GM chief Wagoner now faces an uncertain future

UAW concessions and growth overseas highlight the CEO’s tenure.

DETROIT FREE PRESS

DETROIT — After eight years at the helm of General Motors Corp. and 31 years with the company, Rick Wagoner’s most critical days will arrive in the next few weeks.

Just over a month ago, the chairman and chief executive of GM told a crowd in Flint, Mich., that a new engine plant there was proof of the automaker’s future, saying “GM is here to stay.”

Today, no one can say for sure.

Despite continuous cuts, GM hasn’t booked sustained profits from North America since the first half of 2004. Cash burn has grown and many on Wall Street expect a GM bankruptcy within the year should Wagoner and his team fail to get outside help.

If Wagoner succeeds in raising money, GM will get a life preserver in the worst auto market in nearly two decades. If he fails, GM’s creditors will move in, and Wagoner could be forced to move out.

This is a tough time to raise money. Many banks have their own problems, private equity deals in the automotive industry have slowed and it’s proving difficult to garner government support.

Erich Merkle, an analyst from Crowe Horwath LLP, said Wagoner inherited years of bad decisions from previous managers that have limited his options.

“You almost need to put Roger Smith on the hot seat, and I know he’s dead,” Merkle said of the CEO who led GM from 1981 to 1990. “They were setting the company up for disaster later down the road. The business model that was created and the way that the contracts were structured were such that they were just not economically viable.”

A year ago, Wagoner was hailed for a landmark deal with the UAW allowing GM to hire workers at lower wages and put the union in charge of retiree health care. But the worsening economy and entanglements, such as the stalled bankruptcy of Delphi Corp., a key supplier, has erased much of the hope generated by that deal.

GM has lost $18.7 billion in the first half of this year alone. Sales for October plummeted 45.1 percent.

Since the Flint dedication, Wagoner has not spoken publicly — not about GM’s troubles, its bid to merge with Chrysler or attempts to win up to $10 billion in aid from the Bush administration.

Several critics have castigated Wagoner, GM and the industry for seeking a bailout; the New York Times editorial page endorsed aid to Detroit automakers late last month — but only if Wagoner and other top executives were booted.

In past crises, Wagoner has defended his performance and turned aside criticism, joking once about how GM founder William Durant ended his business career running a bowling alley in Flint.

In 2006, Wagoner appeared to be hanging on by a thread. The company was under siege by activist investor Kirk Kerkorian, who that summer began pushing for an alliance with Renault-Nissan. Wagoner got the vote of confidence from the board. Jerry York, Kerkorian’s board appointee, resigned in October.

Whatever temper Wagoner has is rarely shown in public, and Wagoner evinces the same calm approach whether talking privately, under harangue by lawmakers or being questioned by throngs of reporters.

His tenure at GM also has placed him, in effect, as the head of the Detroit auto industry. With Ford and Chrysler hiring top executives from outside the industry, Wagoner has typically taken the lead in Washington meetings.

An investor who bought $10,000 worth of each company in June 2000 — when Wagoner was named president and CEO — would today have $860 worth of GM stock and $785 of Ford, excluding dividends. And yet, GM’s decline has done little damage to Wagoner’s stature among industry executives because its Detroit rivals have done no better.

“Rick is very highly respected, and he is a very good leader,” said Neil DeKoker, president of the Original Equipment Supplies Association. “They are just facing challenges that are bigger than any one individual or group of individuals can handle.”

DeKoker points to GM’s successful negotiations with the UAW last year.

“That was a historic agreement, and it was under his leadership and his team,” DeKoker said.

The hallmark of Wagoner’s years at the helm has been GM’s struggles in North America and growth overseas.