GM CEO Fritz Henderson Forecasts 28 Percent Drop in Sales
Thursday, October 8, 2009
The chief executive of General Motors said Wednesday that uncertainty surrounding the U.S. economic recovery will continue to depress auto sales and remains one of the primary challenges facing the company.
Citing the high unemployment rate and other dismal statistics, Fritz Henderson predicted that sales will remain far off their 2007 peaks. He forecast that next year there will be 11.5 million car and light-truck sales, down more than 28 percent from about 16 million two years ago.
"Everything we've seen . . . suggests that's a good number to use," Henderson said.
Henderson's remarks stand in contrast to some of the optimism on Wall Street, where stock market indices rose this week in anticipation of strong corporate earnings.
In a telephone conference with reporters and industry analysts, Henderson presented an update on the "new GM," the smaller company that emerged from bankruptcy over the summer with $50 billion in federal aid. It is owned largely by the U.S. government.
Henderson told CNBC on Wednesday that GM is still not breaking even, but he said it is on track with aspects of its business plan. While selling or phasing out its Pontiac, Hummer, Saturn and Saab lines, the company is focusing on what it calls its core brands of Chevrolet, Cadillac, Buick and GMC.
In addition, Henderson said he is seeking to transform the culture of the historic automaker by refocusing on products and customers instead of internal operations. The automaker has also rolled out a new marketing campaign, "May the Best Car Win," featuring appearances by GM Chairman Ed Whitacre Jr.
"We have been spending more and more of each day on customers and making changes to the culture of the company," Henderson said.
One of the key questions raised about GM is whether its management can really change course given that many of its executives have little experience outside of GM or one of the Detroit Three. Henderson announced Wednesday that the company's North American sales chief, Mark LaNeve, is leaving the automaker, presenting an opportunity to bring outside talent into the company's ranks.
But before top executives can be hired, General Motors must get their compensation packages approved by the Obama administration's Kenneth Feinberg, who was appointed in June to oversee compensation for the highest-paid personnel at companies bailed out by U.S. taxpayers.
"We are open to bringing in outside talent," Henderson said. But "we need to explain to people how we might pay them."
Even if its vast restructuring is successful and the company replenishes its leadership with new talent, GM faces an uphill climb with consumers.
Its share of the U.S. automobile market is well below what it was last year. The company's U.S. market share has been running about 19.5 percent this year, down from 22.1 percent in 2008. The company had anticipated declines.
"We think we have found some stability in the third quarter," Henderson said.
The federal government is expected to wait until GM holds a public stock offering to sell off its interest in the company. Henderson said such an offering is expected in the second half of next year.