Wagoner reassigns Lutz and Cowger
04-05-2005, 11:19 AM
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Wagoner reassigns Lutz and Cowger Chief Executive Rick Wagoner shook up the management of General Motors Corp.'s ailing North American operations on Monday, announcing he will be responsible for its day-to-day duties.
Wagoner, 52, who ran the North American operations from 1994 to 1998, takes over from North American Chairman Bob Lutz and President Gary Cowger.
The pair will retain their titles but focus on global responsibilities--Lutz on product development and Cowger on manufacturing, GM said.
More changes are inevitable, said Peter Morici, a University of Maryland business professor: "The North American operations need a fundamental shift in strategy that will free up more cash for new product development and lower product development and production costs."
Morgan Stanley analyst Stephen Girsky said in a research note that it "may be the precursor to more aggressive actions" and questioned Wagoner's ability to handle the additional responsibility.
"What Rick has done with these moves is put a noose around his own neck," said David Cole, chairman of the Center for Automotive Research, an Ann Arbor, Mich., think tank. "If it works, he spreads the credit around. If it doesn't work, he accepts the blame."
Joe Phillippi, principal of Auto Trends Consulting in Short Hills, N.J., said the realignment of Lutz and Cowger means they "can focus more on the critical issues, and that makes sense. They have been diverted by sales and marketing and market share reports."
But independent analyst Maryann Keller, a longtime GM critic, said Wagoner was forced to act because Lutz and Cowger haven't performed.
GM's communications vice president, Tom Kowaleski, denied that Lutz and Cowger were pushed aside. "We're trying to put our resources into place where they are needed most to move faster and more efficiently globally.
"Why would [Lutz] be put in charge of all global development, which includes North America, if that was the case? He hasn't relinquished North America, he's working on ways to develop product globally that would help North America," Kowaleski said.
Keller said Wagoner "has to demonstrate that he can pull this off. North America is where the big problems are. If the people who are directly responsible can't deliver, you have no choice but to take it on yourself."
Keller said the company's North American problems are rooted in products. "It's simple. It doesn't matter how efficiently you build your cars if nobody wants to buy them."
Three weeks ago GM said it expects to lose about $850 million, or $1.50 a share, in the first quarter, mainly because of sagging sales of large sport-utility vehicles in North America. The automaker had forecast in January it would break even for the quarter.
For the full year, GM expects to earn $1 to $2 per share, before special charges, a dramatic reduction from its January forecast of $4 to $5 per share.
GM said its North American automotive operations will post a "significant loss" this year and has not announced when it expects it to be profitable.
The lower forecast announced March 16 sent GM's shares lower and prompted warnings that GM's debt could fall to junk status. GM stock lost 33 cents Monday to close at $29.05.
The management changes were initiated about a month ago when Lutz suggested he step away from his duties as chairman of North American operations to develop products GM can sell globally, Kowaleski said.
Wagoner agreed and suggested that Cowger oversee a corresponding global manufacturing strategy, Kowaleski said.
Cowger, credited with making GM's North American manufacturing the most efficient of the domestic Big Three, has been told to reduce the automaker's soaring health-care bill, which GM estimates will be $5.6 billion this year. That will probably mean tense negotiations with the United Auto Workers union in the middle of a four-year contract that ends in 2007.
GM estimates its salaried workers pay 27 percent of their health care and union members 7 percent. "That 20 percent difference is worth billions," Kowaleski said.
GM is expected to make its initial pitch for health-care concessions April 14 at an annual meeting with UAW leaders.
GM's profitability and market share have dropped since Wagoner became chief executive in 2000, when the automaker earned $4.45 billion and had a 28.3 percent share. Earnings fell to $2.8 billion last year and market share fell to 27.6 percent.
This year, GM's share stands at 25.7 percent through March. U.S. sales are down 5 percent this year.
Damn at first I was hoping Wagoner got ride of Lutz for good but it looks as though he will still be in charge of North. America development. But with his recent lose in power maybe he will want to jump ship (we can only hope)
Wagoner, 52, who ran the North American operations from 1994 to 1998, takes over from North American Chairman Bob Lutz and President Gary Cowger.
The pair will retain their titles but focus on global responsibilities--Lutz on product development and Cowger on manufacturing, GM said.
More changes are inevitable, said Peter Morici, a University of Maryland business professor: "The North American operations need a fundamental shift in strategy that will free up more cash for new product development and lower product development and production costs."
Morgan Stanley analyst Stephen Girsky said in a research note that it "may be the precursor to more aggressive actions" and questioned Wagoner's ability to handle the additional responsibility.
"What Rick has done with these moves is put a noose around his own neck," said David Cole, chairman of the Center for Automotive Research, an Ann Arbor, Mich., think tank. "If it works, he spreads the credit around. If it doesn't work, he accepts the blame."
Joe Phillippi, principal of Auto Trends Consulting in Short Hills, N.J., said the realignment of Lutz and Cowger means they "can focus more on the critical issues, and that makes sense. They have been diverted by sales and marketing and market share reports."
But independent analyst Maryann Keller, a longtime GM critic, said Wagoner was forced to act because Lutz and Cowger haven't performed.
GM's communications vice president, Tom Kowaleski, denied that Lutz and Cowger were pushed aside. "We're trying to put our resources into place where they are needed most to move faster and more efficiently globally.
"Why would [Lutz] be put in charge of all global development, which includes North America, if that was the case? He hasn't relinquished North America, he's working on ways to develop product globally that would help North America," Kowaleski said.
Keller said Wagoner "has to demonstrate that he can pull this off. North America is where the big problems are. If the people who are directly responsible can't deliver, you have no choice but to take it on yourself."
Keller said the company's North American problems are rooted in products. "It's simple. It doesn't matter how efficiently you build your cars if nobody wants to buy them."
Three weeks ago GM said it expects to lose about $850 million, or $1.50 a share, in the first quarter, mainly because of sagging sales of large sport-utility vehicles in North America. The automaker had forecast in January it would break even for the quarter.
For the full year, GM expects to earn $1 to $2 per share, before special charges, a dramatic reduction from its January forecast of $4 to $5 per share.
GM said its North American automotive operations will post a "significant loss" this year and has not announced when it expects it to be profitable.
The lower forecast announced March 16 sent GM's shares lower and prompted warnings that GM's debt could fall to junk status. GM stock lost 33 cents Monday to close at $29.05.
The management changes were initiated about a month ago when Lutz suggested he step away from his duties as chairman of North American operations to develop products GM can sell globally, Kowaleski said.
Wagoner agreed and suggested that Cowger oversee a corresponding global manufacturing strategy, Kowaleski said.
Cowger, credited with making GM's North American manufacturing the most efficient of the domestic Big Three, has been told to reduce the automaker's soaring health-care bill, which GM estimates will be $5.6 billion this year. That will probably mean tense negotiations with the United Auto Workers union in the middle of a four-year contract that ends in 2007.
GM estimates its salaried workers pay 27 percent of their health care and union members 7 percent. "That 20 percent difference is worth billions," Kowaleski said.
GM is expected to make its initial pitch for health-care concessions April 14 at an annual meeting with UAW leaders.
GM's profitability and market share have dropped since Wagoner became chief executive in 2000, when the automaker earned $4.45 billion and had a 28.3 percent share. Earnings fell to $2.8 billion last year and market share fell to 27.6 percent.
This year, GM's share stands at 25.7 percent through March. U.S. sales are down 5 percent this year.
Damn at first I was hoping Wagoner got ride of Lutz for good but it looks as though he will still be in charge of North. America development. But with his recent lose in power maybe he will want to jump ship (we can only hope)
