Wagoner Wins A Round

Financial results buoy CEO’s assertion that turnaround is working.by Joseph Szczesny (2006-07-31)

Link to original article @ TheCarConnection.com

Richard Wagoner, GM's embattled chairman, appears to have shored up his position thanks to a stronger than expected showing by GM during the second quarter. The second-quarter results, despite the $3.2 billion loss the company posted, showed that the company's turnaround efforts are paying dividends.

The second-quarter results were widely seen as a vindication of turnaround effort GM has mounted despite some criticism from Jerry York, who is now a member of GM's board and is the chief lieutenant of Kirk Kerkorian, GM's largest private shareholder.

Last month, Kerkorian and York began promoting a proposed GM alliance with Renault/Nissan, which is led by Carlos Ghosn, widely regarded as the auto industry's turnaround expert.

Wagoner, while publicly supporting a study of the possible alliance with Renault/Nissan, also has said that unlike Kerkorian and York, he does not believe that GM needs any kind of alliance to succeed.

The GM chairman and CEO has emphasized in recent weeks that GM's current turnaround plan is working and the product offensive the company unleashed with the introduction of its new full-sized sport-utility vehicles is paying dividends.

The second quarter also is likely to let the air out of some of the rumors that have floated around GM since last winter that Wagoner is on its way out. Wagoner has given no indications that he is preparing to leave. Meanwhile, GM insiders have dismissed the suggestion by Kerkorian and York that Ghosn could put a GM turnaround on the fast track.

Second thoughts

Ghosn, meanwhile, also appeared to be having some second thoughts about the GM alliance that he had earlier this month. The Renault/Nissan chairman promised a decision on the Renault/Nissan alliance with GM by October 15. He also indicated that he was not interested in an alliance with at any price. The alliance would only succeed only if it created new value and if the gains are ten times the risks, he indicated during an appearance in Paris. The remarks prompted analysts to suggest that such expectations are unrealistic.

In addition, if a tie-up did occur it would not affect Renault's goals for 2009, he said.

Ghosn's reputation as a magician suffered a setback last week when both Nissan and Renault reported double-digit declines in profits. The CEO had been bracing for a disappointing quarter and had joked with reporters during a visit to Detroit that they had better use the opportunity to write negative stories about him now because they results would improve later this year.

Renault posted a 36-percent drop first-half year net profit of $2.06 billion, down from $2.74 billion in the same period the year before. Renault's operating margin for the six-month period came in at 2.7 percent, above analysts' expectations of 2.5 percent, but well down from 4.4 percent in the first half of 2005.

In an interview with a French financial newspaper, Ghosn said that Renault was performing far below its potential. "I consider 2006 an empty year," Carlos Ghosn was quoted as saying in an interview published Friday in the French financial daily, Les Echos. "Frankly, we are very, very far from Renault's potential," he said, adding that the company had been hit by slow demand and a deteriorating product mix.

Nissan Corp., meanwhile, reported its operating income dropped 25.7 percent in the first fiscal quarter to $1.34 billion and operating income from the Japanese automaker's North American operations dropped 45.5 percent in the April-June quarter. "As we predicted, the first half is proving to be challenging as we face significant headwinds and only one new model introduction," he said.

Ghosn noted that during the second half the year, Nissan will launch a total of eight new vehicles, which will help reverse the sales decline that the company experienced during the first half of the year.

I enjoy seeing things like this. Thanks for posting it Fly.

I Think Kirk knows that GM doesnt need any alliance, it was a big media scandal to drive the price up...

He knew profit was coming for the quarter so he got the word out there "GM..." got a little buz, that way when the profit expectations were beat, it would go up even more and would hesitate to decline...

I think Kirk is smart enough to know how to menipulate the public... hes been playing billionare a long time...