Less Product, More Flexibility

Troy Clarke is the rare General Motors Corp. executive: A veteran insider with an outsider's perspective.

Clarke spent the last two years overseeing fast growing yet very lean GM Asia-Pacific operations. Tapped as president of GM North America five months ago, Clarke, 51, returns to a GM that is far leaner than the one he left, but still far from reaching sustained profits.

In the second half, the former head of manufacturing and labor relations for GM has seen 34,000 U.S. hourly workers accept buyouts or early retirements and a dozen GM plants prepare to close by 2008. He manages a product portfolio that is turning away from large SUVs toward cross/utility vehicles, midsize and small cars.

For GM, 2007 could be the true test of whether it has jettisoned enough fixed cost and has the right product mix at the right time to mark a real turnaround.

GM is forecasting 2006 global production of 9.18 million vehicles vs. 9.05 million year-ago, with domestic production expected to fall by 300,000 cars and trucks to 4.65 million units this year. Industrywide, Clarke sees 2007 sales shaping up much like 2006, and “maybe a tad softer.”

“From a General Motors standpoint, we're talking about (total sales) being a little better,” he tells Ward's. “We have some great products that we're launching into higher-volume segments.”

GM hopes to ride three major product waves over the next three quarters, including the sales launch of fullsize pickup trucks, both light and heavy duty, which started in November.

That's followed by the introduction of the Saturn Outlook and GMC Acadia, two of the three all-new offspring of the Midsize Crossover Architecture (Lambda) for the U.S. The third, Buick's luxury CUV, the Enclave, goes on sale in third-quarter 2007.

GM executives hope the new models will offset faltering deliveries of minivans and midsize SUVs. GM last month nixed plans for a new minivan program based on the Lambda architecture.

“Hopefully, this adds some juice to this long suffering midsize utility segment,” Clarke says. “It should be a reason for people to come back to looking at these particular products.”

In the third quarter, GM will launch a new Chevy Malibu, which gets a significant redesign but stays on its current platform. The Malibu is the second major car launch in a year, following Saturn's Aura midsize sedan, which shares Malibu's underpinnings.

Clarke is interested in refining the brands and flatly says GM must do a better job on its car rollout. He gives praise to Honda Motor Co. Ltd. When Honda launches a new Civic, he says, “the whole world knows” it.

Clarke's goal is to have fewer — but better coordinated — product launches. That means more interaction with dealerships, which have been supportive of “staying the course” with GM's strategy that discourages widespread sales incentives, Clarke says.

With domestic production cuts and new incentives taking effect now, GM anticipates dealer inventories will be between 1 million and 1.1 million units at the end of the year.

Clarke's other immediate challenge is bringing GM North America's costs under control to ensure sustained profits. GM expects to reap $6 billion in savings this year, mainly due to its attrition program, and projects a savings of $9 billion in annual structural costs next year.

GM North America has seen some sales improvement, logging revenues of $127.83 billion vs. $115.84 billion during the first nine months of the year. Year-to-date, it shows a net loss of $3.9 billion vs. $6.1 billion year ago.

But most of the year-to-date losses are tied to restructuring costs, including a $3.7 billion after-tax charge for the worker-attrition program.

Clarke seems cautiously optimistic that GMNA can keep the trend going.

Meanwhile, whether GM's recent deals with the United Auto Workers union on health-care concessions and attrition will help contract negotiations in 2007 is an open question.

As GM's chief negotiator for the 2003 UAW negotiations in North America, Clarke knows the ropes. He says the Jobs Bank, which allows laid-off UAW members to draw full pay and benefits, will be scrutinized even though it may not be the dominant issue. But he sees alternatives between ending the program and continuing it indefinitely.

“There's probably a hundred possibilities in between,” he says. “I've got to believe somewhere in that spectrum of a hundred we can probably find some common ground.”

It all takes place against GM's overarching goal of bringing multiple fuel-efficient powertrains to market, including a plug-in hybrid-electric vehicle, which is under development.

Whether the world turns toward diesel or HEVs, Clarke is convinced GM is “ready to play” in the alternative-powertrain arena.

“I suspect we (will) see gas engines and diesel engines hanging around for quite a while,” he says.