, as is the company's.
Five years ago, at 47, Mr. Wagoner became G.M.'s youngest chief executive. He was a protégé of John F. Smith Jr., who became chief executive after a boardroom coup in 1992. Mr. Smith pulled the company from record losses to a record profit by 1999.
Mr. Wagoner did not promise to reinvent G.M.
"The state of business at General Motors Corporation is strong," he told shareholders in 2000, adding later that the company's success "gives us a great chance to build off what we're doing."
Today, however, many analysts say G.M. is still unable to solve some of the problems it had in 1992, namely the seemingly unstoppable surge of efficient foreign competitors like Toyota.
The strategy of Mr. Wagoner, now also G.M.'s chairman, has been to continue his predecessor's work of pushing global expansion even as he is now moving to shrink G.M.'s disparate global operations into a single manufacturing, design and engineering organization.
Few industry analysts call him a visionary leader, but many see him as a skilled executive who has held the company together despite being dealt a difficult hand. Others say G.M. needs a more radical approach to ensure its survival.
"It's not like this tide can't turn," Mr. Wagoner said in January. "It's not going to turn by cheerleading or me convincing you here; it's going to be great products. It's going to be helped if exchange rates get in line with what they should be so companies that don't need to get subsidies aren't getting them."
At 6-foot-4, Mr. Wagoner briefly played college basketball while attending Duke University and remains an avid Blue Devil fan. He has approached his job more like a coach than an authoritarian chief, assembling a management team of prominent industry executives.
Mr. Wagoner is a career G.M. employee who came up through the company's huge finance operations and is not considered one of Detroit's "car guy" executives. Filling that role is Robert A. Lutz, the 73-year-old former Chrysler president Mr. Wagoner hired in 2001 to shake up G.M.'s product development. Mr. Lutz, a former Marine who commutes to work in a copter, commands most of the company's spotlight.
Far from undermining his authority, Mr. Wagoner's willingness to delegate has earned him praise.
"What's remarkable about Rick's leadership is the strength of the team that he has been able to attract," said Mike Jackson, chief executive of AutoNation, the largest G.M. dealer.
Gerald Meyers, a University of Michigan professor and the former head of American Motors, now part of DaimlerChrysler, called Mr. Wagoner "superb," adding that his drive to globalize could not be accomplished quickly.
How Long Can G.M. Tread Water?
By DANNY HAKIM
Published: March 11, 2005
ETROIT, March 10 - Since the Depression, General Motors has reigned as the world's largest automaker and a pillar of American economic might. But now the company is broadly struggling and facing the humbling possibility that it will be displaced by Toyota at the top of the auto industry within a few years.
General Motors, which controlled nearly half the American market as recently as the late 1970's, held about one-quarter in February. Last week, the company said that it would produce 300,000 fewer cars and trucks in North America in the first half of this year, a 10 percent drop from a year ago.
Its European operations have lost money for five consecutive years and rising interest rates are expected to cool its lending division. With its shrinking profits dwarfed by those of Nissan and Toyota, G.M.'s debt is threatened with a downgrade to a junk bond rating, a move that could force it to pay more to borrow money.
The company's financial health is no trivial matter. With 7,600 dealers across the country, its eight brands, from Chevrolet to Cadillac, have long been American icons. The company has operations in 32 states; in Michigan and Ohio, both G.M. and Delphi, its struggling former parts subsidiary, are top 10 employers. G.M. is also the nation's largest private health care payer, giving coverage to 1.1 million Americans. Hundreds of thousands of retirees depend on the company's pension checks.
G.M. might be in better shape than it was when it lost $23 billion in 1992 and was on the brink of bankruptcy, but many analysts say it will be treading water for years to come and extending economic distress across the industrial heartland around the Great Lakes.
Company executives, while acknowledging that G.M. faces serious problems, say they are confident they can weather any storm. "We've been ahead for 73 years in a row," Rick Wagoner, G.M.'s chief executive, said in response to a question at a January news conference about Toyota's looming presence. "I think the betting is we'll be ahead for the next 73 years."
"Is it a birthright?" he added. "Absolutely not. Could we blow it next year? I doubt it. Could we blow it in 10 years? For sure. We could do anything in 10 years."
Mr. Wagoner declined to be interviewed for this article. With the company's stock down about 50 percent on his watch, his legacy is on the line, as is the company's.
Five years ago, at 47, Mr. Wagoner became G.M.'s youngest chief executive. He was a protégé of John F. Smith Jr., who became chief executive after a boardroom coup in 1992. Mr. Smith pulled the company from record losses to a record profit by 1999.
Mr. Wagoner did not promise to reinvent G.M.
"The state of business at General Motors Corporation is strong," he told shareholders in 2000, adding later that the company's success "gives us a great chance to build off what we're doing."
Today, however, many analysts say G.M. is still unable to solve some of the problems it had in 1992, namely the seemingly unstoppable surge of efficient foreign competitors like Toyota.
The strategy of Mr. Wagoner, now also G.M.'s chairman, has been to continue his predecessor's work of pushing global expansion even as he is now moving to shrink G.M.'s disparate global operations into a single manufacturing, design and engineering organization.
Few industry analysts call him a visionary leader, but many see him as a skilled executive who has held the company together despite being dealt a difficult hand. Others say G.M. needs a more radical approach to ensure its survival.
"It's not like this tide can't turn," Mr. Wagoner said in January. "It's not going to turn by cheerleading or me convincing you here; it's going to be great products. It's going to be helped if exchange rates get in line with what they should be so companies that don't need to get subsidies aren't getting them."
At 6-foot-4, Mr. Wagoner briefly played college basketball while attending Duke University and remains an avid Blue Devil fan. He has approached his job more like a coach than an authoritarian chief, assembling a management team of prominent industry executives.
Mr. Wagoner is a career G.M. employee who came up through the company's huge finance operations and is not considered one of Detroit's "car guy" executives. Filling that role is Robert A. Lutz, the 73-year-old former Chrysler president Mr. Wagoner hired in 2001 to shake up G.M.'s product development. Mr. Lutz, a former Marine who commutes to work in a copter, commands most of the company's spotlight.
Far from undermining his authority, Mr. Wagoner's willingness to delegate has earned him praise.
"What's remarkable about Rick's leadership is the strength of the team that he has been able to attract," said Mike Jackson, chief executive of AutoNation, the largest G.M. dealer.
Gerald Meyers, a University of Michigan professor and the former head of American Motors, now part of DaimlerChrysler, called Mr. Wagoner "superb," adding that his drive to globalize could not be accomplished quickly.
03-13-2005, 08:31 PM
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