A Talk With Rick Wagoner --NAO chief upbeat in pre-strike interview

Several weeks before the UAW struck General Motors Corp.'s stamping plant and Delphi Automotive Systems' plant in Flint, G. Richard Wagoner, president of GM North American Operations spoke with WAW Senior Editor Greg Gardner. Here are excerpts from that interview:

Q - With the transfer of Lou Hughes (president of GM International Operations) and other international executives from Zurich to Detroit, is General Motors evolving into something closer to Ford's model of one global automotive organization?

A - I would say there is probably evolution from both sides that is leading us closer than where it looked like we were going a few years ago. Ford, as I understand it, had done away with the concept of regional management, and now they've re-introduced that in Europe, so it's kind of a two-way street.

Q - How much of the improvement in North American profitability can be attributed to your growth in Mexico?

A - It's helped us a lot. We've grown our sales there significantly, but it has helped that the market has grown back after the '94 slide-off. This year we expect total vehicle sales in Mexico to be equal or greater than '94. There was an almost an 80% decline one year from 640,000 vehicles to 200,000, and now it's grown back. Our share has grown a lot. Basically that is attributable to a couple things. The biggest thing is we were in the beginning of a major investment on a small car for Mexico (an Opel Corsa rebadged as a Chevrolet Chevy) and we stuck with that during the crisis. And we've been able to use NAFTA. We import a lot more products to fill niches. We don't have to assemble them locally. We've consolidated a lot around pickup trucks. Rather than build everything to sell in Mexico, you can ship finished products back and forth. You get the production efficiencies of scale.

Q - How much of the Chevrolet Suburban production in Silao, Mexico, is shipped back to the U.S.?

A - A high percentage of it, but the flip side is that we don't build the pickup in Mexico now. You can get a funny picture if you just look at Suburbans and say, holy cow, they're shipping all of those back to the U.S. Yeah, but part of the deal was that we would ship the pickups from, primarily, Fort Wayne.

Q - Beyond incentives, what is GM's strategy for competing in a brutal passenger car market? Ford and Chrysler seem to have decided they only need two car platforms for the U.S. market. Are you headed in that same direction?

A - No. If you look at where we were, if you look from 1992 to 1997 we've really reduced the number of car models from more than 100 to about 81. Our strategy is to have the right number of products. Segment the brands better. There's a lot of work being done on the distribution side of the business. And the data's showing that our new products are doing a very decent job in the market.

Q - Ron Zarrella, GM group executive for sales, service and marketing, recently showed a chart indicating that you wanted to get down to 75 models by 2002. Is that accurate?

A - That's not a big deal. Most of the model consolidation we've done is behind us. There will be some fine tuning.

Q - So we should not expect a year from GM like we saw at Ford last year where five models were dropped?

A - I'm not sure we think it's a win to talk about what you're taking out.

Q - Your capacity use among your North American assembly plants has increased, but you're still below most of the competition. Are you finished with assembly plant closings?

A - Most of the decisions we know about at this moment have been made and announced. History shows you don't know what the future brings. Once we get the Buick City closing finalized, on a relative basis, this issue is behind us. I can't tell you we won't have other issues to face going forward.

Q - We've heard a lot over the last year about the "Blue Macaw" project in Brazil. Occasionally suppliers talk about the Yellowstone project, which they describe as a North American variation of Blue Macaw. Recently, Bloomberg News Service reported that Yellowstone could involve an all new small-car assembly plant that could replace your Lordstown, OH, plant. What can you tell us about this.

A - I'm like Sergeant Schultz, I know nothing. We are trying to share ideas around the world. We don't just come up with a great idea in Brazil and ignore it in the rest of the world. We're obviously learning from that concept (Blue Macaw). (GM Small Car Group Vice President Mark) Hogan was involved in it closely, and he's interested in what can apply to the U.S. It's sort of a trend in the industry. We're obviously looking at it.

Q - How much cash do you need to keep future product programs on schedule if the economy slows down?

A - I think Mike (Losh, GM chief financial officer) has identified this $13 billion bogey as a corporate number. My sense is that's conservative. The cash pot that is being developed is based on our experience in the last downturn.

Q - What's your response to those who say you are just buying back market share with these coupons and other incentives that will shrink your profitability?

A - Just watch the financial results. It's not our idea to reduce price and use incentives. But we're in a market. It makes no sense just to sit back and let your vehicles get dusty. What we've found is that if we don't react and stay close - we don't have to be dollar for dollar on top of every competing product - you get too far out of the market and you pay, particularly in the oversubscribed markets with weak demand, like small cars and small trucks. We're not looking to lead pricing down, but that's the game we have to play.