Klaus
04-04-2005, 06:45 PM
Wagoner to Assume Control
Of GM's North America Unit
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
April 4, 2005 2:08 p.m.
DETROIT -- General Motors Corp. Chairman and Chief Executive Rick Wagoner said Monday he will take over daily responsibility of the huge auto maker's struggling North American division.
GM North American Chairman Bob Lutz, 73 years old, and GMNA President Gary Cowger, 57 years old, will relinquish those roles and focus full-time on global product development and global manufacturing and labor, respectively, the company said.
The world's biggest car maker warned last month it would lose $1.50 a share in the first quarter and slashed its profit outlook for the full year, partly as a result of a steep drop in sales of the large sport-utility vehicles that generate a lot of GM's profit. For the full year GM expects earnings of between $1 and $2 a share, well below its initial forecast of $4 to $5 a share, issued in mid-January.
GM North America is expected to post a "significant full-year loss," rather than earnings of $500 million as previously forecast. The unit has faced growing competitive pressure both from rival U.S. auto makers Ford Motor Co. and DaimlerChrysler AG's Chrysler brand as well as Asian auto makers like Toyota Motor Corp. and Nissan Motor Co. GM's U.S. market share dipped to 27.2% in 2004 from 28% in 2003.
"Given the challenges we face in North America, it makes sense for me to assume control of GM North America's day-to-day operations and shorten the lines of communication and decision-making," Mr. Wagoner said in a statement. "I look forward to working closely with an energized, aggressive GMNA team … to move faster on the path toward re-establishing profitability in GM's largest regional business unit."
Mr. Lutz also serves as GM's vice chairman and Mr. Cowger as a group vice president. Mr. Wagoner said they are two of GM's most experienced executives and will help the company enhance its global position.
But analysts saw the move as a sign of frustration in the lack of progress in fixing the company's biggest business, which has been led by Messrs. Lutz and Cowger since 2001.
"It's a signal of dissatisfaction that the turnaround hasn't happened," said Ephraim Levy, an equities analyst with Standard & Poor's. He has no holdings in GM, but his company may provide services to the auto maker. "I'm not sure what the specific advantages are for having Mr. Wagoner oversee North America directly," said Mr. Levy. "I don't see it as a panacea."
The moves are the most recent of a series of management changes at the auto maker. On March 1, GM announced that three of its top North American executives -- sales chief John Smith, engineering chief Jim Queen and design chief Ed Welburn -- would take over new positions with global responsibility. All three report to Mr. Lutz, who has been tasked in recent years with improving global efficiency.
GM announced last week that its U.S. sales rose 2.3% to 420,417 cars and light trucks. Mr. Wagoner, who was president of GMNA from 1994 until 1998 and served as GM's chief financial officer for two years before that, is under growing pressure from investors to get GM back on track. The company's credit rating is close to junk status following downgrades in the wake of GM's reduced earnings forecasts.
Mr. Wagoner said GM is challenged by its lack of cost-competitiveness in manufacturing in the U.S., reflecting the company's legacy costs, particularly health-care expenses. For 2005, GM has forecast $5.6 billion in health-care costs, up about $1 billion from 2004. Mr. Cowger will lead the effort to lower those costs, working with GM's unions and with the government and health-care providers.
Mr. Cowger told reporters at last month's New York Auto Show that "We need a competitive plan for all our employees. An across-the-board competitive health-care plan for salaried and hourly employees could save us billions of dollars a year."
Messrs. Cowger and Lutz were named to the top posts at GM North America on the same day, November 13, 2001. Previously, Mr. Cowger had been group vice president in charge of GM manufacturing and labor relations. Mr. Lutz rejoined GM, where he worked from 1963 to 1971, as vice chairman of product development in Sept. 2001. Prior to that, Mr. Lutz served as chairman and chief executive officer of battery manufacturer Exide Technologies.
Of GM's North America Unit
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
April 4, 2005 2:08 p.m.
DETROIT -- General Motors Corp. Chairman and Chief Executive Rick Wagoner said Monday he will take over daily responsibility of the huge auto maker's struggling North American division.
GM North American Chairman Bob Lutz, 73 years old, and GMNA President Gary Cowger, 57 years old, will relinquish those roles and focus full-time on global product development and global manufacturing and labor, respectively, the company said.
The world's biggest car maker warned last month it would lose $1.50 a share in the first quarter and slashed its profit outlook for the full year, partly as a result of a steep drop in sales of the large sport-utility vehicles that generate a lot of GM's profit. For the full year GM expects earnings of between $1 and $2 a share, well below its initial forecast of $4 to $5 a share, issued in mid-January.
GM North America is expected to post a "significant full-year loss," rather than earnings of $500 million as previously forecast. The unit has faced growing competitive pressure both from rival U.S. auto makers Ford Motor Co. and DaimlerChrysler AG's Chrysler brand as well as Asian auto makers like Toyota Motor Corp. and Nissan Motor Co. GM's U.S. market share dipped to 27.2% in 2004 from 28% in 2003.
"Given the challenges we face in North America, it makes sense for me to assume control of GM North America's day-to-day operations and shorten the lines of communication and decision-making," Mr. Wagoner said in a statement. "I look forward to working closely with an energized, aggressive GMNA team … to move faster on the path toward re-establishing profitability in GM's largest regional business unit."
Mr. Lutz also serves as GM's vice chairman and Mr. Cowger as a group vice president. Mr. Wagoner said they are two of GM's most experienced executives and will help the company enhance its global position.
But analysts saw the move as a sign of frustration in the lack of progress in fixing the company's biggest business, which has been led by Messrs. Lutz and Cowger since 2001.
"It's a signal of dissatisfaction that the turnaround hasn't happened," said Ephraim Levy, an equities analyst with Standard & Poor's. He has no holdings in GM, but his company may provide services to the auto maker. "I'm not sure what the specific advantages are for having Mr. Wagoner oversee North America directly," said Mr. Levy. "I don't see it as a panacea."
The moves are the most recent of a series of management changes at the auto maker. On March 1, GM announced that three of its top North American executives -- sales chief John Smith, engineering chief Jim Queen and design chief Ed Welburn -- would take over new positions with global responsibility. All three report to Mr. Lutz, who has been tasked in recent years with improving global efficiency.
GM announced last week that its U.S. sales rose 2.3% to 420,417 cars and light trucks. Mr. Wagoner, who was president of GMNA from 1994 until 1998 and served as GM's chief financial officer for two years before that, is under growing pressure from investors to get GM back on track. The company's credit rating is close to junk status following downgrades in the wake of GM's reduced earnings forecasts.
Mr. Wagoner said GM is challenged by its lack of cost-competitiveness in manufacturing in the U.S., reflecting the company's legacy costs, particularly health-care expenses. For 2005, GM has forecast $5.6 billion in health-care costs, up about $1 billion from 2004. Mr. Cowger will lead the effort to lower those costs, working with GM's unions and with the government and health-care providers.
Mr. Cowger told reporters at last month's New York Auto Show that "We need a competitive plan for all our employees. An across-the-board competitive health-care plan for salaried and hourly employees could save us billions of dollars a year."
Messrs. Cowger and Lutz were named to the top posts at GM North America on the same day, November 13, 2001. Previously, Mr. Cowger had been group vice president in charge of GM manufacturing and labor relations. Mr. Lutz rejoined GM, where he worked from 1963 to 1971, as vice chairman of product development in Sept. 2001. Prior to that, Mr. Lutz served as chairman and chief executive officer of battery manufacturer Exide Technologies.