<VV> Rick Wagoner's Editorial

Frank DuVal corvairduval at cox.net
Sun Dec 11 10:44:56 EST 2005


Since there was discussion of GM's woes earlier I thought you might like 
Rick Wagoner's take on what's happening.


----- Forwarded by Kevin S Berry/US/GM/GMC on 12/06/2005 12:36 PM -----
                                                                          
             Frances                                                      
             Wallace/US/GM/GMC                                            
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             12/06/2005 12:19          SE-SOUTHEAST REGION - ALL          
             PM                                                         cc
                                                                          
                                                                   Subject
                                       Wagoner's Editorial Opinion to The 
                                       Wall Street Journal                
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          




Dave Borchelt requested that I forward the attached editorial opinion
submitted by Rick Wagoner to The Wall Street Journal and printed in today's
U.S. and European editions.  Rick's article is titled,  "A Portrait of My
Industry" and provides GM's position on the challenges that we face.

A Portrait of My Industry -- By Rick Wagoner
The Wall Street Journal
December 6, 2005

DETROIT -- Since mid-October, General Motors has announced plans to cease
production at 12 North American manufacturing facilities and eliminate
30,000
jobs by 2008; trim $1 billion in net material costs in 2006; and, in
cooperation
with the United Automobile Workers, reduce GM's retiree health-care
liabilities
by $15 billion, or about 25%, for an annualized expense reduction of $3
billion.

The reason for these dramatic actions is no secret: GM has lost a lot of
money
in 2005, due to rapidly increasing health-care and raw-material costs,
lower
sales volumes and a weaker sales mix -- essentially, we've sold fewer
high-profit SUVs and more lower-profit cars. What is less clear is why
things
turned sour so fast for GM, as well as for other American auto makers and
suppliers. To put it another way, why are so many foreign auto makers and
suppliers doing well in the United States, while so many U.S.-based auto
companies are not?

Despite public perception, the answer is not that foreign auto makers are
more
productive or offer better-quality or more fuel-efficient vehicles. In this
year's Harbour Report, which measures manufacturing productivity, GM plants
took
three of the top five spots in North America, including first and second
place.
In the latest J.D. Power Initial Quality Study, GM's Buick and Cadillac
ranked
among the top five vehicle brands sold in America, ahead of nameplates like
Toyota, Honda, Acura, Nissan, Infiniti and Mercedes-Benz. And GM offers
more
models that get over 30 miles per gallon (highway) than any other auto
maker.

In fact, this kind of operating performance makes GM's recent financial
performance all the more frustrating. The fact is, we're building the best
cars
and trucks we've ever built at GM, our products are receiving excellent
reviews,
and we're running the business in a globally competitive manner. Outside of
North America, we're setting sales records. In fact, for the first time in
our
history, we will sell more cars and trucks this year outside the United
States
than inside, aided in no small part by our market-leading performance in
China.

So why, fundamentally, are GM and the U.S. auto industry struggling right
now?

Intense competition, for one. The global auto business grows tougher every
year, and we accept that. Our ability to compete has made us the world's
No. 1
auto maker for 74 consecutive years, and we're fighting hard to stay on
top.

Beyond that, our performance in the marketplace has not been what we've
wanted
it to be. While we've been strong in truck sales, we've been weaker in
cars,
and, yes, the recent surge in gas prices hurt sales. While we've led in
technologies like OnStar, we've lagged in others like hybrid vehicles. Rest
assured, we're working hard to address the areas where we lag. Simply put,
we
are committed to doing a better job of designing, building and selling
high-quality, high-value cars and trucks that consumers can't wait to buy.
No
excuses. We will step up our performance in this regard.

But competition and marketplace performance are not the whole story. To
fully
understand why GM and the U.S. auto industry are struggling right now, we
have
to understand some of the fundamental challenges facing American
manufacturing
in general -- challenges well beyond the control of any single company.

There are those who ask if manufacturing is still relevant for America. My
view: You bet it is! Manufacturing generates two-thirds of America's R&D
investment, accounts for three-fourths of our exports, and creates about 15
million American jobs. And the auto industry is a big part of that,
accounting
for 11% of American manufacturing, and nearly 4% of U.S. GDP. Together, GM,
Ford
and DaimlerChrysler invest more than $16 billion in research and
development
every year -- more than any other U.S. industry. And GM, alone, supports
more
than one million American jobs.

So what are the fundamental challenges facing American manufacturing? One
is
the spiraling cost of health care in the United States. Last year, GM spent
$5.2
billion on health care for its U.S. employees, retirees and dependents -- a
staggering $1,525 for every car and truck we produced. And the figure is
going
up again this year. Foreign auto makers have just a fraction of these
costs,
because they have few, if any, U.S. retirees, and in their home countries
their
governments fund a much greater portion of employee and retiree health-care
costs.

Some argue that we have no one but ourselves to blame for our
disproportionately high health-care "legacy costs." That kind of
observation
reminds me of the saying that no good deed going unpunished. That argument,
while appealing to some, ignores the fact that American auto makers and
other
traditional manufacturing companies created a social contract with
government
and labor that raised America's standard of living and provided much of the
economic growth of the 20th century. American manufacturers were once held
up as
good corporate citizens for providing these benefits. Today, we are
maligned for
our poor judgment in "giving away" such benefits 40 years ago.

Another factor beyond our control is lawsuit abuse. Litigation now costs
the
U.S. economy more than $245 billion a year, or more than $845 per person.
That's
more than 2% of our GDP. No other country has costs anywhere near this
level.
And the perverse thing is that, in many cases, the majority of courtroom
settlements go to the lawyers and other litigation costs, not to the
injured
parties.

Another major concern is unfair trading practices, especially Japan's
long-term initiatives to artificially weaken the yen. A leading Japanese
auto
maker reports that for each movement of one yen against the dollar, it
gains 20
billion yen in additional profitability -- or nearly $170 million at
today's
exchange rate. No wonder Japanese auto makers have noted their recent
record
profits were aided by exchange rates. And no wonder the U.S. trade-balance
deficit continues to grow by leaps and bounds.

There are other issues, of course, but my point is this: We at GM have a
number of tough challenges that we must and will address on our own -- but
we
also carry some huge costs that our foreign competitors do not share.

Some say we're looking for a bailout. Baloney -- we at GM do not want a
bailout. What we want -- after we take the actions we are taking, in
product,
technology, cost and every area we're working in our business today -- is
the
chance to compete on a level playing field. It's critical that government
leaders, supported by business, unions and all our citizens, forge policy
solutions to the issues undercutting American manufacturing
competitiveness. We
can do this. And we need to do it now.


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