Big Wheel at GM Is on a Roll at Unripe Age of 40 : Autos: G. Richard Wagoner gets high marks from Wall Street analysts in his dual role as chief financial officer and chief of worldwide purchasing.
If these were the not-so-old days at General Motors Corp., 40-year-old G. Richard Wagoner Jr. would still be paying his dues, perhaps dreaming of life as a big wheel at the world’s largest auto maker.
But a lot has changed at GM. Talent and experience appear to count for more than age and patience.
Wagoner’s appointment last fall as chief financial officer at age 39 was a surprise to many. In April, less than two months after he hit the big four-o, Wagoner added the title of chief of worldwide purchasing.
“Rick is certainly the ‘Doogie Howser’ of the auto industry,” said Wertheim Schroder & Co. analyst John Casesa, referring to television’s fictional teen-age doctor.
“When I got the press release, I read the thing three times,” Casesa said. “I couldn’t believe the guy was 39.”
Too much responsibility too soon?
Probably not, say Casesa and other Wall Street analysts, who describe Wagoner as extremely bright, able and candid.
That is extraordinary praise from professional stock pickers who are naturally skeptical and cautious, particularly concerning GM. In November, when Wagoner addressed an analysts gathering and discussed the company’s bleak financial picture, they weren’t sure how to evaluate him.
When he predicted GM would break even in its weak North American operations this year--before interest, taxes and retiree health care charges--some of the financial pundits didn’t believe him. How could a company that lost almost $8 billion in North America in 1991 accomplish that turnaround?
Wagoner apparently knew what he was talking about. GM’s final numbers for 1992 revealed North American losses of $4.5 billion, down $3.5 billion from 1991. In this year’s first quarter, GM’s net loss in North America was $194 million. Before taxes, interest and retiree health care costs, it earned $525 million in North America.
“I think we understand that (breaking) even . . . over the long term is not going to be a sustainable business proposition, so we will have other targets beyond that,” Wagoner said at a news conference discussing GM’s first-quarter earnings.
He calls wiping out $4.5 billion in home market losses this year an “aggressive but still attainable” target.
Wagoner plays an enormous role in reaching that goal. Not only is he GM’s top financial officer, but he also has the equally critical job of overseeing the company’s purchasing operations. He succeeded Jose Ignacio Lopez de Arriortua, a flamboyant executive renowned for slashing purchasing costs.
Before Lopez quit to take the No. 2 post at Volkswagen in Germany, he saved GM about $1 billion in parts purchases. He had as much as $3 billion more in savings on the books because of advance purchases and price cuts squeezed from suppliers.
Showing some self-deprecating humor, Wagoner said Lopez’s programs are continuing. “The process is going and even I can’t screw that up, so that’s what we’re going to keep doing,” he said after taking on the purchasing job.
Wagoner knows plenty about the kind of global purchasing and cost-cutting programs that made Lopez the talk of the town in his 10 months in Detroit.
Wagoner helped put such programs in place in Brazil, which was such a bright spot for GM last year that Wagoner was one of only two top executives to earn bonuses. GM-Europe boss Louis Hughes, also a 40-something member of Chief Executive Jack Smith’s President’s Council, was the other.
Noting in his first-quarter review that Brazil’s performance is up 100% over last year, Wagoner quipped, “Obviously I picked the wrong time to be there.”
Not by Smith’s reckoning. He said GM considered a lot of people to replace Lopez, whose resignation to work for Volkswagen was considered an acute embarrassment. GM revamped its hiring policy afterward, making top officers sign agreements that prevent them from defecting to a rival.
Before Wagoner’s second stint in Brazil--his first overseas assignment was as treasurer there--he was a vice president and finance manager at GM Canada for a year.
Next, he spent two years in the United States as a director of strategic business planning for the Chevrolet-Pontiac-GM of Canada Group. Then he was off to Europe as vice president of finance.
Little wonder Smith says Wagoner’s overseas experience was a factor in his choice to succeed Lopez. Wagoner’s easygoing manner stands in sharp contrast to that of Lopez.
But the doubling of Wagoner’s responsibilities could hint at a weakness GM has in retaining top executives. Much of GM’s executive compensation is tied to performance. Because of the company’s abysmal showings in recent years, nearly all executive bonuses have been canceled.
“GM’s bench strength has been weakened some by lack of bonus compensation,” said David Garrity, an automotive analyst for the McDonald & Co. investment firm. “They’ll have a hard time paying out bonuses for just a break-even performance.”
Wagoner, who will earn $450,000 in salary this year, suggested the three-year non-compete agreement he signed recently is irrelevant because he’s not looking for another job.
“You can see we’ve been busy enough at work that we haven’t focused on what it said,” Wagoner said. “I don’t think any of us are planning to leave, at least voluntarily.”
