GM's Wagoner Defends His Record

General Motors CEO Rick Wagoner felt like the turnaround he's struggled to engineer was finally gaining some traction when he was broadsided last month by a proposal to marry the U.S. automaker with France's Renault and Japan's Nissan. The radical idea came from Kirk Kerkorian, the 89-year-old Las Vegas billionaire who is GM's largest individual investor, and Kerkorian's right-hand man, Jerry York, the former Chrysler and IBM executive who now sits on GM's board. The two have grown impatient with Wagoner's efforts to fix the ailing automaker, which lost $10.6 billion last year. So they secretly approached Renault-Nissan's superstar CEO Carlos Ghosn. The proposed deal, which Kerkorian sprung on Wagoner and the world in late June, could create a car colossus that would control one quarter of the world's auto sales. It also could shove Wagoner out of the driver's seat and give Ghosn a chance to jump start GM as he did Nissan.

Not so fast, says Wagoner. He jammed the brakes on the deal by getting his board's blessing to become GM's point man in the talks with Renault-Nissan. Wagoner will initiate formal negotiations in a Friday meeting with Ghosn in Detroit. Before he got together with Ghosn, Wagoner sat down with NEWSWEEK Detroit Bureau Chief Keith Naughton to defend the job he's doing and offer his view on what might come of all this. Excerpts:

NEWSWEEK: How secure do you feel in your job?

Rick Wagoner: I feel very secure.

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Why?

We're executing the turnaround plan at a pace that's faster than we thought we could. And I think we're doing it really on all fronts.

There are reports that three or four directors are not satisfied with your performance or the progress of the turnaround. Do you feel like you have the full support of the board?

Yeah, I feel like I get good support from the board. Just read the statement that was issued last week [which said the board "continues to fully support" Wagoner's strategic plan]. I think it's a clear endorsement that we're moving well on the turnaround strategy.

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Do you feel like you have Kerkorian's full support?

I don't talk to Kerkorian that often, but my conversations with him, as I have interpreted them, have been cordial. I haven't asked him for his support, to be perfectly honest.

The suggestion has been made that he and Jerry York aren't satisfied with the pace of your turnaround and want you to move faster. Have they ever expressed any dissatisfaction to you?

No. No one has expressed dissatisfaction with me. And if one steps back and looks at the facts, the pace of the turnaround is exceptionally fast, I think faster than anybody would have thought would be possible, particularly against the context of what we're doing. We're not slashing advertising and R&D so we can make the next quarter results. We're fundamentally restructuring the company. I've come up with a plan that initially cut $5 billion in structural costs, and then $6 billion, and then $7 billion, then $8 billion and now more than $8 billion in the span of one year—which is a benchmark I don't think you'll see anywhere else. And at the same time, [I am] doing it with excellent support from key constituents, like the United Auto Workers, employees and dealers. I think that's a rather remarkable accomplishment.

What do you think of the way Kerkorian and York handled this proposal, meeting with Ghosn without your knowledge and then going public with it before you'd discussed it with your board?

It's certainly not the conventional approach, and I would say not the preferred approach. But we have a lot of issues that we deal with that don't arise in the way we'd like them to arise. And we're handling this one just as we handle those, which is professionally and with a clear focus on doing the right thing for General Motors. So when this issue arose, however it arose, I virtually immediately got on the phone with Carlos Ghosn and said, "Let's talk about this."

What was your reaction when Jerry York first contacted you on June 19 and said he and Kerkorian had had dinner with Carlos Ghosn in Nashville and here's this deal we've been talking over for the past six weeks?

My thought was, "Gee, this is a very interesting idea and a very unusual way to pursue it. And certainly not in line with the way these kind of matters would normally be pursued by a company and its board." But having said it, I said, "OK, thanks for the idea. I'll pick up on it."

Did you tell York how unusual you found his approach and ask why you hadn't been included in the talks with Ghosn?

[ Pause. ] Ummm. To be perfectly honest, I don't remember exactly what I said. But I learned long ago that one shouldn't take things personally. You know I'm here to do a job for General Motors and our constituents and our shareholders, and my first thought is, "OK, so is this a good idea for GM?"

Many folks believe Kerkorian's and York's real agenda is getting you out and Carlos Ghosn in. What do you think?

The agenda presented to me is there's interest on the part of Renault-Nissan in expanding the alliance that they have and that's what we're going to work through. Beyond that, there's been so much speculation on [how] somebody else could do this job better. And I remain convinced that that's not true.

You told me in March that bringing in an outsider to be GM's CEO "would be the biggest risk I've ever heard of." Does that include somebody like Carlos Ghosn?

I've known Carlos for many years, and I have a lot of respect for him. And I think he's taken on some tough issues and done them very well. And I think he's got a big job to do right now. But I'm quite sure that I'm the right guy to run GM.

How about if Ghosn were on the GM board? Would that be helpful or awkward?

First of all, when do you put a competitor on your board? I've never heard of that happening before. Today, that would be tantamount to putting on a competitor. So your question would have to be preconditioned by other arrangements, which we haven't had a chance to sit down yet and talk about. I don't know what that would lead to. That might change that view of being competitors. But at least today, that's where we are with it.

On June 30, Kerkorian went public with his proposal by filing it with the SEC. That was surprise No. 2. Did you again think that was not handled in the normal fashion?

There are a lot of aspects of all of this that hasn't been normal. It's not the way I would have done it. And our experience, having had a chance to work toward many alliances, is that we've negotiated them to a certain extent and try to understand the value in them before we publicly announced them. Because we thought we could do that in a little calmer atmosphere. But, OK, it's out there. So we'll continue on. It doesn't really change the fact that we had already determined that we would take a considered look at this and sit down and talk to exchange the ideas. But it obviously put a lot of public interest in it that otherwise we wouldn't have been dealing with yet.

In the late '90s, the future of the auto industry was supposed to be big global alliances like this. But then after all the difficulty pulling DaimlerChrysler together and your own failed alliance with Fiat, the thinking shifted to simply doing partnerships on specific projects that don't require swapping stock. This deal, though, seems to go back to that old model. Is this the future shape of the auto industry after all?

That's a great observation. Your point really highlights that one size doesn't fit all. We've all learned a lot as we've been involved and watched others be involved over the last decade of consolidation and projects. That's going to help us to look at this in a way and ask questions. We've got a good list ourselves of lessons learned, what's worked well for us, what hasn't worked. We're going to be able to draw from our side on that. And I know Renault and Nissan have some of the same experiences. So I think that's going to help being able to make sure that whatever comes out of this, we'll be able to say with a high degree of confidence that it's going to create value for all companies.

Much has been made of your management style compared to Ghosn's. People say you're not an emotional leader but instead very measured and analytical. How would you describe your style?

I think I'm very straightforward, thoughtful and very driven.

But people see you as a laid-back guy, which sometimes is taken for showing a lack of urgency. What do you think of that?

Let me tell you, if I've heard one thing from our employees it's that in these challenging times of crisis, they sincerely appreciate thoughtful, aggressive and calm leadership. You know, when you're running a business with 300,000 people, it might be fun to occasionally be emotional. And I might even do that. But people are looking for someone who's thought through what we're going to do, has a clear direction. [Someone who is] able to deal with crises that arise, uncertainties, calls from directors offering unexpected things in a competent, fast and thoughtful way, but in a steady way. They don't like to see someone hopping around left and right, going "The sky is falling." People aren't looking for panic. They're looking for a sense of urgency, direction, commitment. And the referendum's there. Talk to the people I deal with. Talk to our dealers. I didn't tell them to put that ad [supporting Wagoner] in The Wall Street Journal, for God's sakes. That's unprecedented. Why did they do that? It sounds like they have a lot of confidence in me. The UAW has gone through some very tough stuff. Why did we get through that? I think it's because they understand the direction. We've talked about it very clearly. And they trust us. They don't always like what we have to do. They don't always agree. But they trust us to be honest and direct and to work through this stuff. I think that's worth a lot to a company. That's worth a lot. So why would I change that style? I think it's exactly why we've been able to do remarkable stuff here in the span of a year. Why would anybody want to change that? That's the craziest thing I've ever heard.

GM's Wagoner Defends His Record | News