What's next for GM's Rick Wagoner? He has NAO on the right track, butthere's no shortage of challenges

Mr. Wagoner's NAO by itself is larger than the total operations of any other automaker except the Ford Motor Co., with more than 5 million sales expected when final 1995 numbers are reported.

If Mr. Wagoner, who turns 43 in February, has presidential aspirations, his chances will be shaped by his success in continuing to rebuild NAO into a profitable powerhouse. Named to the top NAO job in 1993, he inherited three years of losses totaling more than $11 billion. NAO turned the corner in 1994, earning $690 million.

Slower overall industry sales, major new-model changeovers and a shortage of highly profitable trucks contributed to NAO's $93 million third-quarter '95 loss, but that was a big improvement from its $363 million in red ink a year earlier. During the first nine months of last year NAO was still a healthy $1.845 billion in the black compared with just $79 million the prior year.

What's NAO outlook as 1996 begins? WAW interviewed Mr. Wagoner on this and a variety of other subjects just a few weeks before Mr. Smith's promotion.

Despite the industry's fourth-quarter malaise, Mr. Wagoner was optimistic about NAO's performance as 1995 would down. He echoes GM's relatively bullish forecast for 1996: 15-million-plus sales.

After years of market-share attrition, GM's slice during the first two months of model-year 1996 crept back to 34% vs. 33.8% a year earlier. Next target: 35%, although he declines to say when that may happen.

Mr. Wagoner cites other solid reasons for optimism. For one, he's finally getting ample supplies of the J-body subcompact Chevrolet Cavalier/Pontiac Sunfire after a notoriously slow production startup last winter at Lordstown, OH, (see WAW -- April '93, p.23). Cavalier sales in '95s first 11 months actually shot past the prior year, rising to 192.300 from 179,900. Sunfire (combined with its predecessor, Sunbird) grew to 67,700 from 66,100 in the same period.

Although the Lordstown launch was painful, Mr. Wagoner says GM learned a great deal about pitfalls to watch for in future launches and about efficiencies in building the new model to make them more profitable. That, however, is a relative term. "It's tough to make a net, net, net profit on small cars," he concedes. "Would I say today we'll never make money (on the J-cars)? No, I wouldn't say that, but I'd say it's got a long way to go," says Mr. Wagoner.

NAO's profit prospects are considerably brighter in other segments where it's making a big splash in 1996. First there's an all-new midsize platform replacing the W- and A-body models introduced over a 10-year period starting in 1982.

Pontiac gets an all-new Grand Prix, Oldsmobile a new nameplate called Allure, and Buick a new Century off the new platform. Other spinoffs will follow, including a revamped Buick Regal, and GM's new U-van replacement for the slow-selling APVs coming next fall.

The U-van also will be exported to Europe, providing GM with a currency offset for the Catera that arrives from its Adam Opel AG subsidiary in Germany next September to become Cadillac's "entry-level" luxury car at around $35,000. Also coming: Buick's restyled Park Avenue/Ultra for '97.

Mr. Wagoner's mission is to continue pressing for more efficiency and lower costs, both aimed at keeping prices down, and the payoff on the supplier side will show up on contracts already placed for the 1997 through 2002 model years, he says.

Because of GM's advance purchasing and global sourcing schemes, suppliers are getting involved much earlier and bringing "their own new ideas to get costs down," he says. "Yes, as we've gone along under the famous Dr. Lopez (GM's tough former purchasing chief) and the precarious Mr. Wagoner (he replaced Mr. Lopez when the latter bolted to Volkswagen AG early in 1993), the focus has been to benchmark what we're buying" on a global basis, GM remains a tough customer, he allows, but the acrimony stirred up by Mr. Lopez has subsided. "I guess he (Harold Kutner, who succeeded Mr. Wagoner as purchasing czar) just must be a nicer guy" than Messrs. Lopez and Wagoner, he quips.

Commenting on other trends, Mr. Wagoner says that:

* GM's product-launch delays may have been over-dramatized. Most relate to the corporation's losses and cash shortages in recent years, but its failure to weed out new-product ideas also has hurt. "We just didn't make the calls on weeding out. Now what we're trying to do is fairly early on make the call, get a plan and execute."

* NAO's new vehicle line executive (VLE) product development process and brand manager marketing strategy will speed new-product launches and shore up the identity and image of each GM marque, he says.

Does that mean once a project gets the green light, GM will stick by the schedule? "Yes, the objective is to put in the schedule and live with it," he says. That means keeping financial commitments as well, and to that end GM hopes to have $12 billion to $13 billion on hand when the next downturn comes.

That's perhaps his biggest challenge, and there's a lot riding on the outcome: His future and GM's.