GM needs more exciting vehicles and a more streamlined operation Global merger presents Wagoner with opportunities

The Outlook

October 11, 1998|By Ted Shelsby

General Motors Corp. announced last week that it will combine its North American and international automotive operations into one global organization headed by G. Richard Wagoner Jr., who was also named the company's new president and chief operating officer.

What does Wagoner need to do to turn General Motors around and make it more profitable and more competitive?

Eric Hood

President of the Hood Group, automotive consultant firm

Wagoner has to oversee the continued re-engineering of General Motors as it seeks to reduce its massive bureaucracy. His leadership will be important in the continued streamlining of General Motors.

There are a number of issues he has to address.

The first is a product issue. When it comes to design and innovation, GM has got to be first in some products other than trucks. They need more exciting vehicle designs. It is that simple.

GM's management needs to be more bold. It needs to take more chances and not be so risk-averse, which has been a hallmark of the company's culture for a long time.

Look at the new Chevrolet CK pickup truck. It was one of the most expensive development projects in GM's history, and look at what they came out with.

Fundamentally, it is one of the most sound trucks you will ever find, but design-wise they took a baby step. They are not going to win any new customers with that design.

He also has to deal with the whole transformation of General Motors' retail network. He needs to make it easier and less threatening for people to buy GM cars.

On the North American side, GM has a mature market, but it really needs a breakthrough product if the company is to do more than tread water or maintain its market share. The amount of competition, especially in the light truck market, where GM makes much of its money, is fierce.

It is going to be hard for GM to grow in the North American market. Wagoner needs to boost business in other parts of the world, including China.

Wagoner really needs to solve their labor problems and reduce their production costs. Right off the line, General Motors is looking at a $600 to $1,000 differential in per-car profit because of its higher labor costs.

David Healy

Auto analyst, Burnham Securities Inc.

This move of merging the North American and European operations makes a lot of sense on paper, but its ultimate success will depend upon the execution of the merger by Wagoner.

Wagoner's biggest challenge will be to improve the operations of General Motors' North American operations, which he has been running for some time. Its costs are too high and its product lines are too dull.

He has got to develop some new products, especially when it comes to cars, that will stir more excitement with consumers. He has to speed up the process of introducing new models and make the new models more exciting. He has to reduce the company's cost of production.

He also needs to do something to improve GM's relations with the United Auto Workers. There have been seven strikes since the three U.S. automakers and the UAW signed their national agreement and they have all been against General Motors. The strikes have cost General Motors billions of dollars in lost sales. Wagoner will have to find a way of reducing GM's dependence on more costly in-house parts while avoiding more strikes by the UAW.

Richard Block

Professor of labor and industrial relations, Michigan State University

Rick Wagoner is in a position where he can speed up General Motors' decision-making process, especially those decisions related to the introduction of new vehicles. He has got to do that.

Instead of having to go through a bureaucracy where decisions on a vehicle in another part of the world have to go through its own system and then through another system, one guy will be responsible for it all.

Of all the automakers, General Motors has been the slowest at getting new products to market. It takes them an enormously long time to get new products out to the market. It used to be normal to take four years for a car to go from conception to the showroom. He has got to work on getting that down to two years.

The new Oldsmobile Alero is a good example of what he has to change. They have been talking about the Alero for five years. It should not take that long to bring a car to the market.

If he can reduce the time it takes to introduce a new vehicle, it will help General Motors reduce its administrative process and cut the company's cost of doing business. It will make General Motors more competitive with U.S. automakers as well as those in other parts of the world.

He also has to reduce the number of platforms that GM uses in making vehicles. They have got to use the same platform across different geographic areas. They have to make more vehicles that they can sell in the U.S. as well as other parts of the world.

Pub Date: 10/11/98

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