The embattled CEO of
claimed progress on several fronts Tuesday in defending his turnaround plan at an annual shareholders' meeting.
Wagoner pointed to GM's first-quarter profit of $445 million, which ended a five-quarter streak of red ink, as a sign of improvement that can be sustained,
reported. After originally posting a loss for the quarter, regulators allowed GM to revise the way it accounted for a health care deal with the United Auto Workers union and to bump up the results to a profit.
"Our goal is to structure GM for sustained profitability and growth," Wagoner said, according to the newswire. "We have absolute clarity about the road ahead. We have a strong plan, and I have no doubt we will succeed."
Though the meeting's tone sounded more upbeat than previous sessions, GM's management still faces criticism from loyalists who watched the automaker's shares plunge 30% in 2005 -- a year in which it lost $10.6 billion. GM also halved its dividend in February, and it continues to bleed market share to competitors in North America, as evidenced by the steeper-than-expected drop in U.S. sales in May.
That said, GM has scored wins on the cost side of its business, where runaway health care and legacy expenses are a huge burden. It's offering early retirement and buyout packages to its entire U.S. hourly workforce as part of a plan to cut 30,000 jobs and shutter nine manufacturing plants in North America. The reported success of those offerings has inspired a rally on Wall Street, where shares of GM have gained about 19% so far this year.
Wagoner said at the meeting in Wilmington, Del., that the automaker expects to cut $7 billion in structural costs in North America, reducing its costs from 34% of revenue last year to 25% in 2010, according to the
"The cuts will make GM a global leader in the industry and position it for sustained profitability, not just short-term profits," Wagoner was quoted as saying.
Despite the optimism, the threat of a labor strike at
, GM's bankrupt parts supplier and former subsidiary, looms large in Detroit. GM and Delphi are in talks with the UAW in an effort to reduce hourly wages paid to workers as part of the company's restructuring plan. Delphi is seeking a judge's approval to cancel its labor contracts, while the UAW has threatened to strike in response -- an event that could cripple GM's productivity and devour its cash reserves.
As a security blanket, GM has beefed up those reserves this year by selling off stakes in some of its businesses, including its profitable finance arm, GMAC. A private equity consortium led by Cerberus Capital Management bought the unit in April in a deal that's expected to add $14 billion to GM's cash pile over the next three years.
On the product side, Wagoner was reportedly upbeat about GM's newly launched vehicles, including a line of full-size sport-utility models. He said that new models accounted for one-third of sales in the first quarter and should represent 30% of U.S. retail sales volume for 2006, according to
. Wagoner said he expects new vehicles to account for 40% of total sales next year, compared with 20% last year.