Wagoner: GM looking to cut costs, but nothing drastic on tap
09-21-2004 | 11:50 PM
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Wagoner: GM looking to cut costs, but nothing drastic on tap
Wagoner: GM looking to cut costs, but nothing drastic on tap
JOHN PORRETTO
Associated Press
ROMULUS, Mich. - Lagging sales and lower-to-flat net vehicle pricing has General Motors Corp. searching for ways to trim costs, but the world's largest automaker doesn't expect drastic operational changes anytime soon, chairman and chief executive Rick Wagoner said Tuesday night.
Wagoner, in an interview at an event to launch the new Pontiac G6 sedan, said reducing expenses remains an important dynamic in today's ultra-competitive market place.
"You know how the math works for your business," Wagoner said before dinner at the Westin Detroit Metropolitan Airport. "If you don't get revenue, which is volume times price, and you want to continue to run positive net income and generate cash ... then you need to keep cutting costs."
Wagoner said material costs remain a focus, and he cited the consolidation of the company's engineering operations as an example of how costs can be reduced. But he said other factors largely are out of GM's control, such as the skyrocketing tab for health care, which amounted to $4.8 billion for the automaker in 2003.
"It's not unhealthy at all to go back from time to time and say, 'OK, we've moved to this structure, that's been working, are there areas where we're still a little bit heavy?'" Wagoner said without offering specifics. "I think that's going to go on. We're going into our budget cycle, and that's always the time we ask these kinds of questions.
"But I don't expect any major changes in strategy."
Despite spending an average of more than $4,000 per vehicle on incentives, GM had its third straight month of negative U.S. sales in August, when business was down 7 percent. For the first eight months of 2004, GM's business was off 2 percent, compared to roughly flat sales industrywide.
In a move that could hurt profits, GM said it was cutting its fourth-quarter production forecast by roughly 7 percent because of inflated vehicle inventories, and Wagoner acknowledged that producing fewer vehicles has placed "a little more pressure on the cost side of the business."
GM's profit rose 49 percent in the second quarter, but it relied heavily on record earnings at its financial services arm. Despite lower production forecasts, the company has not wavered from its 2004 earnings estimate of approximately $7 a share. Wall Street's current estimate is $7.05.
GM hopes to propel sales in the final months of 2004 with the release of several new products, including the G6, a performance midsize sedan; the Chevrolet Cobalt, which will replace the high-volume Cavalier; and the Buick LaCrosse premium midsize sedan.
Because most of the new vehicles will not arrive at dealerships in large volumes until very late in the year, Wagoner said it likely will be next year before they provide a marked boost to business.
"As we go through next year, we'll have relatively more of our production new - say introduced in the last 12 months," he said. "That should help, but hey, our competitors are also bringing out new cars."
http://www.sunherald.com/mld/sunhera...ss/9663780.htm
JOHN PORRETTO
Associated Press
ROMULUS, Mich. - Lagging sales and lower-to-flat net vehicle pricing has General Motors Corp. searching for ways to trim costs, but the world's largest automaker doesn't expect drastic operational changes anytime soon, chairman and chief executive Rick Wagoner said Tuesday night.
Wagoner, in an interview at an event to launch the new Pontiac G6 sedan, said reducing expenses remains an important dynamic in today's ultra-competitive market place.
"You know how the math works for your business," Wagoner said before dinner at the Westin Detroit Metropolitan Airport. "If you don't get revenue, which is volume times price, and you want to continue to run positive net income and generate cash ... then you need to keep cutting costs."
Wagoner said material costs remain a focus, and he cited the consolidation of the company's engineering operations as an example of how costs can be reduced. But he said other factors largely are out of GM's control, such as the skyrocketing tab for health care, which amounted to $4.8 billion for the automaker in 2003.
"It's not unhealthy at all to go back from time to time and say, 'OK, we've moved to this structure, that's been working, are there areas where we're still a little bit heavy?'" Wagoner said without offering specifics. "I think that's going to go on. We're going into our budget cycle, and that's always the time we ask these kinds of questions.
"But I don't expect any major changes in strategy."
Despite spending an average of more than $4,000 per vehicle on incentives, GM had its third straight month of negative U.S. sales in August, when business was down 7 percent. For the first eight months of 2004, GM's business was off 2 percent, compared to roughly flat sales industrywide.
In a move that could hurt profits, GM said it was cutting its fourth-quarter production forecast by roughly 7 percent because of inflated vehicle inventories, and Wagoner acknowledged that producing fewer vehicles has placed "a little more pressure on the cost side of the business."
GM's profit rose 49 percent in the second quarter, but it relied heavily on record earnings at its financial services arm. Despite lower production forecasts, the company has not wavered from its 2004 earnings estimate of approximately $7 a share. Wall Street's current estimate is $7.05.
GM hopes to propel sales in the final months of 2004 with the release of several new products, including the G6, a performance midsize sedan; the Chevrolet Cobalt, which will replace the high-volume Cavalier; and the Buick LaCrosse premium midsize sedan.
Because most of the new vehicles will not arrive at dealerships in large volumes until very late in the year, Wagoner said it likely will be next year before they provide a marked boost to business.
"As we go through next year, we'll have relatively more of our production new - say introduced in the last 12 months," he said. "That should help, but hey, our competitors are also bringing out new cars."
http://www.sunherald.com/mld/sunhera...ss/9663780.htm
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