TRAVERSE CITY, MI – Richard E. (Dick) Dauch has a reputation for straight talk, and he clearly believesCorp. should continue to go it alone rather than align itself with SA and Motor Co. Ltd.
Chairman, CEO and co-founder of Detroit-based& Mfg. (AAM) Inc., Dauch has long ties with GM – and it is by far his largest customer: 77% of AAM’s $1.7 billion first-half revenues were derived from GM.
Interviewed by Ward’s following an address at the Management Briefing Seminars, Dauch says AAM is “one of the biggest cheerleaders” of GM Chairman Rick Wagoner’s efforts to turn around the corporation’s fortunes.
“GM is obviously going through a massive transformation and restructuring, and we need a powerful, strong, independent GM,” Dauch says. “I want to see GM solve its own issues (and emerge) strong, powerful and profitable.”
Urged on by Las Vegas billionaire Kirk Kerkorian, who owns 9.9% of GM’s stock,and reportedly are mulling purchasing a combined 20% of GM to create an alliance that would control 24% of global automotive production.
GM agreed in mid-July to conduct a 90-day feasibility study with Nissan and Renault. Wagoner has said he would remain open-minded about possible collaboration.
Kerkorian’s point man on the proposed alliance is Jerry York, a member of GM’s board of directors and a colleague of Dauch’s when both were officers of the formerCorp. during the 1980s.
“He’s a brilliant engineer and businessman, and I respect him and where he and Kerkorian, as a big stakeholder, are going,” Dauch says. “Now we’re in a ‘quiet period’ while the feasibility studies are being done.”
But Dauch has little faith in such studies.
“I’ve been involved in thousands of feasibility studies, and 90% end up as a waste of time and paper. But you’ve got to keep an open mind.”
Dauch cites three examples of where automotive tie-ups have been successful:’s 1987 acquisition of American Motors Corp.; the Renault rescue of Nissan conducted by Carlos Ghosn, CEO of both Renault and Nissan, who many think would unseat Wagoner in GM’s top spot if the three companies were to be allied; and the combination of suppliers Siemens Automotive and VDO.
“Usually these deals fail in implementation,” he says. “It has been hard enough at Chrysler and Mercedes, and it’s taken eight years.”
Dauch confirms AAM is the exclusive driveline supplier to GM’s GMT900 new-generation light-duty truck program, which includes the launch of the Chevrolet Silverado and GMC Sierra this fall.
“We had a majority of this business on the GMT400 in 1994 and a significant amount on the GMT800 in 1998,” he observes. ‘‘There are 16 derivatives in the GMT900 program, and it provides $1.8 billion to $1.9 billion in revenues for AAM.”
Those are big bucks, but AAM continues to troll for more business outside GM, he says. Its GM share the first year was 99%. That’s now down to 77% and is targeted to reach 50% by 2015, he says.
In his formal speech, Dauch underscores that automotive suppliers need to change quickly if they are to survive.
“Five of North America’s largest 27 suppliers are operating under Chapter 11 court protection,” he says. “Did you realize that 85% of the automotive suppliers in the 1995 phone book no longer exist?”
To remain in the game, Dauch urges suppliers to develop strong global strategies, eliminate waste in all of their operations and pursue new technology. That has paid off at AAM, he emphasizes.
“In 1994, only 3% of our sales were based on new technologies. Today it’s over 80%.”