GM’s Wagoner sees difficult road in 2008

updated 2:21 p.m. ET Dec. 20, 2007

DETROIT - His critics would say he didn't move quickly enough, but few would dispute that Rick Wagoner has started to turn the giant freighter known as General Motors Corp.

Since a devastating $10.6 billion loss in 2005, the company has cut labor and other costs, expanded sales overseas and moved to upgrade products to rival those made by the Japanese.

But just as years of work start to right the once-plodding industrial giant, Wagoner is faced with a gloomy U.S. auto market that could hamper GM's recovery plan.

"It would have helped to have a little bit of sunshine," he said this week in an interview with The Associated Press.

Yet the 54-year-old chairman and chief executive of the largest U.S. automaker is optimistic the rays will return and says his company is far better positioned to weather a tough 2008 than it was during past downturns.

"We look forward to the sunny days, but realistically we can't plan on it for next year," he said from his high-rise office along the slushy Detroit River.

Since 2005, GM has slashed $9 billion in annual costs, including the departure of more than 34,000 hourly workers to buyout and early retirement offers. It has globalized engineering, design and manufacturing to save billions, and there's the landmark cost-saving contract reached this year with the United Auto Workers.

On Thursday, GM tentatively agreed to sell its medium-duty truck business to a unit of truck maker Navistar International Corp. The sale, which involves a division that builds vehicles used as tow trucks, for example, is part of GM's plan to focus on building and selling passenger cars and pickup trucks.

"I'm glad we did all the stuff we did because frankly, the competitive conditions, the economy, obviously the discussions around the fuel economy regulations, certainly highlight that there's plenty of stuff to work on in front of us," Wagoner said.

If the dismal sales forecasts for next year come true, Wagoner said GM is determined not to rely on costly incentives, which hurt brand image and resale value, or low-profit fleet sales that have boosted its U.S. numbers in the past.

"I think, considering the state of the market, we've shown good discipline, and I think you'll see more of the same next year," he said. GM has spent about $2,975 per vehicle on incentives so far in 2007, down from $3,872 in 2004, according to the automotive information Web site Edmunds.com.

Wagoner said "the deal" topped the reasons people bought a GM vehicle in 2004. Now, thanks to stylish new models like the Cadillac CTS sedan and Buick Enclave crossover, the company says exterior styling tops the list, followed by value for the money.

"I don't want to mess with that. I want to keep building on that," he said.

Wagoner also said GM can meet new federal fuel economy requirements, but he's not sure if consumers will accept higher prices that come with the technology.

President Bush signed the new standards into law Wednesday, increasing the federal standard automakers must meet to an industrywide 35 mpg for passenger cars, SUVs and small trucks. The standard for cars today is 27.5 mpg, and 22.2 mpg for trucks and SUVs.

"I do think the challenge is really twofold. It's not just, 'Can you get the technology?', but 'What happens if people don't want to buy it?'" Wagoner said. "So that is the question mark that concerns me, but we'll have plenty of time to play that out."

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