Just as General Motors Corp. Chairman and Chief Executive Rick Wagoner’s turnaround plan is starting to take hold, analysts say he now has to fight to keep it going and perhaps save his career.
The battle begins on Friday when GM’s board meets via teleconference to discuss a plan from dissident shareholder and billionaire Kirk Kerkorian that would link GM with Renault SA of France and Nissan Motor Co. of Japan.
If Kerkorian, who has been unhappy with the pace of change at GM, can convince some big investors of the plan’s merits, Wagoner could be ousted and replaced by Carlos Ghosn, chief executive of both Renault and Nissan who revived Nissan from near death.
Although GM officially says it will study the proposal from Kerkorian’s Tracinda Corp. and judge it objectively, industry analysts and dealers who know Wagoner say he probably is building a coalition to fight Kerkorian.
“He’s a coach type of guy. He’s very much a team player,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor. “How he’s operated in the past, it’s less focused on Rick and more focused on what’s right for the company.”
What’s right for GM, Cole said, is to continue in the direction Wagoner has set, with significant expense cuts and upcoming new products that have potential, including a hybrid large SUV to be unveiled next year that gets up to 25 miles per gallon of gasoline.
Wagoner received a vote of confidence from the board in April. GM officials say it’s unlikely that the board would take any action on the Tracinda deal in the Friday meeting.
But Stephen Mader, vice chairman of Christian & Timbers, a New York-based executive search firm, said GM needs Ghosn’s leadership style and personality more than a team approach led by Wagoner, who has been with GM since 1977.
Kerkorian, Cole said, wants GM to change more quickly, and Ghosn clearly is capable of leading quick change. But the transition to join three companies with vastly different cultures would take far longer than letting Wagoner’s plan work its way out, Cole said.
“You put three companies together, it’s not going to happen fast,” he said. “The economies that come with combinations really take a long, long time.”
GM has suffered from declining profits, high labor costs and growing competition from Asian automakers.
“I don’t think General Motors can be solved from the inside,” said Mader, adding that Ghosn had great success turning around Nissan by coming in from the outside. “You can’t get an insider with all of those years with background and affiliations and relationships. You get bogged down in your assumptions about what is possible,” he said.
Wagoner, Mader said, is a first-class business leader, but has become bogged down in his perception of GM’s realities. Ghosn would not be beholden to GM’s idiosyncrasies, Mader said.
“They’re trying to live with too many givens. GM’s got to start throwing the givens out the window,” Mader said.
Yet analysts say Wagoner is making progress, getting 35,000 hourly workers to retire or take buyouts, getting health care concessions from the United Auto Workers and coming close to resolving cost problems at Delphi Corp., GM’s largest parts supplier that the automaker spun off into a separate company in 1999.
While Wagoner’s consensus-building approach may seem to be slow, both Cole and Jim Sanfilippo, senior industry analyst for Automotive Marketing Consultants in Bloomfield Hills, said change at GM has moved quickly in the past year, especially when dealing with the UAW.
Sanfilippo said GM’s market share rose more than four percentage points in June even though its sales dropped dramatically from June 2005, a sign that its strategy to lower prices and wean itself of rebates is working.
“They’re learning to make money on every vehicle. You’re going to see operating revenue figures reflect that,” Sanfilippo said.
GM, which has announced plans to close 12 plants by 2008, lost $10.6 billion last year. It made a $445 million profit in the first quarter of 2006.
B. Scott Smith, vice chairman and chief strategic officer for Sonic Automotive Inc. a 150-dealer group based in Charlotte, N.C., that includes multiple GM dealers, said he recently returned from a GM dealer event in New York. Other dealers, he said, support Wagoner’s plan and would like to see him stay.
The board, he said, already has made up its mind on Wagoner with the vote of confidence in April.
“I think under his leadership they’ll continue to pull this out,” Smith said.