On the Offensive

General Motors Corp. will not turn itself around overnight, but it is on the right track with a series of cost-saving and revenue-enhancing moves that should take hold in the second quarter and start yielding results by the third and fourth.

That's the gist of a new public-relations campaign being waged by GM CEO Rick Wagoner as he struggles to explain a very deliberate and incremental comeback plan while at the same time combating a litany of problems at the world's largest auto maker that have caused bankruptcy rumors and put his job in jeopardy.

“You can imagine it wasn't necessarily my first choice for a Sunday morning activity to go to Washington and be on Face the Nation (April 9), but we have to get out and tell our story a little more. So we are going to be doing that,” Wagoner tells a small group of reporters he met with the following day.

“We've got a pretty good story to tell now,” he says, acknowledging his frequent meetings with reporters are “at the behest” of Steve Harris, the auto maker's newly appointed vice president-global communications.

Harris, 60, is known for his crisis-PR savvy after tours of duty as the top spokesman at both the former Chrysler Corp. and GM. He retired from GM in 2004 and was working part time as a consultant when he was lured back to replace Tom Kowaleski, 54, who resigned March 1. Kowaleski is known primarily as a product expert.

So far, the new communication strategy appears to be gaining traction. After reporting a smaller-than-expected $323 million first-quarter loss April 20 — its sixth straight quarterly loss — GM's stock price soared more than 10%, its strongest 1-day return since an 18% gain in May 2005.

Much of the stock-price gains evaporated the following day as profit-takers cashed out, but the notion that GM is on the comeback trail still lingers.

Plenty of skepticism remains about GM's future, especially with the recent run-up of gasoline prices casting further doubts on whether GM's profitable new fullsize SUVs will continue to sell, and with a possible debilitating strike at supplier Delphi Corp. looming on the horizon.

When asked how long of a strike at Delphi GM could stand, Wagoner says:

“We haven't talked about that. We're totally focused on avoiding a long strike.”

Wagoner makes it clear his comeback plan is more comprehensive than merely hoping there is no strike and its SUVs continue selling. It is a combination of pension, health-care and other structural cost savings expected to save $8 billion annually by 2007 and gradual revenue increases that will start easing in over the next three quarters.

“The chart I showed analysts shows a little bit in the first quarter, a little more in the second quarter and then big jumps in the third and fourth quarter on the cost side. On the revenue side, that will play out more evenly as the year goes on,” he says.

White-collar headcount reductions and pension and health-care moves will begin to impact GM's bottom line in the second quarter, while the blue-collar health-care cost savings, approved by the U.S. District Court in Detroit March 31, will start impacting GM's bottom line in the third quarter.

The revenue side of the ledger will be helped by backing away from profit-sapping incentives as GM continues its plan to extract higher transaction prices from U.S. sales. Daily rental sales, special employee deals, lease pull-aheads and other incentives all are being cut back, Wagoner says.