Veteran to Head Troubled GM Unit
General Motors Corp. said Tuesday that Troy Clarke, head of its profitable Asia-Pacific operation and a veteran labor negotiator, would take over its troubled North American unit this summer.
Clarke, formerly head of labor relations for GM North America, returns to the United States as the company gears up for expected tough 2007 contract negotiations with the United Auto Workers union.
The move, effective July 1, will free GM Chairman and Chief Executive Rick Wagoner from day-to-day operating responsibilities for the automaker’s largest unit and biggest headache.
GM North America is in the midst of a massive reorganization and downsizing after accounting for $8.2 billion of the automaker’s $10.6-billion loss in 2005.
The unit, which accounts for about half of GM’s revenue globally, has been losing U.S. market share to foreign competitors such as Toyota Motor Corp. for several decades. GM ended 2005 with a 26% market share, its lowest since the 1920s, and has seen that fall to 23.8% for the first four months of this year.
Clarke’s promotion will give Wagoner more time to work on the restructuring program. He intends to cut GM’s North American payroll by 30,000 jobs and to close nine factories in the U.S. and Canada by 2008 to help reduce costs and revive earnings.
GM said Tuesday that more than 20,000 unionized workers had agreed to leave the company through voluntary buyout and early-retirement plans. The automaker said it expected the total to approach 30,000 by the June 23 deadline.
Wagoner also is selling assets, including a 51% stake in its profitable finance unit, to raise money to help fund development of new models. And he wants to revise GM’s pension and healthcare plans so that employees pay more of the costs.
That will entail tough negotiations with the United Auto Workers union when its contract with GM comes up for renewal in September 2007.
“This isn’t a slap at Wagoner,” Burnham Securities analyst David Healy said. “At some point he was going to have to stop doing three jobs, and this is that point.”
A big plus that Clarke, 51, will bring to his new job is that he handled GM’s relations with the UAW as head of North American manufacturing before being promoted in 2004 to oversee the Asia-Pacific region. He negotiated the automaker’s present contract with the union.
The 33-year GM veteran will return to the U.S. amid a continuing effort by the automaker to help negotiate a settlement of wage-cut talks between the UAW and former GM subsidiary Delphi Corp., which is reorganizing under Chapter 11 bankruptcy.
Delphi has asked a U.S. Bankruptcy judge to allow it to unilaterally cancel its union contracts, and the union has threatened to strike if that occurs.
GM is involved in mediating the dispute because Delphi is its largest parts supplier. A strike against Delphi could shut down GM production in North America in a matter of days, potentially costing the automaker billions of dollars in lost sales and in wages paid to its idled factory workers.
Wagoner took direct responsibility for GM’s North American operations in April 2005. He reassigned the executive then in charge, Gary Cowger, to focus on global manufacturing and labor relations.
Cowger’s job will not be affected by the new moves, GM spokesman Brian Akre said.
The automaker said Nick Reilly, 56, president of GM Daewoo Auto & Technology Co. in South Korea, would replace Clarke as head of the AsiaPacific unit.
Separately, GM said Vice Chairman John Devine, 62, would retire Thursday.
Devine had been chief financial officer but stepped down last year in anticipation of his retirement while continuing to serve as an advisor to Wagoner. Frederick “Fritz” Henderson, formerly head of GM Asia-Pacific, took over as chief financial officer last year.
On a day when every other component of the Dow Jones industrial average also fell, GM’s stock dropped $1.51, or 5.4%, to $26.57. Among the factors was a downgrade of GM’s shares by Deutsche Bank analyst Rod Lache to “sell” from “hold.”
In a letter to investors, Lache cited higher U.S. interest rates and lower sales of pickup trucks as “pointing to a tough outlook.”
Despite Tuesday’s decline, GM’s shares have risen about 37% this year on positive news about its turnaround efforts.
