GENERAL MOTORS CEO Rick Wagoner has a full agenda at the world's largest automaker. Besides stemming decades of eroding share in North America, Wagoner must help German subsidiary Opel execute a turnaround plan; continue the GM-Fiat integration on powertrain sharing and purchasing activities; and mesh a pending takeover of Korean automaker Daewoo into European and North American product plans. Reporter Dave Guilford, Executive Editor Peter Brown and Editor Edward Lapham from US sister publication Automotive News interviewed Wagoner on November 6 in Detroit.
Do you want Daewoo to be a small-car powerhouse in Europe and North America?
I don't know enough about their financials to draw the conclusion whether that strategy works. We're going to have to build it up from what makes business sense. We don't have any plans to close down their distribution in Europe or the USA at this point, but we need to let the business speak for itself.
What are your short- and long-term plans for Daewoo?
I think what we're going to do is build it up from the Korean base. It's a great business opportunity, but we can only take it on if it makes money. Philosophically, if selling vehicles in Romania is a money-loser for Daewoo in Korea, we can't do that. Daewoo has to be standalone financially and we've set it up with a financial structure that, assuming we're able to proceed, we think we'll be able to do. The strategic interest on General Motors' part is first and foremost Korean market, second Asia-Pacific market. As that grows we'll need production capacity. We'll need their capability to do, let me say, high-value products in the way they execute them, frequently leveraging others' platforms. The third area of opportunity is value sales orientation in the developed world. I would say that's the area that we've spent the least amount of time on.
Will Daewoo be a management distraction for GM?
We need to make sure that when we take it over that it can be financially successful because we don't want a drain. We have to have a high degree of confidence that there won't be a financial burden. There's some significant respect for Daewoo middle management. A lot of things they've done very well. But under the circumstances that we're going in, we'll want to put in a reasonable sprinkling of senior people. But just to give you context, we're talking 10 or 20, not 50 or 100. Maybe it's 25.
How is Daewoo vehicle quality compared to other Korean competitors?
Daewoo certainly doesn't do, from the data that we have, any better than the other two. But they're all down there. On the other hand, customer satisfaction with some of the Korean products is pretty good because the value equation is well understood and the concerns have been addressed through the warranty program. I think it's an area where Daewoo needs to do some work. I think we can help.
Will GM platforms and powertrains go to Daewoo in Korea?
We would look to leverage that. You look at their history and a lot of their at least underlying components - it would be taking a liberty to say platforms - would be drawn from either Opel or Suzuki products, so I think we can extend that.
Are you near a final deal with Daewoo?
I think the progress is good. Final signing of the deal would be first or second quarter next year.
How big will Opel's Project Olympia be?
It's pretty big. Basically, rather than producing products on two different lines [at two plants], you will be moving to one line.
And that makes a big difference in investment?
It enables you to handle the attrition of the people. If you can take chunks of capacity out of two big sites, you have a chance to attract certain people to retire to maintain some work there for the middle-aged and younger people who don't want to retire. It's a good response, a practical response to what is a very difficult problem. In most developed markets, a huge piece of the structural cost is salary and benefits - the costs related to people. Sure, there is cost in having a plant, but relatively speaking, the big cost is around the employment-related costs. The issue is how can you efficiently reduce your capacity and your related employment in a way that works for unions and the people being affected. A good example is in Luton, England. When we proposed closing the car assembly plant, we had the van plant in Luton [that needed] more people. You net-net reduce but you don't take it to zero.
Does that reduce your costs?
We think it's a practical approach. The early 1980s, massive layoffs in the USA, you pay people for 10 weeks and then you're done with them - that doesn't work in the developed markets. That's the world we're in. Headcount reductions are expensive.
When are you going to make money in Europe?
2003 is what we've committed; 2002 would be very difficult.
How is Opel Chairman Carl-Peter Forster doing?
Off to a very good start, very good executive. Good product knowledge, good business knowledge, and I think handling the many challenges of that job in this environment very astutely.