Investors’ Vote Shows Confidence in GM CEO

A year after facing angry stockholders calling for his head, General Motors Corp. Chairman and Chief Executive Rick Wagoner left Tuesday’s annual meeting with his neck -- and business card -- fully intact.

Shareholders soundly defeated a proposal that would have stripped him of one of his two jobs at the troubled automaker. The 79.6% vote against the measure was a strong show of support for a man who this year threatened to quit unless his board publicly backed him.

But the relative calm didn’t extend to the company’s directors as GM held court at the plush Hotel DuPont here for its 98th annual meeting.

Upending nearly a century of precedent, shareholders approved two measures opposed by the board that could make it easier for dissidents to elect a director of their own.

It was the first time in GM’s history that a majority of voting shareholders supported propositions after directors had urged their defeat.

“They are sending an accountability message” to GM directors in the wake of the giant automaker’s huge loss last year, said Cheryl Gustitus, spokeswoman for Institutional Shareholder Services, a Rockville, Md.-based stockholder rights group.

Still, the meeting was relatively quiet after last year’s contentious session, in which dissident investors repeatedly called for Wagoner’s resignation.

Even longtime GM critic Jim Dollinger, a management consultant and former top Buick salesman, seemed mellow.

Although he accused Wagoner of misleading shareholders and continued to question the CEO’s ability to lead the company, Dollinger said after the meeting that he was pleased with its tone and outcome.

“I thought there was a high level of audience participation and that it was productive,” he said.

Shareholder Mike Johnson wasn’t so sure.

“This was a nonevent. I don’t think the company will follow through” on what the shareholders asked for, said the Philadelphia resident, who owns 150 GM shares.

Wagoner and the board have been under fire since the company posted a $1.3-billion loss for the first quarter of 2005.

GM lost $10.6 billion for the full year but has launched an aggressive turnaround plan -- including job cuts, factory closures and asset sales -- and turned a $445-million first-quarter profit this year.

Nonetheless, GM’s share of the crucial U.S. market continues to slip as Asian automakers, led by a surging Toyota Motor Corp., chew away at a lead once considered invincible. At the end of May, GM’s market share had fallen to 22.7%, down from more than 50% in the 1970s.

GM also faces the possibility of a strike over proposed wage cuts at Delphi Corp., its largest parts supplier. The automaker is trying to mediate talks between the United Auto Workers union and Delphi, a former GM subsidiary that is undergoing Chapter 11 bankruptcy reorganization, because a strike could force GM to suspend production.

Wagoner, speaking Tuesday before about 125 shareholders, described the direction of the talks as positive.

The endorsement of Wagoner’s dual role at GM comes as he oversees a recovery plan that he told shareholders was aimed at structuring the company “for sustained profitability and growth” and was not just a quick fix to put profit on the books.

Wagoner’s program calls for GM to shutter a dozen plants in the U.S. and Canada, shed at least 30,000 of its 113,000 unionized manufacturing jobs and cut operating costs, including those for healthcare and pension plans, by at least $7 billion a year.

The surprising victory of two recommendations -- to allow cumulative voting by stockholders and to require a majority vote rather than a mere plurality to elect a director -- sends a signal that shareholders are displeased with the board’s performance, Gustitus of Institutional Shareholder Services said.

Cumulative balloting multiplies an investor’s shares and number of votes by the number of candidates on the slate and permits all the votes to be cast for a single candidate, giving dissidents the ability to join in support of one candidate.

“It’s a tool to use if the board can’t turn things around,” Gustitus said.

The majority-vote provision makes it more difficult for marginally performing directors, who now need just one more vote than an opponent to be reelected.

The measures, however, are only recommendations. The same board that has gone on record opposing them must now respond, and can reject the proposals, although Wagoner said the company respected the shareholders’ input.

GM shares fell 80 cents to $25.25 amid a broad market decline.

There was little reason for the stock to climb after the annual meeting, though, “because all they did was rehash what they’ve been telling us for three months now,” Burnham Securities analyst David Healy said.