Sunday, June 04, 2006

Will GM's New North American Head stop GM's downward Market Share

Written by: S.M.Mehdi Hassan
GM has declared its new head of North American region. Troy Clarke, 51, Head of GM’s Asia-Pacific operations will be the new head. Until now Rick Wagoner, Chairman and CEO, was the head of the North American operations. He will relinquish his post in July.
Recent times have not been very good for General Motors. The automobile giant is loosing market in its home ground, America, which is the company’s biggest market. Two thirds of its profit comes from this region. According to a report published in Shanghai Daily.Com, in 2005, out of 10.6 billion dollar profit the North American region accounted for 8.2 billion. The North American region reported a $US462 million loss in its first quarter of 2006.
2005: A year of loss and suffering for General Motor’s
I also came across an article on GM published in Wikipedia. According to that article, in the first quarter of last year GM reported a loss of $1.1 billion. During that time the company cut down 25,000 jobs and decided to shut down two of its plants situated in Japan and USA by 2008. Then in November, 2005, it reported another loss of $ 4billion and this time it declared to increase its job cuts. From 25000 it rose to 30000 followed by a decision of shutting down 12 plants. The early plan of the company was to shut down eight plants. I am quoting from the article:
In December, 2005, Standard and Poor's further downgraded GM bonds to "B", with the observation that it is "now dubious" whether the new line of SUVs and trucks would return GM's North American auto business to profitability.
In February 2006, GM decided to slash its annual dividend to $1.00 per share. GM had resisted the move for some time. However, the reduction will save GM about $565 million in cash each year.
GM was also famous for its pensions and health care costs. The company was paying its employees who were out of work. These decisions added with marketing problems and low sales proved to be suicidal for the company.
Richard Wagoner:
In such a desperate time the company has decided to remove its present in charge of the North American region-- Chairman and CEO, G. Richard Wagoner Junior. Wagoner became the President of the North American region in 2005 after the unit reported its quarterly loss. After taking over from former President Gary Cowger, Wagner implemented a four-point recovery plan. During his time GM was able to make a profit of 445 million dollar but there was much to be done. I am quoting from the report published in The Australian
While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year," Mr Wagoner said.
Recently, the board has pressured him to cut back his work load and find a permanent leader. Now, Mr. Wagoner, along with Fritz Henderson, Chief financial officer, will oversee the deal with Delphi, a former auto parts producer for GM. The company has been bankrupted and now the workers are demanding for a concession.
Troy Clarke, the new head:
Troy Clarke, Head, GM’s Asia-Pacific region has been chosen to lead the North American region operations. Clarke, 51, has been working in GM for 33 years and he has turned Asia-Pacific into GM’s most profitable region. He joined GM in 1973. In 1998 he was the in charge of the company’s Mexican operations and labor relations. In 2003 he negotiated labor deal with the United Auto Workers Union. However, many people are suspicious, if Clarke has the necessary skills for developing product and market plan that would stop GM’s downward market slide.
John Casesa, Auto-industry analyst, Casesa Shapiro Group LLC, said that GM is too big a company to have a head of North America. He also said “Having Troy Clarke in this job now is like having a chief operating officer that this company desperately needs.
The North American business of GM is now going through a critical restructuring. According to the report published in The Australian GM is now adjusting its production capacity and severance packages offered to its blue collar work force. In addition, it decided to hold down health care costs after coming in an agreement with the United Auto Workers union. The company is also devising a new pricing strategy that will reduce discounts and incentives. It has cut down 30,000 labors and shut down several operations. A major challenge lying ahead of Clarke is negotiating with the United Auto Workers Union and form a new labor pact.
GM’s Success in Asia Pacific Region:
General Motor may be losing its market in America but it has huge success in Asia Pacific region. According to the report published Shanghai Daily.Com in the first quarter of 2006 GM’s profit rose to 453 million US dollar. In China GM is the biggest and most profitable producer of passenger cars, vans and trucks. In Korea GM Daewoo is the company’s most efficient engineering center. This company produces Daewoo model cars which are sold in USA and China. Until now Troy Clarke was heading GM’s Asia-Pacific operations. He will be succeeded by Nick Reilly, President GM Daewoo Auto & Technology Corporation. Fifty six year old Reilly is among GM’s most popular executives. He was in charge of Vauxhall in Britain from 1996 to 2001.

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