GM#39;S Wagoner Sees Revival in Overseas Sales Growth U.S. Gain
GM;S Wagoner Sees Revival in Overseas Sales Growth, U.S. Gain
By Jeff Green and Greg Bensinger
Feb. 13 (Bloomberg) — General Motors Corp. Chief Executive
Officer Rick Wagoner said his recovery plan is working, even as
the world;s largest automaker reported the biggest loss in its
100-year history.
Rising sales in China, Russia and Latin America and money-
saving labor agreements in the U.S. will help the Detroit-based
maker of Chevrolet and Cadillac cars trim automotive losses for
a third straight year in 2008, Wagoner said yesterday.
“Certainly in total, automotive earnings should continue
to improve,;; the 55-year-old chief executive said in a
Bloomberg television interview from his Detroit headquarters
after GM posted a $38.7 billion loss for the year, including
$722 million in the fourth quarter. “We expect the strength in
Asia and Latin America to continue.;;
GM lost money the past three years as Wagoner repelled a
takeover attempt by billionaire Kirk Kerkorian and quashed
speculation by analysts that the automaker may be forced into
bankruptcy. He raised $21 billion in asset sales and cut annual
costs by $9 billion to pay for new models. Still, Standard %26amp;
Poor;s and other rating companies reduced GM;s credit rating to
below investment grade for the first time in its history.
Wagoner;s challenges include losses in North America and a
U.S. market share that fell to 23.7 percent last year from a 51
percent peak in 1962. GM shares have lost 54 percent of their
value since Wagoner took over almost eight years ago. The
company hasn;t reported a U.S. sales gain since 1999 and hasn;t
had a profit from making vehicles since 2003.
`It Takes Time;
“In terms of this restructuring business, it takes time,;;
said Mirko Mikelic, who helps manage $22 billion at Fifth Third
Asset Management in Grand Rapids, Michigan, including GM bonds.
“I have to give Rick Wagoner credit for doing that. You cannot
just write a check and say I am moving production to China. I do
not think anyone expects a profit this year.;;
The 2007 shortfall is the third-biggest among S%26amp;P 500 Index
member companies since 1980, exceeded only by $97 billion at
Time Warner Inc. in 2002 and $56 billion at JDS Uniphase Corp.
in 2000, according to data compiled by Bloomberg. GM;s $23.5
billion deficit in 1992 had been the previous largest automotive
loss in the U.S.
The 2007 loss stemmed primarily from a $39 billion expense
related to a tax-accounting change in the third quarter.
The automaker yesterday also announced details of a buyout
plan for its remaining 74,000 United Auto Workers union
employees in the U.S. The offers would provide payments of as
much as $62,500 for the most-skilled workers with at least 30
years service. GM, which has gained 6.9 percent this year, fell
52 cents to $26.60 yesterday in New York Stock Exchange
composite trading.
10-Year Low
GM;s 8.375 percent note due July 2033 rose 0.5 cent to 81
cents on the dollar yesterday, yielding 10.53 percent, according
to Trace, the NASD;s bond-price reporting service.
Credit-default swaps on GM debt rose 10 basis points to 902
basis points, according to CMA Datavision in New York. The
contracts are designed to protect bondholders against default. A
rise in the price indicates a decrease in the perception of a
company;s credit quality.
Analysts project industry sales may fall to 15.5 million
vehicles in the U.S. this year, about 8 percent below the annual
average this decade. Toyota Motor Corp. has posted gains every
year, raising its U.S. market share to 16.2 percent.
Wagoner said new models will help reach his goal of halting
GM;s slide this year.
`We Can Grow;
“Even in a tough market, we think we can grow share,;; he
said. “We do have a good chance, primarily on the strength of
some important car products: Chevy Malibu, Cadillac CTS.;;
As GM tries to recover in North America, it is pushing
ahead outside the U.S., boosting international sales to a record
59 percent of unit volume last year. The automaker plans to
increase car and truck production in emerging markets by 1.4
million vehicles by 2010, according to data compiled by
Bloomberg.
Projects include new joint ventures in Kazakhstan, Serbia,
Uzbekistan and Poland as well as a 70,000-unit GM-owned plant in
St. Petersburg, according to Chris Lacey, who runs the company;s
operations in Russia, Central and Eastern Europe. GM also plans
a 140,000-unit plant in India and is doubling production in
China.
Russia, Brazil
Chevrolet sales in Russia and Brazil helped GM hang on to
the title of world;s largest automaker for a 77th year in 2007,
by a 3,100-unit margin over Toyota City, Japan-based Toyota.
Wagoner has refused to concede the top position, even as
analysts predicted GM would lose it for the last two years. He
said in a Jan. 4 interview that 75 percent of GM;s sales will
come from outside the U.S. within a decade.
“Where they will get growth obviously is overseas, but
this is a mature market in the United States and Europe,;; and
GM needs to maintain its share in both markets, Mikelic of Fifth
Third Asset Management said. “It will be another rough year for
GM.;;
To contact the reporters on this story:
Jeff Green in Southfield, Michigan at
