[Mr. Wyndham]

Upbeat chief of GM says group is over the worst

By Patti Waldmeir in Shanghai
Published: August 12 2008 03:00

Rick Wagoner, chairman and chief executive of General Motors, said the worst may be over for the beleaguered carmaker, in terms of US job cuts, retiree healthcare costs and pension problems.

"I would say, from an assembly perspective [the pain] is largely behind us," Mr Wagoner told the Financial Times in Shanghai, after attending the opening ceremony of the Beijing Olympic games.

GM, which recently announced a $15.5bn second quarter loss and 5,000 salaried job cuts, has put in place plans to cut North American capacity to 3.7m units, Mr Wagoner said. "That's a pretty good position."

Mr Wagoner's optimism comes at a time when the once-dominant US carmaker is about to celebrate its 100th anniversary - in an atmosphere of doom and gloom in the US car industry, where sales have been depressed by the economic downturn and high fuel prices, which are hammering sales of large vehicles.

Mr Wagoner is under heavy pressure to steer the company back to profitability. GM lost a cumulative $50bn between 2005 and last year, with a further $18bn in losses so far this year.

Sales of the company's trucks and sport-utility vehicles have suffered in the US as consumers have shifted to smaller, more fuelefficient cars.

July's annualised rate for US car sales of 12.7m units, "is not a long-term sustainable position", Mr Wagoner said, noting that GM needs to "stay on the balls of our feet until we feel that that is behind us and I don't think that's going to happen for a while".

Mr Wagoner is pinning his hopes for the future on emerging markets - which he expects to contribute 80 per cent of global car industry growth in the next five years. GM is particularly optimistic about China, where the carmaker sold more than 1m cars last year. China is GM's second-largest market.

"This has been miracle story from our perspective," he said. "For me it's the replay of the US auto industry in the 50s, 60s, 70s, but the upside potential is dramatically greater."

Analysts expect growth in passenger-car sales in China to slow considerably this year.

They say the stunningly rapid growth of the domestic car market - 34 per cent in 2006 and 24 per cent in 2007 - could not have been expected to last for ever.

JD Power, the car consultancy, recently cut its forecast of passenger-car sales growth in China in 2008 from 15 per cent to 9.7 per cent, or sales of 5.95m units.

"That's not something we are losing sleep over," Mr Wagoner said, noting that vehicle density in China is still very low by US or western European standards.