GM CEO Cedes Control of North America

Photos

Troy Clarke, now ex-head of GMs most profitable market sector, Asia-Acific, will take over North American operations from Wagoner. (Photo: General Motors)

GMs Wilmington plant, responsible for the popular Sostice, just added a third shift to the assembly line; giving investors some hope of recovery. (Photo: General Motors)

GMs high-profit truck market has been losng ground due predominantly to high gas prices. (Photo: General Motors)

Wagoner took a pay cut in April to the apparent effect of 46 percent, although his earnigns this year will still be close to $5.5 million. (Photo: General Motors)

Wagoner Hands NA Reins to ex-Asia-Pacific Chief

That GM is in some trouble is news to nobody. The worlds largest automakers slide has been well publicized, making headlines last year for losing an unparalleled $10.6 billion. While the cause is a point of debate, GMs current CEO, Rick Wagoner has taken much of the flak for these losses, and rightfully so. As the head of GMs unprofitable North American operations hes responsible for the automakers plans to cut 30,000 jobs and close nine factories by 2008, in order to limit the massive losses GM has encountered.

So, in order to give himself more time to commit to the problem, or rather its solution, Wagoner has ceded control of the day-to-day North American operations to ex-Asia-Pacific head Troy Clarke. Wagoner stated that, “While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year. This is the right time to turn the regions day-to-day operations over to Troy, who has the experience and skills to help lead the GMNA team as it continues this unprecedented restructuring. Troy has a track record of success in general management, manufacturing and labor relations in the United States and globally, which will be invaluable in his new assignment.”

That track record Wagoner mentions involves leading the most profitable sales market in GMs portfolio; the aforementioned Asian-Pacific market. That division turned a $453 million dollar profit in the first quarter of 2006, as compared to the North American operations posted loss of $503 million during the same time span.

And while he will be stepping down from the head of GM North America, Wagoner will not be out of the picture entirely. According to a press release, Wagoner will still be involved in “executing the next key steps in the GMNA turnaround plan.” That plan involves such things as reorganizing GMs largest supplier, Delphi, as well as the completion of the “attrition and capacity-reduction programs,” plus the eventual achievement of the $7 billion structural loss-reduction target. He will also be involved in product development and release.

This restructuring comes at the end of a campaign that has left investors worried, as GM has steadily lost market share to import giants Toyota and Honda; losing a whopping 26.2 percent of their total market share last year alone. To curb losses and fund new models that GM hopes will dig them out of the hole, the Detroit-based automaker has been selling its assets, including 51 percent of its finance unit, GMAC. Unfortunately slimming down hasnt entirely worked, and although the newest models, such as the Saturn Sky, Pontiac Solstice, and updated Corvette have garnered much attention, they simply cant make up for the losses in other areas; specifically the high-profit truck market.

That segment has taken a dramatic and sudden downturn recently as a
result of rising gas prices; a severe problem for GM, which placed
their new truck line at the top of their priority list two years ago, at the expense of any conceptual or pre-production car models. As a result of this, market analysts downgraded GMs stock from “hold” to “sell” this month, saying that the “leading indicators are increasingly pointing to a tough outlook.”

Earlier this year Wagoner himself made headlines for doing his part to lighten GMs load; taking a 46 percent pay cut in late April. As well, GMs board of directors withheld any and all bonuses from Wagoner and the other four top executives, although they did praise Wagoners direction and steady leadership performance throughout 2005. Wagoner said the pay cut was the most difficult in the automakers 98-year history, although mysteriously enough his base salary remained unchanged over last years, sitting at a steady $2.2 million. Additionally, Wagoner received stock options for 400,000 shares with a total value of $2.9 million (last year he received the same amount of stock options, although the valuation was much higher at $5.1 million), as well as $395,000 compensation for standard out-of-pocket expenses, such as security measures, the use of the company aircraft, and contributions to a savings plan. All told his pay this year will be just shy of $5.5 million. Difficult indeed.