From Detroit Free Press
DETROIT — After enacting sharp cost-cutting efforts over the past year, General Motors Corp. Chief Executive Rick Wagoner said Tuesday he will hand over direct control of the money-losing North American automotive operations to a GM veteran with a strong background in manufacturing and labor relations.
Troy Clarke, 51, president of the Asia Pacific region for the past two years, takes over GM North America at a time when Wagoner’s cost cuts are starting to pay off, new full-size SUVs are selling well, and subsiding fears of a debilitating strike at parts maker Delphi Corp. have boosted GM’s stock price.
In his new role, effective July 1, Clarke needs to reverse GM’s sliding market share, even as the automaker heads into next year’s critical negotiations with the UAW on a new labor contract.
“I think there’s still a lot that needs to be delivered. But relative to expectations in the first quarter this year, it is beginning to click, particularly when you compare it to Ford,” said David Sowerby, portfolio manager and economist at Loomis Sayles, a Bloomfield Hills, MI, money management firm.
Also Tuesday, GM said that Vice Chairman John Devine would retire Thursday.
In April of last year, as losses started to mount because of weaker sales and escalating health care costs, Wagoner took the unusual step of assuming day-to-day control of GM North America.
Over the past year, GM announced plans to close or idle 12 plants or facilities in North America and won concessions from the UAW for hourly retirees to pay more for their health care costs.
In March, GM and Delphi reached a deal with the UAW to offer U.S. hourly workers incentives to retire early or quit.
The Free Press reported last week that up to 30,000 workers, including more than 20,000 at GM and as many as 10,000 at Delphi, have accepted the incentives, allowing both companies to significantly cut their payrolls.
“While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year,” Wagoner said in a news release. “This is the right time to turn the region’s day-to-day operations over to Troy.”
Clarke ran Asia Pacific as China grew to become GM’s second-largest national market and began contributing significant profits to the parent company.
Before moving to Asia, Clarke had been group vice president of manufacturing and labor relations, where he headed the contract negotiations with the UAW during the 2003 labor talks.
“We have had a constructive relationship with Troy Clarke during his years of service at GM,” UAW Vice President Richard Shoemaker, the union’s liaison with GM, said in a news release.
“He is a capable executive who understands the issues now facing the auto industry. We wish him good luck and look forward to working with him in his new assignment as president of GM North America.”
Clarke joined GM on a summer internship at the Pontiac Motor Division in Pontiac in the 1970s. He pioneered shop floor changes at key plants that set the stage for major gains in GM productivity in recent years.
Losses continue
Despite those gains, however, GM lost $10.6 billion last year, including $8.2 billion in North America, before the automaker surprised Wall Street with a first-quarter profit of $445 million. North America, though, lost $462 million.
As fears of a Delphi strike and possible GM bankruptcy have eased this year, GM’s stock has been the best-performing of the 30 companies that make up the Dow Jones Industrial Average.
GM shares retreated slightly Tuesday, falling $1.51, or 5.4 percent, to $26.57 after Deutsche Bank downgraded its recommendation on the stock to sell from hold.
Deutsche Bank analyst Rod Lache noted the recent rally in GM shares and told clients that more caution on the stock is now warranted, as the company’s cost-cutting measures don’t appear to be enough to turn the automaker around.
Wall Street analysts expect GM to press for more cost cuts in negotiations with the UAW next year, including the modification or elimination of the so-called jobs bank, the provision that pays wages and benefits to autoworkers even when they have been laid off.
Clarke’s elevation makes him another possible successor to 53-year old Wagoner. But that would be a break with tradition for the automaker that has a trend of granting the top spots to executives with backgrounds in finance.
Clarke will be replaced at GM Asia Pacific by Nick Reilly, 56, president of South Korean automaker GM Daewoo Auto & Technology.
Devine to leave
GM also said Devine, 62, who announced in December that he planned to retire this year, has decided to make his retirement effective Thursday.
During his five years at GM, Devine won praise from Wall Street for setting aggressive earnings targets for GM.
He also oversaw the automaker’s finances when a series of accounting problems occurred.
Some of those errors have been linked to subpoenas GM has received from the U.S. Securities and Exchange Commission. GM also has been subpoenaed by two grand juries.
Copyright 2006 Detroit Free Press. All Rights Reserved.
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