GM board affirms support for Wagoner
Amid rising concern about the company’s outlook, General Motors Corp. directors took the unusual step of affirming support for Chief Executive Rick Wagoner on Wednesday.
The nation’s largest automaker has suffered financially as gas prices have soared, sales have plummeted, values of SUVs and trucks have collapsed and consumer confidence has reached record lows. Last week, GM reported a $15.5-billion loss for the second quarter on an 18% revenue slide.
GM shares have plummeted amid questions about the company’s liquidity. Some investors appear to be asking whether Wagoner is to blame for the Detroit company’s woes.
“A lot of [stuff] has happened on his watch,” said David Healy, analyst for Burnham Securities. “There are probably a lot of angry shareholders out there.”
To calm Wall Street fears, GM director George M.C. Fisher, head of the board’s directors and corporate governance committee, spoke to the press Wednesday, saying Wagoner had the “unanimous” and “unified” support of the board and that there were no plans to remove him. Fisher, former chief executive at Eastman Kodak Co., has been on GM’s board since 1996.
The board also has retained outside counsel according to reports Wednesday, but neither Fisher nor GM elaborated.
Such an announcement about Wagoner from a normally quiet independent board is unusual, and some interpreted it as a sign of just how difficult conditions were for GM. Through July, its U.S. sales are down nearly 18% over last year, and it was well behind Toyota in global sales through the first six months of the year.
Burning through an estimated $1 billion in cash per month, the company in July announced an aggressive plan to increase its liquidity position by $15 billion before 2010, including suspending its quarterly dividend and laying off thousands of white-collar workers.
The 55-year-old Wagoner, who began his career at GM in 1977 and became chief executive in 2000 and chairman in 2003, has faced -- and survived -- leadership challenges before. The most recent instance was in 2006, when billionaire Kirk Kerkorian amassed a stake in the company and pressured the board to make significant changes. As is the case today, bankruptcy fears fueled doubts about Wagoner’s leadership.
Since Wagoner took the chief executive job, GM shares have fallen 85%, hitting five-decade lows last month. Last year, Wagoner received $14.4 million in compensation, according to GM filings.
GM shares fell 44 cents, or 4.1%, to $10.25.
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