After a year of running General Motors' troubled North American business, Chairman and CEO G. Richard Wagoner Jr. is passing the baton to focus full-time on his role as chairman and CEO. The recipient is Troy Clarke, the 51-year-old head of the auto giant's successful Asia-Pacific business.
Wagoner isn't declaring victory in his attempt to turn around GM's all-important home market. But the move is a clear sign that he has put enough restructuring moves in motion that he no longer has to be the point man at home. "Over the past year, we have reached several significant milestones in our GMNA turnaround plan," Wagoner said in an internal memo that later appeared as part of a May 30 press release. "This is the right time to turn the region's day-to-day operations over to Troy."
While General Motors (GM) has made some big strides, including getting its union to agree to health-care concessions and job cuts, and even turning a small $445 million profit in the first quarter, a lot of work remains. Clarke will play a big role in determining if GM can do what it has failed to do for many decades: stop market-share slide.
TAKING CONTROL. That was a major factor in pushing GM into its woeful condition last year. Wagoner took control of GM-North America from former division President Gary Cowger in April, 2005, after a dismal first quarter that became the prelude to a $10.6 billion loss by the end of 2005.
At the time, Wagoner said it made sense for him to take over GM-North America and spearhead the turnaround. Sources inside GM say the board has recently pressured him to find a permanent leader for the business, and cut back his responsibilities.
Clarke is the right man for GM right now. The auto maker is still in restructuring mode as it continues to buy out up to 30,000 workers and close factories. Next year, GM will have to sit down with the United Auto Workers union to hammer out a new labor pact.
LABOR EXPERIENCE. Analysts say next year's contract talks should be tense. GM will need deeper health-care concessions, and possibly the elimination of a long-standing benefit that gives workers most of their pay even when they're laid off. And if market share doesn't stop falling, GM may need to make deeper cost cuts in the future.
In terms of finding a chief who can negotiate with the union, Clarke is a good choice. Before going to run GM's Asian business, he was group vice-president of manufacturing and labor relations. He negotiated GM's 2003 labor deal with the UAW. So his experience will come in handy. "Labor relations is one of Clarke's big things," says UBS analyst Robert Hinchliffe. "That might be the more important aspect of his job."
What's less clear is if Clarke has the expertise to help develop product and marketing plans to stop GM's market-share slide. So far this year, GM's share of the U.S. market is down almost two points, to 23.3%.
ALL HANDS ON DECK. One GM insider says that when Clarke ran GM Mexico in 1998, he was known for his smarts on the plant floor, but adds that he has less experience in sales and marketing. GM has done well in Asia in the past couple of years, especially in China. But a lot of the spade work was done by current Vice-Chairman and Chief Financial Officer Frederick "Fritz" Henderson, and Phil Murtaugh, GM's former head of China operations.
But Clarke won't be expected to do it all on his own. Under GM's new global structure, executives who head the carmaker's regional business units have less responsibility when it comes to things like product planning and engineering. Those disciplines are increasingly managed by group vice-presidents with global oversight.
The result: Wagoner has all hands on deck to fix North America, with sales and marketing vice-president Mark LaNeve pushing its marketing plans -- which include a pullback from the heavy rebate game that GM played in recent years. And Vice-Chairman Robert Lutz runs the product-development works.
Henderson has been the go-to guy for talks with Delphi, GM's bankrupt former parts unit. GM will probably stump up cash to help Delphi pay for a deal to get rid of some high-wage parts workers and emerge from Chapter 11. The tough part for Clarke is that he walks into a big job after just two years running GM-Asia Pacific. The good news is that Wagoner believes in running as a team. And he has veterans in key positions.