"We're trying to move faster in everything we do"
GM CEO talks about 0.0% new products, branding and the future
General Motors CEO Richard Wagoner was looking out the window of his 39th floor office when his peripheral vision saw a large airplane. Flying low. At eye-level!
"Whoa!" said Mr. Wagoner, startled by the closeness of the aircraft. Turns out, it was a military aircraft flying an unusual pattern over the Detroit River. Mr. Wagoner at work doesn't usually see big airplanes fly by. Not that low. Not that near. For a second... well, Sept. 11 was too close for comfort.
But neither Mr. Wagoner nor his visitors mentioned that connection. For him, some words are better left unsaid or nearly unsaid. Such as the word "terrorism." He almost said it in the course of an interview, then thought otherwise:
"The primary uncertainty that layers over is the whole issue of terr... - of something else happening that shakes people's confidence."
Absent another shattering of public confidence, Mr. Wagoner says, "The basic macroeconomics would suggest that this thing is going to come back pretty strong at some point because of the (interest) rate cuts and a huge amount of (governmental) fiscal stimulus."
But it's a difficult time for prognosticating vehicle sales the next year. Still, Mr. Wagoner is willing to take a stab at it:
"This guess is worth what you are paying for it. Every year we say next year is really uncertain. This year we mean it. Our best guess is 15.5 million. Basically that will be a weaker first half and a stronger second half.
"We expect the next couple months to be softer... A lot of the monetary and fiscal stimulus playing out in front of us should be a pretty strong boost to the economy, and we place that in the second half."
He says impending federal tax rate cuts will spur consumer spending more than 2001's federal tax rebates did. A lot of people just put the rebate checks in the bank.
"It's different getting money back versus having your rates down so you can build it into your monthly standard of living," he says.
GM offered its own version of stimulating the economy by introducing 0.0% financing. Ford, DaimlerChrysler and Toyota followed with their own versions. GM then extended it into the new year.
"It's done better than we thought," says Mr. Wagoner.
Another aspect of 0.0% - hard to quantify, says Mr. Wagoner, "is that we really got better alignment with our dealers than we've had in a long time." He explains, "The dealers got behind the program, and it allowed us to exercise these new local marketing groups with a single integrated message, attitudes and enthusiasm about the future and a chance to highlight some hot products like the Chevy Avalanche. We sold 13,000 in October. It's a great way to get that thing going. We sold over 100,000 Chevy trucks.
"Those are products that we think are strong. And indications are that those are not all pull-aheads. We got some conquest sales. When is pull-ahead not bad? When you're pulling ahead somebody else's sales. We'll take that every day." Trucks account for 52% of GM vehicle sales. The automaker wants to increase that.
Although the verdict is still out on 0.0%, GM introducing it so quickly and decisively seemed so unlike GM, a company saddled with a reputation of being slow-moving and bureaucratic.
Is this a sign of the new GM? After all, a heavyweight such as GM that's fast on its feet could be a force like no other in the industry, according to auto analyst Jim Hall of AutoPacific.
"Yeah, we're trying to move faster in everything we do," says Mr. Wagoner, who enters his third year as the world's largest automaker's CEO.
He adds, "One of the priorities we set for the company is to move with a sense of urgency, whether that's shorter product development times or faster new product start-ups or quicker decision-making or Wagoner responding to e-mails in one day rather than two. We're trying to do everything faster because speed is increasingly a determiner of success in our business.
"In moving fast, you may make some mistakes sometimes. But you got to reposition and go again rather than pull back and lick your wounds."
GM, which has about a 30% market share, is far from its long-time profit margin goal of 5%. But it's done better this year than Ford and DaimlerChrysler which have racked up big losses.
Products Mr. Wagoner thinks will do well next year are full-size pickups and SUVs as well as mid-size SUVs such as GM's new generation of Chevy Trailblazer, GMC Envoy and Oldsmobile Bravado.
"There's no indication that enthusiasm for those is dampening," he says. "We have new stuff coming into segments of the market which are small SUVs. The Saturn Vue is going right into an increasingly volume segment where we don't play big right now."
GM had a cash reserve of $13 billion last year. It ended the third quarter with $11 billion. Mr. Wagoner says that's enough to weather an extended downturn while at the same time funding necessary product development. "We have to have a good focus on cash. We need a lot of cash to be successful in our business," he says.
The Big Three all got hit with credit downgrades, even though GM's performance was considerably better than its struggling domestic competitors. Says Mr. Wagoner, "The credit rating agencies over the past 10-15 years, as we've got into economic downturns, have taken hard looks at all the OEMs. We did this in the early '90s as well.
"The kind of concerns they raise are hard to respond to other than through performance - over capacity, can you get more market share, what about the impact of pension funds?"
Mr. Wagoner says dealer relations are improving. That's through no small effort by the automaker after irking dealers a few years ago with some questionable programs, most notably a plan to buy dealerships and eliminating local dealer association control of regional advertising.
"While we are not always king for the day here, the general attitude with dealers is pretty constructive," says Mr. Wagoner. "In particular, some of the products out there are being well received. And there's a positive reaction to the 'Keep America Rolling' campaign...
"Bill Lovejoy (v.p. of sales and marketing) deserves a lot of credit in working on how to rebuild relations with dealers...Obviously dealers are concerned about what happens to the economy in the near-term. Depending on the brand, some would like more future products or future products today. They'd like us to work a little more on that.
"The hiring of Bob Lutz (who joined GM as a "product czar" and is now chairman of North American operations with the departure of Ron Zarrella) got a lot of correspondences from dealers. In the end, what they want is great products. They think if they got those, they could sell them. That's probably true."Quality is a key to all those prospective product introductions. GM is getting higher quality ratings from J.D. Power & Associates and others. Mr. Wagoner says, "We've really cut the gap versus number one, and moved ahead of the traditional domestics and passed some Japanese. We're just a nudge behind Nissan, and a little bit behind Honda. We realize we have a chance to keep moving up in the rank."
Mr. Wagoner shies away from commenting on the firing of cross-town rival Ford CEO Jac Nasser.
He says, "I've long held the view that the specific business strategy and how you change cultures is very different from company to company. I've got my hands full at GM, and can't comment on how other companies are run.
"Competitive pressures are terrific in this industry. We all need to change. It is a challenge to drive the right amount of change in the industry. We're trying to do that at GM. It's not easy. We are moving in a good direction, on the other hand we set a bunch of vision objectives, and we're not exactly marching to them at the pace we'd like. It highlights a tough business."
Meanwhile, he's still shaping his own management team. The latest change involves Mr. Zarrella leaving GM to become CEO of Bausch & Lomb Inc., and Mr. Lutz taking charge of North America operations.
Some industry observers say that move represents product triumphing over brand management because Mr. Lutz is so associated with product development and Mr. Zarrella with branding.
But Mr. Wagoner doesn't see it that way.
He explains, "Bob Lutz is the consummate brand management guy. He understands products, positioning in the marketplace, positioning against consumer needs, the history and tradition of brands, and what customers think about when they think about brands.
"It's not an issue of exciting products versus brand management, it's how we can get leverage out of the two...
"If you ask the person who runs BMW, 'Is product more important or is brand more important?' The answer would be, 'Yes.' They have to do both. That's no different for us."
"If you have great product, you'll have a strong brand. People who have mediocre products on a regular basis have brands they constantly are defending." Mr. Wagoner has been likened more to a coach than a conventional auto executive. He thinks he's put together a pretty good team, especially with Mr. Lutz running product development, Gary Cowger in charge of manufacturing and labor relations and John M. Devine overseeing finances.
"The only question is, 'What does Wagner do?' That's the good thing about being the boss."