The General Motors Corp. Chairman and CEO Rick Wagoner said last Tuesday that the company's future depends on clearing several difficult hurdles, including reducing health care costs, developing alternative-powered vehicles and growing sales in emerging markets. But those challenges also represent some of GM's greatest opportunities, he added.
"It's not about short-term initiatives to react to short-term challenges," Wagoner announced at GM's annual meeting Tuesday. "We're taking the profound actions necessary to transform the company for the long haul, for sustained profitability and growth, setting us up to be a global leader for years to come."
One action the Detroit-based automaker is not mulling over is becoming privately held, even as consolidations and acquisitions by private equity firms created a trend in the industry. GM has "no plans or thoughts about going private," Wagoner said when a shareholder asked if GM might go the way of Chrysler, which DaimlerChrysler AG is selling to private equity firm Cerberus Capital Management LP.
Wagoner, speaking of front of about 100 often-combative shareholders, described 2006 as a year of progress and mounting successes - from aggressive cost cutting to an improving product lineup. However, he said that tough challenges lie ahead. Reducing a "still-unsustainable" health care bill, which last year amounted to $4.6 billion for workers, retirees and their dependents, will be critical to turning around the automaker's North American operations, he said.
In addition, Wagoner said that the largest American automaker must grow its share of car and truck sales in emerging markets such as Brazil, Russia, India, the Middle East and China. In the said territories, GM already outsells other automakers. The recovery crux is to produce flexible fuel vehicles to slash vehicle emissions and reduce foreign oil reliance. GM is pursing that goal "at an unprecedented pace and commitment," Wagoner said. This is the reason why the automaker is accelerating its initiatives like the .
At the annual meeting, Wagoner announced that GM awarded contracts to two suppliers to develop advanced battery technology for the Chevy Volt's E-Flex system. This is done to speed up the development of an affordable battery with lasting power to run an electric vehicle.
At the North American International Auto Show in January, GM grabbed the spotlight when it outlined plans to build the Chevrolet Volt electric plug-in vehicle which will be powered by a lithium ion battery. At present, GM is developing a system for the Volt called the E-Flex, which matches battery power with different energy sources that recharge the battery. As such, the driver does not have to stop and plug in when the battery is low. The challenge now is to produce a battery that lasts without overheating, recharges quickly and is small enough and affordable enough to sell on the mass market. "This is for sure a top priority program for GM," Wagoner said.
Showing progress in its turnaround, GM now commands more confidence on Wall Street, but it remains vulnerable to upsets in the market, said analyst Brad Rubin at the investment firm BNP-Paribas. "There's a lot of ifs," Rubin said of GM's plans. "If they get all those things right, they'll be in great shape. If they don't, the business model isn't in great shape."
Wagoner responded good-naturedly to barbs from a few activist shareholders. Evelyn Davis of Washington, D.C., called Wagoner and other executives "accounting flunkies." Davis then announced that, though she is a Republican, she will vote for Hillary Clinton. "I'm sure Senator Clinton will be happy to hear that," said Wagoner.
