No Fear

Attention critics of General Motors Corp.: It's time to stand up and be counted or be forgotten by Gary Cowger. The president of GM's North American operations wants to make sure the auto maker's detractors are genuine. What critics? We've gained share year over year. Our product portfolio is getting better. We've made double-digit improvements in quality and productivity. Who are these critics? Bring

Attention critics of General Motors Corp.: It's time to stand up and be counted — or be forgotten — by Gary Cowger.

The president of GM's North American operations wants to make sure the auto maker's detractors are genuine.

“What critics? We've gained share year over year. Our product portfolio is getting better. We've made double-digit improvements in quality and productivity. Who are these critics? Bring them in,” Cowger says with a smile.

Just a few years ago it was easy to pick on the world's largest auto maker. Labor relations were a mess. It was the least efficient producer in North America. U.S. market share had been sliding steadily downward since 1962.

New products that were supposed to restore GM's fortunes — such as the Saturn L-Series and Pontiac Aztek — were instead the punch lines for industry jokes. Quality lagged far behind industry leaders. Dealers were bitter over plans for company-owned stores.

In those not-so-distant bad old days, the auto maker's critics could have formed a club and charged a membership fee.

Then, faster than you can say “Wall Street,” GM's cross-town rivals, Ford Motor Co. and Chrysler Group, each suffered major crises. Suddenly, it was a lot easier to see what GM was doing right.

So it's no wonder Cowger is upbeat in the face of a struggling economy, the ongoing war on terrorism, a possible invasion of Iraq, a stock market stung by massive scandals, increasing competition, soaring incentive costs and a pension fund for GM retirees that now is underfunded by about $13 billion.

The feeling in GM's top executive ranks is that the auto maker has seen a lot worse. It's now well positioned to succeed in a U.S. market it predicts will have sales of 16 million to 16.5 million light vehicles in 2003, as customers are lured by innovative vehicles and the best affordability index the industry has seen since 1978.

“There are external forces that you cannot control,” Cowger tells Ward's in his Renaissance Center office overlooking the Detroit River.

“There are internal things that you can control, like your momentum in quality, productivity, safety, cost and having ‘gotta-have’ products. I'm very proud of what this North American team has done on delivering those. And you'll see more of the same in 2003.”

Doubt him? Think again. GM's detractors have been eating crow recently. In 2002, GM, which has struggled with quality issues, dominated J.D. Power & Associates' North American assembly plant quality study with 10 of the top 14 factories.

GM also has made huge strides in labor productivity.

For the first time since Harbour and Associates began publishing its widely followed annual report on manufacturing efficiency in the early 1980s, GM surpassed Ford and moved into fourth place behind Nissan Motor Mfg. Corp. U.S.A., Honda of America Mfg. Inc. and Toyota Motor Mfg. Corp.

Also for the first time in the report's history, GM had the most efficient assembly plant in North America: its Oshawa, Ont., Canada, car factory.

Credit the improving results to GM's Global Manufacturing System, a strategy championed by Cowger that's patterned after the lean manufacturing methods of the Toyota Production System. Expect even faster launches and less downtime for changeovers as continuous improvement takes hold, Cowger promises.

However, don't hold your breath waiting for GM to mimic the supplier park concept Ford is implementing in Europe and Chicago in an effort to further improve efficiency.

Cowger says supplier parks aren't always necessary. “If you are building a plant in a new area that doesn't have a big supplier infrastructure, like Brazil or Mexico, or even new plants in Eastern Europe, and the suppliers have not filled a footprint, then it probably makes some sense to put some in the area around your plant because (suppliers) have got to build a new infrastructure anyway,” says Cowger.

“When you look at a market like Western Europe or the U.S., where the supplier footprint is pretty entrenched, somebody has got to pay for all that capital and building that you're requiring your suppliers to build.”

Cowger doesn't mention it, but GM tried the supplier park idea in Flint, MI, in the mid-1980s with a project called Buick City. It didn't work. Neither did the 1999 “Yellowstone” concept of having on-site suppliers build the modules that become the finished vehicle. The UAW killed the idea.

As GM's factories improve, so does the quality of its cars and trucks. GM moved from fourth to third in J.D. Power's report on initial vehicle quality, and placed 12 vehicles in the top three of their respective categories. Of course, all the quality awards in the world won't sell a product if nobody wants it.

But GM does have a growing list of new vehicles that are selling well or are even bona fide hits, including the Cadillac Escalade, Chevy Impala, Cadillac CTS, Hummer H2 and Chevy Avalanche.

Since taking over GM's North American operations last fall, Cowger and GM North America Chairman Robert A. Lutz have unleashed designers, phased out the much-criticized brand management strategy and preserved funding for product development while most other budgets have been chopped.

“What we did was isolate the product development budget,” Cowger says. “We're not touching it. Despite all the cost we're taking out of the place, we're not taking it out of product development because that's the lifeblood.”

Despite the worries of Wall Street analysts over what it is spending on incentives — estimated to be $2,500 per car — Cowger insists that GM's divisions all are reasonably healthy, even though outsiders raise legitimate concerns about Saturn Corp., which is losing money, and Buick, which has an aging customer base.

But Cowger argues that new product — not only at Saturn and Buick — will solve a lot of woes.

He points out there's a boatload of promising new cars and trucks on the way in 2003 or soon after: the Chevy SSR roadster pickup, Cadillac XLR luxury coupe, Pontiac Grand Am, Cadillac SRX crossover, Chevy Colorado/GMC Canyon small pickups, GMC Envoy XUV crossover, Saab 9-3, Pontiac GTO and Chevy Equinox small CUV.

GM also will add three new trim levels, 12 special editions and five powertrain upgrades in 2003. By 2006, it will introduce 10 new or restyled midsize cars, and expect the auto maker soon to approve a third SUV for Hummer (to be called H3).

“We basically have 12-14 new products every year for the next five years. I don't think any competitor, foreign or domestic, can match that product investment,” Cowger says.

According to Ward's data, 10 months into 2002, GM's market share equals year-ago — 28.5% — while Ford and Chrysler have lost ground to the Europeans and Asians. If GM can hold on and finish 2002 at 28.5%, it will post a gain over its year-end 28.3% market share in 2001 and 2000.

That's lower than goals set internally at GM, but it still would be the auto maker's first market share gain since 1990. And while two-tenths of a point might not seem like much, in the U.S. market that translates into nearly 100,000 units.

What's more, Cowger says GM's share of U.S. light truck retail sales is 31%, which is seven points higher than its nearest competitor. And the new products are winning back the good will of dealers, who were outraged by plans GM announced in late 1999 to own and operate showrooms.

Cowger and Lutz sent a letter to GM's North American dealers reaffirming the auto maker's commitment to strong relations when they replaced Ron Zarrella, who left GM to become chairman and CEO at Bausch & Lomb.

Cowger calls about 20 dealers each month and attended nearly every dealer regional meeting in 2002. “I think they like that,” he says. “There's nothing like unfiltered data.”

Despite all this good news, GM's pension fund continues to haunt the company's otherwise positive outlook.

Because of slumping stock market values, where 40% of the auto maker's pension funds are invested, GM's retirement fund could be $12.7 billion in the red by the end of 2002. That's a considerable change from 1999, when it was over-funded by $7.2 billion, compliments of a booming stock market.

GM's pension fund at the close of 2001 was short by $9.1 billion — its worst position since 1993 when the retirement account suffered a shortfall of $18.5 billion. GM was nearly bankrupt at the time, and the economy only was beginning to emerge from a full-fledged recession.

The auto maker corrected the situation by contributing a whopping $25 billion over the following two years. Using history as his guide, Cowger is undaunted by current pension fund concerns, which he thinks are being overplayed.

“Is it a problem? Absolutely,” he admits. “Is it unsolvable? No, absolutely not. We've managed it before. We'll get that part of the balance sheet fixed.”

GM also faces contract talks with the United Auto Workers union next summer. The auto maker's relationship with the union is the strongest of the U.S. Big Three — a huge turnaround from the ugly strike in 1998 and a blowup over outsourcing in 1999.

But GM still has too much production capacity, and plants in Linden, NJ, and Baltimore are likely candidates to be closed. Negotiations will be delicate. In keeping with his style, Cowger won't discuss it in public.

It's just one of many issues that keep him and GM on alert, despite recent successes. Asked what keeps him up at night, he replies: “Everything keeps me up at night. Only the paranoid survive.”

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