by  posted November 21, 2006

 

DETROIT (AP) - General Motors Corp. North America (NYSE:GM) president Troy Clarke said Tuesday he will work toward achieving aggressive cost-cut targets as soon as possible as the company scrambles to revive its North American automotive unit and "adapt to a global, very tough, very competitive" marketplace.

Clarke, speaking during a question-and-answer session that followed a speech given to the Automotive Press Association, said the company currently has a target to reduce structural costs to 25 per cent of revenue by 2010, but he insists he is working to meet that goal as soon as possible.

He said the costs currently represent nearly 30 per cent of revenue. He said there are still "pockets" at GM where workers operate under "the legacy of having been big."

He noted that GM once held 50 per cent of the U.S. market but now holds less than 25 per cent, and Clarke insists the company must continue to "break up" bureaucracy to cope with reality.

Clarke heads GM's North American auto operations, which has been a money loser and a key contributor to the company's financial woes. He took the helm of the troubled unit four months ago, taking the role from GM chief executive Rick Wagoner, who had been running the unit for more than a year.

GM's troubles in North America primarily stem from high labour costs, excessive manufacturing capacity and falling market share. The company began restructuring the operations in 2005 and has knocked down several items it needed to do to reduce costs and streamline operations.

"The turnaround is not yet finished," Clarke said, during his speech prior to the question-and-answer session. "We are only beginning the transformation."

Clarke, who previously ran GM's Asia operations, pointed to Suzuki Motor Corp., a GM joint-venture partner, as "an organization that I truly admire." He said the Japanese auto maker, which primarily produces mini cars, runs the business with "a very healthy level of paranoia."

Clarke said GM will continue to focus on cost cutting "as a new way of life." He said the company will continue to focus on further trimming U.S. health-care costs. He characterized the company's drive to cut $9 billion in structural costs annually as a cost-reduction target that "may be unmatched in American business history."

Clarke said the company is looking to boost top-line results to complement the cost cutting. He pointed to a renewed focus on mid-sized cars, which is a huge U.S. vehicle segment where GM has lagged Asian rivals.

"GM needs to have a presence" in the segment, Clarke said.

He said the company will unveil its new Chevrolet Malibu sedan at the Detroit auto show in January and the car will give buyers the sense they receive "more than they paid for."

So GM is talking more cuts, and Gettelfinger is talking about keeping the job bank. This could get interesting.

Clarke, who previously ran GM's Asia operations, pointed to Suzuki Motor Corp., a GM joint-venture partner, as "an organization that I truly admire." He said the Japanese auto maker, which primarily produces mini cars, runs the business with "a very healthy level of paranoia."

I like the fact that GM execs are thinking this way but money is ultimately a factor in making decisions and even though the intent to build a good car may be there, I have a feeling that keeping serious spending on new cars at a minimum will be an issue GM will continue to deal with until the healthcare situation is corrected.