GM Chief Is Keeping Eyes on the Road

The chief executive of the world’s largest auto manufacturer is perfectly content toiling away at his job while his competitors grab all the headlines.

Of course, those headlines have been bright crimson, either about a competitor awash in red ink or about another with its nose bloodied in one of the most spectacular corporate fistfights in history. So G. Richard Wagoner, president of General Motors Corp., would just as soon not be part of the newscasts.

The 48-year-old Wagoner quietly marked his first year as GM’s CEO earlier this month. During his first six months on the job, DaimlerChrysler’s troubled Chrysler Group made news, first when it said it was on its way to losing $1.2 billion in the second half of 2000, then when it took a $2.8-billion restructuring charge in the first quarter of this year.

In August, Ford Motor Co. leaped to Page 1 with the Firestone tire recall--and hasn’t stayed out of the headlines since. The chief executives of Ford and tire maker Bridgestone/Firestone Inc. are scheduled to appear yet again before a congressional committee Tuesday to answer questions about crashes involving Ford Explorers and Firestone tires, for which they blame each other.

GM has had its own share of woes: a languishing stock price, being savaged for the design of the Pontiac Aztek minivan/sport-utility vehicles and having to kill off the unprofitable Oldsmobile brand. GM’s U.S. market share, once 50%, has been going south for 30 years, standing at 28.3% last year, down from 29.4% in 1999.

GM also recorded a dismal first quarter, earning $237 million to Ford’s $1.06 billion, largely because inventory-related plant shutdowns cut GM’s production by 20%.

But lately Wagoner has been treated to a welcome string of good news: The company’s share price has bounced upward in recent weeks, productivity is closing in rapidly on Ford, new models are getting generally favorable reviews, and, best of all, GM’s market share is moving back up in that high-margin battlefield, mid-size and large trucks, where it has an onslaught of well-received or all-new models.

Full-size SUVs such as the Chevy Tahoe and Suburban and their GMC counterparts are gaining ground, as are GM’s full-size pickup trucks. Meanwhile, GM’s brand-new mid-size SUVs--the Chevy TrailBlazer, GMC Envoy and Oldsmobile Bravada--have been well-received even as Ford’s completely redesigned Explorer has stumbled, partly because of all the bad publicity over Firestone tires.

“I’m happy to see some momentum,” Wagoner said in an interview Friday on the 39th floor of one of the several round towers that make up GM’s headquarters in downtown Detroit, overlooking the Detroit River and Windsor, Canada.

“We’ve seen productivity improvement, a lot of our products are hitting well on the market, and the quality trend is good,” Wagoner said. “I feel good for our people who have been under siege for a long time.”

A long time indeed. “GM has been an embattled company for a decade,” said David Bradley, an auto industry analyst with J.P. Morgan. “It’s been perceived as a day late, dollar short. But market share has done much better than Ford, Chrysler in the last 12 months.”

In large trucks--which account for an estimated 90% of profit at GM and Ford--traditional leader Ford has lost 3.5% in market share this year while GM has gained 4%, said Saul Rubin, auto analyst for UBS Warburg.

GM also improved in recently released productivity and quality surveys, and Ford’s ranking fell.

“There have been moves afoot at GM in the last two to three years that led to a better product line, certainly in light trucks,” Rubin said. “Things have been good on the cost side as well.”

Wagoner was promoted to president and chief operating officer in 1998 and to chief executive June 1 of last year. But serving as chief financial officer from 1992 to 1994 and concurrently as head of worldwide purchasing from 1993 to 1994 and then president of North American operations from 1994 to 1998, he was closely involved in product, manufacturing and labor strategies that are beginning to pay off.

He is known as a likable exec with an easygoing, steady style. Unfailingly polite, he’s not a hard-charging, joke-cracking CEO like Jacques Nasser at Ford across town, nor is he a reserved, studious chief executive with a single mission to cut costs like Dieter Zetsche at Chrysler Group. To some, he is a cautious, bland bureaucrat who lacks engineering credentials; to others, he’s the right mix of strategy and bean counting (he rose through GM’s financial ranks) who delegates well.

He is nonetheless closely involved in two of GM’s most sensitive deals: negotiating to acquire all or part of South Korean auto maker Daewoo Motor Co. and to sell GM’s El Segundo-based Hughes Electronics unit, which runs the DirecTV satellite television service and is being strenuously courted. Wagoner declined to comment on plans for Daewoo or Hughes or speculate about their effect on GM’s stock price, which is up about 20% since April. GM shares fell 86 cents to close at $59.35 on the New York Stock Exchange on Friday.

But he credits John Devine, GM’s new chief financial officer, who once held the same job at Ford, for cutting costs and shoring up confidence in GM on Wall Street.

“The best thing that Wagoner’s done is hire John Devine, who has the capacity to think more like an investor than most executives I can think of in the industry,” UBS Warburg’s Rubin said. “From a Wall Street standpoint, that’s a jolly good thing.”

With regard to products, Wagoner acknowledged GM needs to move more aggressively into so-called crossover vehicles, or cars that are mixtures of SUVs, pickup trucks and station wagons.

Any delays could be costly in today’s keenly competitive market. “GM was slow to get in on the whole light-truck boom of the ‘90s,” said Michael Flynn, director of the Office for the Study of Automotive Transportation at the University of Michigan. “When you get into crossovers, will they miss out on new hot products like they did with sport-utilities?”

Wagoner denied reports that GM has delayed the launches of a number of crossovers by as much as a year to 2005 because of internal bickering.

“As the business tightens down, the financial pressures get greater, and as our product development process churns out product faster, we have to marry that with capital availability and issues of shareholder concerns and balance-sheet structures,” Wagoner said.

“We’re injecting pretty tight realism on what should we be putting on our portfolio charts,” he said. “Undoubtedly there’s [some] moving around in the timing of products.”

He said GM hopes to attract passenger-car buyers--rather than truck or SUV customers--to crossovers, such as the upcoming Pontiac Vibe or Chevy SSR.

Wagoner has to manage a company that employs 386,000, has more than 10 of its own vehicle brands around the world and owns pieces of four auto makers abroad, and which made $4.5 billion on $184 billion in revenue last year, for an unremarkable 2.4% margin.

He has spearheaded the alliances with Japan’s Isuzu Motors, Suzuki Motor Corp. and Fuji Heavy Industries (maker of Subaru-brand cars) as well as with Italy’s Fiat--by most accounts skillfully melding the cultures of Detroit with partners in Tokyo and Turin.

“He has an excellent rapport with each of the CEOs. Part of the reason Fuji Heavy and Fiat selected us was because of Rick’s involvement and his personality,” said a GM executive overseas who is involved in the auto maker’s alliance strategy.

Wagoner’s manner puts partners at ease, including Osamu Suzuki, the ironfisted 71-year-old patriarch of Suzuki, and Fiat Chairman Paolo Fresco, who are both much older than he, the executive said.

“Rick’s pushing us to stretch, to have a mind-set of taking risks,” said Larry Burns, GM’s vice president of research and development, who praises Wagoner as a leader who listens well. “When you can pull that all together, it’s very, very powerful.”

Wagoner said he’s drawn lessons in the last year from taking too much risk, as in the aggressive styling--and sluggish sales--of the Aztek, whose chunky, angular looks have proved to be a turnoff in the market.

“For years we’ve been seen as too conservative,” Wagoner said. “So some young designers and engineers really stretch out there, and if it doesn’t hit everybody’s hot button out on the marketplace, the last thing I want to do is say, ‘Don’t do that again; let’s go back to not letting people express themselves.’ I don’t want to send the message that we want to stop pushing on the edge.

“We need to push on the edge.”