I'm best to run GM, says CEO

Wagoner says no one knows company as well

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April 05, 2006|By MICHAEL ELLIS AND JENNIFER DIXON | MICHAEL ELLIS AND JENNIFER DIXON,DETROIT FREE PRESS

DETROIT -- Asserting that he's the right man to lead General Motors Corp., Chief Executive Officer G. Richard Wagoner Jr. said yesterday that recent accounting errors under federal scrutiny have been an embarrassment and some people have been disciplined for it, but that nobody could run the company better than he is running it.

Wagoner, who won a vote of confidence from the GM board of directors Monday, said bringing in an outsider to run the automaker would be a setback at a time when GM is closing plants across North America and in the middle of critical labor talks to try to avert a strike at Delphi Corp.

"People would be paralyzed wondering what this person is going to do," Wagoner said in an interview with the Detroit Free Press in his 39th-floor office in the Renaissance Center overlooking the Detroit River.

"Nobody knows this business better than I do," he said. "Nobody knows GM, its culture, better than I do. I don't think anybody could have better support from our employees than I do. So I think a change would be a great setback."

GM's next big issues will be addressing labor and supply contract problems at Delphi Corp., its largest parts supplier, as well as awaiting the outcome of investigations by the Securities and Exchange Commission, and two federal grand juries into accounting problems and finances.

Efforts to turn around GM have been partly overshadowed by more accounting errors, which forced GM to delay filing an annual financial report for nearly two weeks, shaking shareholder confidence in its bookkeeping and tarnishing the company's reputation.

When asked if anybody had been disciplined for the new accounting problems, Wagoner said; "I've never been a big believer in public executions. Having said that, we have a pretty pro-active woodshed."

However, no executives have lost their job, GM spokesman Jerry Dubrowski said. Wagoner said mistakes occurred because "by and large, people were doing what they thought was right but either didn't refer to the specific accounting rules or thought they knew the rules and didn't know them."

In addition to his duties as chairman and CEO, Wagoner said he intends to keep control of day-to-day operations of the troubled North American automotive operations - but not for too long.

Wagoner's surprising decision in April last year to take direct control of North America was perceived as a "make or break" move to turn around the automaker from a downturn in earnings. "I don't think having me do both the jobs, the corporate job and the North American job, is the right long-term answer," Wagoner said yesterday, exactly a year after taking the reins.

The last month hasn't been easy for Wagoner, or GM and its employees, as the automaker seeks to slash costs after last year's $10.6 billion in losses. GM dismissed hundreds of white-collar workers, reduced salaried benefits and won court approval of the deal with the UAW to cut health-care costs for retirees.

GM first realized it had accounting problems when it began looking at supplier credits paid out after Sept. 11, 2001. These are credits, or rebates, that vendors give a manufacturer that buys goods from them.

Wagoner said the "supplier payment issue" came to GM's attention as a result of "other things we were asked to look into." He declined to elaborate.

Wagoner said GM did an exhaustive review of its books and found other accounting errors, which had little impact on the bottom line.

Then, before General Motors was to release its 2005 annual financial report last month, it discovered it had another accounting problem involving cash flows at the Residential Capital Corp., the residential mortgage subsidiary of GMAC.

"I think our investigations have shown us that there were accounting errors made. Can't dress that up," Wagoner said. "[It's] embarrassing to us all."

While the accounting issues have eaten up a tremendous amount of time and resources, Wagoner made clear that fixing Delphi is at the top of his agenda. Delphi plans to use the bankruptcy courts to cut its labor costs. The UAW has said that could lead to a lengthy strike, which would quickly cause GM's operations in North America to grind to a halt.

"This is high-stakes poker, and the ramifications of a long strike, that's clearly a bad solution for each one of us. Shame on us if we can't find a way to address it," he said.

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