Struggling GM hands chief reins of N. American unit

April 05, 2005|Associated Press

DETROIT -- General Motors Corp., struggling with weak US sales, tough competition, and tepid earnings prospects, put day-to-day authority over its North American operations in the hands of chairman and chief executive Rick Wagoner yesterday in hopes he can engineer a turnaround. But some say the world's biggest automaker needs a more radical overhaul to boost sales and profit.

''This is like moving around chairs on the deck of the Titanic," said Peter Morici, an economist and business professor at the University of Maryland. ''Until we get a management with the stomach to address GM's fundamental structural problems, there is no reason for stockholders to take comfort."

Wagoner will take over daily responsibility of the automaker's struggling North America division. GM North America's chairman Bob Lutz and GMNA President Gary Cowger are relinquishing those roles to focus full-time on global product development and global manufacturing and labor, respectively, GM said.

''Given the challenges we face in North America, it makes sense for me to assume control of GM North America's day-to-day operations and shorten the lines of communication and decision-making," Wagoner said in a statement.

David Healy, an analyst with Burnham Securities, said Wagoner is under increasing pressure from the company's board. GM recently slashed its earnings outlook for 2005 by more than half, citing slumping North American sales of its sport utility vehicles and trucks and weaker-than-expected business in the car line.

Credit Suisse First Boston analyst Chris Ceraso called the management shuffle ''surprisingly aggressive." In a research note, Ceraso said it appears Cowger will have the crucial job of negotiating with the United Auto Workers union to lower healthcare costs.

GM shares fell 33 cents to close at $29.05 on the New York Stock Exchange yesterday and have traded near 10-year lows since the earnings warning.