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Old 02-13-2009, 02:30 PM   #1
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Rick Wagoner stays optimistic

GM chief Rick Wagoner stays sunny despite bad economy

DETROIT — General Motors (GM) chief Rick Wagoner does not look like the most embattled CEO in the auto industry.

From his aerie 39 stories above the icy Detroit River, Wagoner exudes casual confidence even though he's in charge of a huge car company on the edge of failure, going through the worst time in its 100-year history.

GM, he says, is crouched and ready to pounce if the auto market begins to rebound. "We just need to get the storm over, and we're about ready to go," he said in an exclusive interview with USA TODAY.

The storm is an imploding global auto market. Tight credit worldwide has prevented potential car buyers from getting loans, so they quit buying. Even Toyota Motor (TM) , considered the bedrock of the auto industry, is forecasting its first loss since 1950. Ford Motor (F) , Chrysler, Nissan Motor (NSANY)— most major players — are losing money and customers.

Most auto CEOs face similar problems, but the challenge are outsized for Wagoner because GM's size makes it hard to overhaul quickly, and its image as a stumbling U.S. automaker discourages buyers. GM's plan to survive also differs. Chrysler, for instance, is considering a partner. Italy's Fiat has proposed taking 35% of the company. And Ford Motor, unlike the other two Detroit makers, hasn't yet needed to borrow from the government. GM is trying to soldier through on a combination of federal loans, drastic cuts — including shedding some brands — and sheer optimism.

The reason for Wagoner's confident appearance is his unshakable belief that things will get better soon enough. And, in Wagoner's view, GM will be ready — forged in the crucible of crisis into a tough, hard, healthy, profitable, high-tech and high-quality leader.

Too bright an outlook for some outsiders.

"We're struggling now, but tomorrow is going to be a sunny day.' I've heard it so many times from so many companies for so many years, I guess I'm a little skeptical," says Jim Hossack, senior consultant at AutoPacific consultants.

"If I had to bet, I'd bet yes," on a Detroit bankruptcy filing, even if the government approves the viability plans that GM and Chrysler submit Tuesday and lends them more money, says Douglas Bernstein, managing partner of the banking and bankruptcy practice at law firm Plunkett Cooney in Bloomfield Hills, Mich.

Bankruptcy of one, the automakers have said, could take down all three by starving component suppliers of enough business to keep running.

Says Bernstein, "Whether it's Rick Wagoner or me running the company, if there isn't any money available for consumers to buy cars, it's not going to matter."

Good times ahead, for those that survive
Even so, Wagoner's upbeat attitude might not be as out-of-touch as it can seem.

Veteran industry analyst David Cole, chairman of the Center for Automotive Research, says GM and the other Detroit automakers have slashed their cost structures. They could roar back as profit machines if, as expected, people start buying new cars and trucks again within a couple of years. "You're going to see really huge profitability in the industry like we haven't seen since World War II," Cole predicts.

Perhaps, for those that survive.

Bernstein says filing for bankruptcy protection would make it easier for a company to shed unprofitable arrangements with dealers, unions and suppliers. But he acknowledges "the stigma" that comes with bankruptcy, even if it's a Chapter 11 reorganization that keeps a company in business.

GM, and other automakers, can't simply cut costs and offer big incentives and expect quick, rosy results. That's because the underpinnings of the auto crisis are factors well beyond the control of car companies — maybe even of governments. Problems in the credit markets mean new vehicle buyers have trouble getting loans. That's a huge issue because historically 96% of new car purchases have been via loans. So the new vehicle market has collapsed, down 18%, to 13.2 million sales last year, and forecasts are for an almost unbelievably low 10 million to 10.5 million this year. The global auto market is quickly eroding, too, as the credit crunch spreads worldwide, meaning no havens or profit pockets.

Auto company bailouts and economic stimulus plans around the world have yet to provoke results.

Still there are good moments, which Wagoner likes to see as harbingers.

Two weeks ago, returning from the National Automobile Dealers Association meetings in New Orleans, he found himself on the front lines of consumer feedback. Flying commercial to avoid the fat-cat image of using the company plane as he has done for years, Wagoner was standing at the baggage carousel at the Detroit airport waiting for his luggage when a woman yelled his name.

"Normally, when people chase me around and say, 'Are you Rick Wagoner?' I say, 'No,' and run the other way," Wagoner said, laughing. "But I had to stick around and get my baggage."

He was glad he stayed put.

The woman gushed about the new GMC Acadia SUV she'd bought, trading in her Acura MDX. She'd decided to give GM a chance after hearing so much about the company in the news.

"It was terrific," Wagoner says. "Having been through what we've been through in the last year, I think I'd like to be here when things get turned around."

For that to happen, GM needs:

•More federal loans. GM and Chrysler must submit an economic update to the government next Tuesday to get more government loan money. To bolster its case that it is doing all it can to pare expenses and streamline operations, GM announced Tuesday that it is slashing 10,000 white-collar jobs globally and cutting the pay of those who are left. The financial plan could also include more plant closings.

The company already borrowed $9 billion from the government, expects to get $4 billion more by the end of the first quarter, and could ask for even more after the first quarter.

•More customers. Wagoner says the woman in the airport gives him hope that Americans are giving GM a second chance. "We're hearing that people are paying attention to us," says Mark LaNeve, GM's head of North American sales and marketing. "It's a great opportunity."

All the news about the auto industry's troubles has more Americans re-thinking the brands they buy, says Peter DeLorenzo, publisher of Autoextremist.com and author of The United States of Toyota.

The bad news "caused some to investigate further on their own," DeLorenzo says. They've gone to showrooms and done additional research, "and when they did that, some consumers even discovered that Detroit is actually making some worthwhile products," he says.

•A clear identity. A large slice of Americans don't know for sure what brands GM makes. About 20% don't realize that GM makes GMC trucks, LaNeve says. And 40% think, incorrectly, that GM makes Chryslers.

"Clearly one of the things we're needing to do is focus in our product portfolio," Wagoner says. "People think we haven't been able to put as much marketing resources behind each product as we need. That's changing."

•Warmer appeal. Consumers' icy attitudes toward GM seem to be thawing, ever so slightly, according to the automaker's surveys. For instance, Chevrolet, which is GM's highest-volume, best-known brand, is familiar to 88.5% of likely buyers, up 5.5 percentage points over the past year. But the percentage who said they'd actually consider buying a Chevy rose only 1 percentage point, to 19% of likely buyers.

In surveys done by others, 50% or more of likely buyers say they'd consider a Toyota, showing how much ground GM has to make up. Even though more people also said they were aware of GM's Buick and Cadillac brands, the percentage who said they'd consider buying them dropped slightly as they learned more about the brands.

•A better image. Jesse Toprak, executive director of industry analysis for Edmunds.com, says GM still faces a gap between its quality and how consumers perceive the quality. GM has slashed its warranty rate in half, from 1.6 problems per car in 2000 to 0.8 problems in 2008, and the perception gap is "not as big as it was five years ago, but there's still a lot of work to do," Toprak says.

"When your main worry is to keep the lights on and pay your workers every day, you're not going to have enough money to invest in your image," he says.

•More coastal support. GM needs to win buyers on both coasts, where import brands have strong markets.

"We suffer on the perceptual gap because a lot of the media is on the coasts, and we don't do as well in those markets," LaNeve says. "So if we could start penetrating Washington D.C., New York, L.A. with cars, that's going to help with the perceptual gap. The key influencers are going to pick up on the fact that we're introducing great products."

That's at least in part why Wagoner is happy another new customer introduced himself recently. A New York banker told Wagoner he'd traded in his Lexus for a Buick Enclave.

"I gather heretofore there weren't many Buicks or American cars in his neighborhood," Wagoner says.

Adds LaNeve, "If you can put one Buick into a Lexus neighborhood, that's worth every ad I run in a whole year."

http://www.usatoday.com/money/autos/...nterview_N.htm
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Old 02-13-2009, 02:32 PM   #2
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I think they will accomplish pretty much all of their bulleted goals. Geeze i f Wagoner was not looking posotively at their situation they would be in trouble. He can guide them through this.
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Old 02-13-2009, 03:00 PM   #3
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i am a pretty pessimistic guy in general, but this made me pretty optomistic about GM
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Old 02-13-2009, 03:15 PM   #4
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It's a good thing Wagoner doesn't hang out with that Douglas Bernstein dude. That guy needs to go to a motivational seminar.

Maybe GM will only go as far as Wagoner can take them. Is he for sure leaving or was that final?
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Old 02-13-2009, 03:30 PM   #5
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Quote:
Originally Posted by irpq11 View Post
It's a good thing Wagoner doesn't hang out with that Douglas Bernstein dude. That guy needs to go to a motivational seminar.

Maybe GM will only go as far as Wagoner can take them. Is he for sure leaving or was that final?
Bob Lutz is leaving. akaik, Wagoner's not going anywhere soon.
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Old 02-13-2009, 03:35 PM   #6
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Quote:
Originally Posted by Dragoneye View Post
Bob Lutz is leaving. akaik, Wagoner's not going anywhere soon.
Cool. I thought it was Wagoner.
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Old 02-14-2009, 12:55 PM   #7
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20% don't know that GM makes GMC trucks? wow.
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