Despite ‘Bombs’ GM Did Right Things in 2006, Wagoner says

GM in 2005 lost $10.6 billion but is set for profitability this year due to the massive cost cutting of the last 12 months, its CEO says.

Scott Anderson

January 10, 2007

2 Min Read
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DETROIT – It’s fair to say Rick Wagoner had a better 2007 North American International Auto Show than in 2006.

Taking home both the North American car and truck of the year awards (Saturn Aura and Chevrolet Silverado) would do that for any top auto executive, but particularly for the General Motors Corp.’s chairman and CEO, who among other formidable challenges in 2006 faced drastic company restructuring.

Winning the car and truck awards sends a message that while there were “bombs across the air last year, every way, shape and form they could have come, the vast majority of the people at GM were doing exactly what they should,” Wagoner says at a roundtable discussion with a group of reporters at the North American International Auto Show.

Wagoner says GM’s delay of filing its first-quarter financials due to accounting irregularities marked last year’s lowest point. “It came up completely out of the clear blue. Those were trying times, to say the least.”

GM in 2005 lost $10.6 billion but is set for profitability this year thanks to massive cost cutting over the last 12 months, Wagoner says.

Nevertheless, the CEO sees a very “long runway” for GM’s turnaround and is reluctant to place a date for when its completion.

Some people ask when the business will be profitable again, Wagoner says.

“Our objectives have to be much, much bigger than that. It’s not an issue (of) can you make a nickel. That doesn’t do anything for anybody. We need to get good profit, and very importantly we need to generate good cash flow.”

Growing revenue and the perennial struggle with escalating employee health-care costs, which still hover at about $1,200 to $1,500 per unit, will continue to dominate GM’s agenda in 2007, he says.

“We’ve made a nice step in addressing health care, but we haven’t fixed it by any stretch,” Wagoner says.

Just as important, he says was GM’s overhaul of its sales and marketing strategy, which lowered prices while slashing sales incentives.

“What we did last year (A) was the right thing and (B) cost us revenue,” he says. “Over time, we expect it’s going to yield us more revenue. I hope we don’t get too old waiting for that to happen.”

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