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News > Companies
GM appoints new CEO
February 2, 2000: 10:22 a.m. ET

Wagoner, 46, becomes one of youngest to lead world's largest automaker
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - General Motors Corp. on Wednesday shuffled its top management, making its president, G. Richard Wagoner Jr., one of the youngest chief executives to head the world's largest automaker.
    The change is effective June 1, and is far less of a shake-up of GM than the last change in leadership in November 1992 -- when Jack Smith was installed in a board-led coup.
    This time Smith, Wagoner and Vice Chairman Harry Pearce said they would all stay active in day-to-day operations of GM (GM: Research, Estimates), with Smith, 61, retaining the title of chairman "indefinitely."
    "I think the three of us make a great team," Smith said. (126KB AIFF) (126KB WAV)
    

    
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    Pearce, 57, insisted that Wagoner was his choice for the CEO position and that his health problems were not a factor in his not getting the top job. Wagoner, who goes by the nickname Rick, insisted the chairman title was not one he wanted. Pearce was treated for cancer 17 months ago.
    "There is a lot of work to do in this company and it makes sense to spread it out," Wagoner said. "We very much wanted Jack to stay around and support us."
    
Emphasis on e-commerce, reacting quickly

    Wagoner, who turns 47 on Feb. 9, currently is president and chief operating officer. He was instrumental in speeding GM's moves to set up an Internet-based purchasing system with its suppliers, an initiative that is projected to save it billions of dollars. He pointed to e-commerce, alliances in Asia, and development of new technology and products as his key focus.
    Wagoner said that while the company has tremendous advantages due to its size, it must make sure to react quickly to changes in the market. The e-commerce initiative he helped bring to GM was done in less than a year, much faster than such a change would have been accomplished in the past.
    "There used to be debate in this industry whether it's better to be big or small," he said. "That debate is over. You have to be big, but you have to be big and fast." (75KB AIFF) (75KB WAV)
    Wagoner's commitment to e-commerce is a big part of his effort to cut down on the behemoth's legendary bureaucracy, said Dave Cole, director of the office for the study of automotive transportation at the University of Michigan.
    "He has become a true believer in it," said Cole. "E-commerce has become a bureaucracy-buster to reform the internal aspects of GM, maybe even more than it will transform its relations with suppliers."
    Cole and other outside observers agreed with the three executives' statements that the change of titles would mean little if any change in GM's direction from its current course.
    "I think that Wagoner was essentially running GM for the past year at the very least," said Rod Lache, analyst with Deutsche Banc Alex. Brown. "He was certainly the operating guy, and Smith was the strategic guy."
    
Wagoner part of Smith team since 1992

    Wagoner joined the company as an analyst in the treasurer's office in New York in 1977. He assumed the role of president in October 1998, although he had been president of GM's North American Operations since July 1994. He was executive vice president and chief financial officer for two years before that, part of the top leadership that Smith brought in with him.
    Wagoner made his reputation within the company in the early 1980s, when he helped rescue the company's troubled operations in Brazil. He was named treasurer of General Motors do Brasil in Sao Paulo, then became executive director of finance for that unit in 1984.  He followed that assignment with positions in Canada and Europe for GM.
    On Wall Street, Wagoner's track record is well respected. Wagoner has the youth, energy levels and difference in perspective from his time overseas to guide GM in the rapidly changing global auto industry, said David Garrity, analyst with Dresdner Kleinwort Benson
    "I give Rick credit to try to move GM as an organization more at Internet speed," said Garrity in an interview on CNNfn Wednesday. "We're seeing the baton being passed from one person who made a significant contribution to someone on the same team, who is going to take the company hopefully to the next level."
    Smith's departure as CEO had been rumored and denied by Smith and GM spokesmen several times in recent months. Smith laughed at the suggestion that Wednesday's announcement is a prelude to retirement, saying he will still be going to work every day and would be spending considerable time overseas this year working on possible alliances.
    Still, while the move of Wagoner to the top day-to-day position is not a surprise, the timing is sooner than had been expected.
    
GM stock, market share disappoint

    Wagoner faces a difficult challenge in North America, where GM has been steadily losing market share. Last year it missed U.S. market share targets when it fell below 30 percent of vehicles sold -- the first time since the 1920s it fell below that mark in a non-strike year.
    It has too much car capacity and not enough light truck manufacturing capacity, and while it has some of the hotter selling small trucks in the market, it is struggling to adjust that balance.Wagoner insisted that the U.S. market share numbers was driven more by strong sales in the overall market than weakness in GM efforts.
    "One of the things I learned is I'm out of the market share forecasting business," he joked at the end of the press conference. "I don't think it's going to be easy (to increase market share), but I don't think anyone has a better hand to play from than we do."
    Analysts said Friday that while Wagoner is well respected, it will take more than a new CEO to breath life into the stock, which is trading at lower multiples than some other competitors.
    "The financial results in '99 were pretty good, but there's a lot of questions about how they can keep the momentum going," said Michael Pak, analyst with ING Barings.
    

    
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    Still, Wagoner takes over in much better position than Smith did in 1992, when losses plagued the company. Wagoner assumes the top job after one of its better years in history.
    The company made $5.58 billion, or a record $8.53 a diluted share, in 1999, compared with $3.05 billion, or $4.32 a share, in strike-impacted 1998. Sales rose 14 percent to a record $176.56 billion.
    In addition, the company spun-off its Delphi auto parts manufacturer, and reached a new labor agreement that helped put past strikes behind it, as well as reached new alliances worldwide.
    Shares of GM Wednesday slipped 3-7/8, or about 4.5 percent, to 81-3/8 after the announcement. But that followed Tuesday's gain of 4-11/16, or 6 percent, to 85-1/4, after the company announced strong January auto sales -- as well as the decision to hang on to its Hughes Electronic division but let shareholders swap GM shares for $8 billion of Hughes' tracking stock.
    Lache said the decision on Hughes was the reason for Wednesday's sell-off, not Wagoner's appointment.
    "It's not trading on that," he said of Wagoner's appointment. "Many institutional investors were playing GM as a play on Hughes. Now they're looking ahead and saying, 'What's the next catalyst (for the stock's gain)?'" Back to top

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