New General Motors CEO to step up on accelerator for high growth

New General Motors CEO to step up on accelerator for high growth
MICHAEL ELLIS

DETROIT, MAY 31: Big and fast. That's not the usual description of General Motors Corp, better known for its cumbersome bureaucracy and slow reaction to market trends. But when President G Richard Wagoner takes over as Chief Executive Officer of the world's largest automaker on Thursday, he intends to accelerate change and put the ultimate old economy company on the fast road in the online age.

Wagoner takes control of day-to-day operations at a time when the US market is becoming ever more competitive, worldwide prowess is paramount in an era of overcapacity and the automotive industry is embracing the Internet.

The tall, lanky Virginian, who played as a freshman on the Duke University basketball team, likens the challenge to his favourite sport. "The winner is going to be the person who's big and fast," Wagoner said when he was named CEO in February. "If you don't believe me, watch the NBA. The big and fast team wins. Generally fast has n't been associated with General Motors."

GM declined to make Wagoner available for comment for this story. In the past year, Wagoner, at 47 the youngest CEO in GM's history, pushed for the automaker to embrace the Internet to cut costs and establish new high-margin businesses.

One result - Covisint, the online marketplace for automotive supplies formed with Ford Motor Co and DaimlerChrysler AG that is expected to chop more than $2,000 off the cost of making a vehicle, and generate billions of dollars in user fees from suppliers.

"I think he's going to be more of an agent of change in the company even though he's a GM guy," said Rod Lache, an analyst with Deutsche Banc Alex. Brown. "He is a much more aggressive guy. It's probably in his nature to make more key changes at the top."

Despite the bright prospects for Covisint, Wagoner must grapple with some basic issues that have long perplexed the automaker - how to make and sell cars and trucks that generate a decent profit and stay ahead of the competition.

Since a crippling two-month long strike at key parts plants in the summer of 1998, GM's US market share has been on a downward slope, mainly due to a staid product lineup that has failed to win over younger buyers. "Unfortunately, they are one of the companies out there who are least likely to take a risk," said Nextrend analyst Wesley Brown.

Wagoner has the opportunity to take over where board member John Smale left off. Smale, the Procter & Gamble CEO who introduced brand management philosophy to GM, retires in June.

"Wagoner's got to begin to show that he can accelerate GM's North American operations," said one Wall Street analyst who declined to be named. "As much improvement as they've made in North America, they've kind of hit a wall, and things have slowed down. The measurable mark of that would be stabilising these (US) market share losses."

GM has taken steps recently to revive its product line. Later this month, the Pontiac Aztek goes on sale at dealerships. The Aztek, a cross between a minivan, SUV and sedan, is the first of several head-turning hybrid vehicles in the works that GM hopes will change its image.

In May, GM hired away from French automaker Renault atop-ranking designer who analysts hope will inject more style into the brands.

Union relations appear to be on the mend, and GM is close to wrapping up its new four-year contract with the United Auto Workers (UAW) in the fastest time in years. But with the slipping US sales and the addition of a leaner manufacturing plants in Lansing, overcapacity threatens to derail the new-found peace with the UAW, analysts said.

Wagoner must also reconcile mending relations with disgruntled dealers -- a top priority of Chairman Smith -- and lackluster sales for the Oldsmobile, Saturn and Buick nameplates, they said. Rumours have circulated in Detroit that Wagoner may elect to merge Oldsmobile with another brand like Saturn or even scrap it altogether, although analysts have said such a move would risk angering dealers.

He must also deliver on the groundwork Smith laid for expansion overseas with the acquisition of Sweden's Saab, stakes in Japanese automakers Suzuki Motor Co., Isuzu Motors Ltd. and Subaru Motor and Italy's Fiat SpA, and new assembly plants in China and Thailand, analysts said.

Smith will continue to focus on Asia, particularly the pending auction of troubled Korean automaker Daewoo Motor Co. Ltd.