"Maybe In 100 years cars will be able to fly", Interview

General Motors Corp. (NYSE: GM), the world's largest automaker, has been the global industry sales leader for 75 years. Founded in 1908, GM today employs about 327,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries. But GM might be one of the richest troubled companies in history. Following the bankruptcy filing by the company's former parts unit Delphi late last year, rumors were abundant that GM was likely to file for bankruptcy in the near future.

Today, as the crisis atmosphere has subsided, GM seems well on its way to recovery. It has reported profit for the second quarter of this year. "But we have more work to do", said GM Chairman and CEO G. Richard Wagoner Jr. in his office in a recent interview with Yong Tang, People's Daily correspondent based in Washington DC.

GM Chairman and CEO G. Richard Wagoner, Jr. (R) and Yong Tang, People's Daily correspondent based in Washington DC

GM headquarters in Detroit

About GM recovery

Yong Tang: GM is the world's largest automaker. But it is predicted that Toyota will become the world's number one automaker by 2010 in terms of the global sale. Do you think so?

Wagoner: What we are doing at GM is continuing to focus on our business. I don't have a crystal ball to tell me what the other manufacturers, including Toyota, are going to do. What we are going to do is to improve and grow our business. We are very excited by growth opportunities. The Chinese market is a good example. If we do that, we will continue to be successful. I can't guarantee that we will be number one. We like being number one, but we just need to do what is right to make our business strong.

Yong Tang: It is reported that GM is likely to merge with Ford or some kind of strategic alliance will be created between the Big Two. How do you comment on this?

Wagoner: I have seen the coverage. GM actually works with a number of other OEMs around the world. We have joint ventures with Toyota here. We work with Renault in Europe. Over the years we have done many projects with Suzuki. In fact we have co-developed a transmission here with Ford. So I suspect we will continue to work with various other OEMs on specific projects. But as far as a broad based alliance or merger, we aren't involved in any ongoing discussions.

Yong Tang: The most recent news is that talks for a 3-way alliance between Renault, GM and Nissan have broken down. What does this mean for GM? Can you comment briefly on this event?

Wagoner: As part of the study, we identified some good opportunities to work together on specific projects. But the alliance structure that Renault-Nissan preferred would have involved selling a significant equity stake in GM and would have blocked GM from pursuing other alliances. On the basis of that broader proposal, we couldn't come to an agreement which we felt made sense for GM shareholders. So we remain open to working with Renault and Nissan on specific projects, but at this point, an equity-based alliance is off the table.

Yong Tang: Some auto experts list a number of reasons why the Big Three cannot compete very well with automakers from other countries like Japan and Germany: its cars are too oil consuming; its employees are overpaid and its cradle-to-grave social welfare is too generous; its size is too big; there is virtually no policy support from the federal government; it is irresponsive to market changes. How do you think of the criticism?

Wagoner: I think some are partially accurate and some are not. We have a long history and we offer a very broad range of products, including larger trucks that our consumers want to buy. We also have more products that get 30 miles per gallon on the highway than any other manufacturer. It is simply not accurate to say our products consume more fuel than those of our competitors. In most cases we offer models that are very competitive. The statement that people make on relative fuel economy is not true.

As for social welfare, GM has been in the business for almost 100 years. Starting in the 1940s and 1950s in the United States, many companies offered generous benefits including health care, pension and medical care for their employees and retirees. That is not a custom in most of the rest of the world, where the government pays those benefits. But in the US, it has been a tradition that benefits are provided by companies. The fact that we have been around for a long time means we have a lot of retirees. We do have a very heavy cost burden that puts us at a huge competitive disadvantages versus companies based in other parts of the world. We are working to try to address those issues with the unions. We put 50 billion dollars in our pension fund and the pension is more than fully funded now. We put about 20 billion dollars in our accounts to fund some of these medical costs. We work with the unions to try to reduce those costs. But it continues to be one of our competitive issues. There is no question about that.

The general philosophy of our government in recent years has been to promote a free market economy, so while the government has not taken actions to disadvantage us, neither has it taken actions that specifically favor the domestic auto producers. It is a free market economy. The fact that we pay the medical benefits for our employees and retirees and other competitors don't is something that we have to work out ourselves. In the area of exchange rates, the government has allowed the Japanese to keep an artificially weak Yen. It could have played a bigger role there. But for the most part, we compete in a free market economy.

We think GM's size is an advantage, but we have to use it well. Keep in mind: in the United States, we still sell one out of every four cars and trucks sold. It is a big number. But we have many tough competitors, and I am not sure it is realistic to think of having 40% or 45% market share when you have so many competitors. Selling one out of four cars in the US shows that we are still quite competitive. We currently offer a good range of products. If you look at our future products, we are confident that they are even better.

Yong Tang: There had been abundant rumors since late lat year that GM would go into bankruptcy in the near future. Are those rumors disappearing now? Has the crisis atmosphere really subsided?

Wagoner: I think you see less discussion of that. But there is still a reasonable amount of tension around the fact that we do have these very heavy legacy costs, including medical benefits. I think it is still an issue that is a competitive disadvantage. We need to continue to make progress. But if you look at the fact that we have made a number of moves this year to reduce our cost structure in North America by 9 billion dollars over this year, I think people are seeing that GM is getting much more lean and efficient. We made some of that progress with the full support of our unions. We need to keep working on this. I think people are recognizing that we are getting back on the upswing here in North America. But we still have more work to do here.

Yong Tang: Is GM really well on its way to recovery?

Wagoner: Yes. But we have more work to do, though. Well on our way, but more work to do.

About China

Yong Tang: GM's largest national market is the United States, followed by China, Canada, the United Kingdom and Germany. Someone said GM is the most successful auto company in China. Why can GM be so successful in China?

Wagoner: I think there are several reasons. We have been fortunate to have a very good partner to work with. We work very well with SAIC. They are an excellent partner. Second of all, we have been fortunate to offer products that Chinese customers have appreciated. We offer a broad range of products to Chinese markets, everything from inexpensive vehicles to luxurious models. That has been very helpful. Third, we work very hard to develop our presence as a local company. We have developed a significant engineering and design center with SAIC. We have tried to be very supportive of government initiatives regarding advanced technology. China is not just a market in which to sell our products. China is also a partner to help us develop China's own industry, and this helps us strengthen our company in China, and also globally. I think so far that relationship has worked out very well. We are very interested in continuing it.

Yong Tang: That means not only GM but also China could benefit from this kind of cooperation?

Wagoner: Absolutely!

Yong Tang: How could China and Chinese people benefit from the collaboration with GM?

Wagoner: I think in a number of ways. We can bring relevant technologies that we have developed elsewhere in the world when they are appropriate for China. And we are now building an engineering capability to develop technologies that are relevant for China in China. We can then use that capability to help GM in the rest of the world, and help China as well by developing its design and technology capability and its exports. We are working very hard to develop our supply base. We are working very hard to develop right kind of fuel saving technology. I think China, as it grows its auto industry, needs to come up with more fuel efficient ways to power its vehicles. We have a lot of technologies and ideas we are able to share. The problem is important. We are very interested in working to develop expertise in China to help us solve these problems and challenges for the Chinese industry and, over time, for the global industry.

Yong Tang: In recently years outsourcing is a fashionable trend. Will China become a production center and/or RD center for GM and other major automakers?

Wagoner: China is going to be a very important place to buy and to develop components. It is a very important place to manufacture vehicles to sell, but also important in developing automotive R&D. Our 50-50 agreement with SAIC in developing our PATEC joint ventures is a good example of the recognition of the opportunity that China offers. China has very good math and engineering and science education. There are many great universities in China with great technological capability. There is very good engineering capability within China. So R&D is a very important part of our future there.

Yong Tang: Last year GM spent 7.2 billion dollars on R &D. Is that right?

Wagoner: Yes, including new product investment.

Yong Tang: How many percent was used in China?

Wagoner: Well, the China spending number is not included in that number. Because we only own 50% of SGM, we are not allowed under the US accounting law to include that in our financial statements. So I can't tell you the exact amount of money we have spent in China. What I can tell you is that this global spending also has an impact on China. At the same time, we look forward to our Chinese center developing products and designing technologies that are not only used in China, but are also used in the rest of the world as well. So we look at R&D as a network of capability that we want to develop. We want to use both the U.S. and China to help create a stronger company and to advance automotive industry more rapidly in critical areas.

Yong Tang: Last month I interviewed Mr. Milton Kotler, President of Kotler Marketing Group. He suggested that GM should create a more strategic alliance with SAIC. For example, SAIC could use its sufficient cash to buy some GM stocks and even become a member on the GM board.

Wagoner: Well, they haven't asked us to do that. But let me say this: underneath that is a very good suggestion. We went in with SAIC, and we went in initially with one assembly plant. Now we have many assembly plants around China. We've brought in additional brands, the Chevrolet brand. We've expanded our range of products. We have grown the investment in engines and transmissions. And then we put together, and I don't think anybody else has done this unitl recently, the joint venture for engineering and design. I think that is, quite frankly, a true partnership with SAIC. That is one that could continue to develop. Could it mean them buying a stake in General Motors or GM buying a stake in SAIC? I would not rule it out. We have not talked about that, but it is certainly a possibility for the future.

Yong Tang: Someone said there are thousands of Chinese Americans workings as GM employees?

Wagoner: We cannot verify that, as we do not require employees to list their race or heritage on employment forms. We have 409 employees who volunteered that they were born in the PRC, and 35 more who volunteered that they were born in Hong Kong city. We no doubt have some who declined to answer, and many more who are second or third generation immigrants of Chinese heritage.

Yong Tang: Why does GM have so many Chinese Americans?

Wagoner: We are a big company. We believe it is important to employ people from all aspects of American society. If you look at the Chinese population in US, many are successful and well educated, attending the best colleges and universities, and we recruit people from the best universities for our R&D centers and other areas. So it is natural that we would have a significant representation of Chinese employees.

By the way, I should share something from my own experience. Over the last ten years, as we grew our business in China, this group of employees has been enthusiastic in asking how they can help GM to be successful in China. Because they are very interested in their company here being successful in the Chinese market. They are interested in the rapid development and successful growth of China, and they are very pleased to see GM play a role in that.

Yong Tang: How do you think of the role China will play in the global economy? Many congressmen on the Capitol Hill are criticizing China all the time for its so called negative role.

Wagoner: That is American politics. I think the role of China is going to be huge today and in the future. I think, by the way, that is good news for the rest of the world. Because China is not only a cost competitive manufacturer, it is a huge consuming nation too. I think China has a chance to provide the basis for growth of the global economy for the next decades. Many Americans are pleased with the rapid growth of China. Auto sales in China one day are going to be bigger than in the US. It is inevitable that it is going to happen. It is a unique opportunity for our industry. I think it is a good development.

About the global auto industry

Yong Tang: But someone said the global auto industry has reached its climax. Do you think so? Does it still have much room for growth?

Wagoner: I believe it has a lot of room for growth. You look at the number of Chinese people who own cars versus the number of people who want to own a car. You look at other countries like India and Russia. There are huge opportunities for additional growth. There are some challenges with that. We have to work on emissions, we have to improve fuel economy, we have to improve highway safety. For the last five years, every year has set a record for the global automotive sale. That is going to continue for a long, long time.

Yong Tang: Some experts say the rising oil prices, environmental pollution and traffic congestion are three significant bottlenecks of the global auto industry. If oil prices continue to rise rapidly, consumers will no longer consider buying cars. 3% of GDP should be put into eliminating pollutions arising from auto emissions. The roads cannot be paved endlessly for cars. Do you think so? Do you think the auto industry can ultimately get out of those three bottlenecks?

Wagoner: The auto industry has to support solving those three bottlenecks, because they are real issues. The good news is that more than any time in the last 30 years, the auto industry is making progress on the first two issues. On the issue of congestion, with the rapid growth in the ability to apply sensors and electronics and communications technology, we have a more realistic vision of how we might improve this area of congestion than we did 10 or 15 years ago. There is more work that needs to be done in all three areas, but I am quite confident that the industry, with good support from governments, can make tremendous progress on these areas and address these challenges.

Yong Tang: Six major auto companies in the world were sued recently in California for allegedly polluting the environment. How do you think of the outcome and significance of the case?

Wagoner: The lawsuit doesn't have any merit and we expect it to be dismissed. No merit whatsoever. I wouldn't read too much into it. It just highlights the issue of your prior point, the importance of continuing to make progress both in fuel economy and emissions with our current technology, and the importance of aggressively bringing to the market new technology: whether it is alternative fuels like ethanol, whether it is broader use of hybrids or electric type vehicles, whether it is the application of fuel cells. We need to keep investing heavily. GM is investing millions and millions of dollars to bring these technologies to the market. We need to keep doing that. It is important to do that because the society needs that kind of advancement.

Yong Tang: The mayor of Guangzhou said every family in Guangzhou should have one car. But at the same time the mayor of Soul said Soul should become a city of bicycles. The statements made by both mayors reflect two extremely different approaches to transportation development. How do you think of the two approaches and how you think of the future of the auto industry?

Wagoner: It is inaccurate to think that this is a question of either/or. There is no question if you live in Manhattan, in New York City, you know that driving in Manhattan is hard to do. It is much easier to take the subway. By the same token, once you get out of Manhattan, if you want to go to Connecticut or get off to the rail line, you need a car. We need to think of transportation as an integrated system. There are different solutions for different needs. So bicycles are fine under some circumstances. But if you live in Minnesota, in the winter it is pretty cold, and you can't rely on bicycles. So there is a role for cars. There is a role for trucks. There is a role for light rail and subways. Good governments think ahead and plan an integrated infrastructure.

Looking around the world, you see that people like owning cars. Cars provide a freedom of mobility. Even if you live in a city, to have access to a car means you can get up on Saturday morning and drive to the beach, drive to visit your family in Pennsylvania, go visit the Washington Monument or whatever. People like to have that freedom. Our challenge is to provide a way that is non-intrusive to the environment, that is cost efficient; a way that is affordable along with the other transportation systems.

Yong Tang: Cars have changed our way of life completely since the birth of the great invention. How will cars continue to change or affect our way of life in the future?

Wagoner: Our challenge is to maintain the affordability of cars, to reduce their impact on the environment, reduce their emissions and fuel consumption. We need to continue to make cars safer, to offer more features that are pleasing to our customers. Some people anticipate that one day when you enter the highway cars will drive themselves. You will be able to do your work, making phone calls or reading newspapers, while cars drive themselves. I think over the time those kinds of development will be seen, in 10 or 20 or 50 years.

Yong Tang: Many inventions, no matter how great they are at the very beginning, just disappeared. Do you think some day cars will disappear from human life too? Will cars be replaced by some better transportation tools?

Wagoner: Sometimes things change so much that it is hard to tell if they have become something totally new. If you look at a 1909 car and you look at today's cars, they are very different. Cars in 1909 were open cars. You had to use a hand crank to start them. They were horrible to drive in bad conditions.They were uncomfortable because they had tires that could not handle the road conditions. They would frequently break down, so you had to bring your own mechanic with you if you were traveling any distance. It was still called a car, but it was radically different from today's cars. I suspect if we look ahead 100 years, we can't imagine how different the car is going to be versus today. But I suspect meeting the needs of personal transportation in a vehicle that individuals can drive themselves on a time schedule they choose is a need the society will continue to have. Maybe in 100 years cars will be able to fly! I don't know, I guess so. Maybe we will call it a personal plane. I don't want to worry about that. It is too far in the future.

About professional and family life

Yong Tang: You received a bachelor's degree in economics from Duke University in 1975 and a master's degree in business administration from Harvard University in 1977. According to a recent survey most CEOs in America have graduated from state and unknown universities. Of course you are one of the exceptions. How has education affected your course of career?

Wagoner: I have seen those studies. The point of the studies is that when you get into your profession, whether it is journalism or law or business, your success is going to be determined by your capability. It is not necessarily where you went to school. Capability means knowledge, persistence, enthusiasm and ability to work with people, and the willingness to put in time and commitment. I think that is what ultimately determines success. The reason I got the opportunity to work at GM in the position I was offered was because I was graduating from a very good business school. Obviously the education I had did give me opportunities, but other people have done well with different paths.

Yong Tang: I know you are a trustee of Duke University. Can you tell me more about this job?

Wagoner: It is a part time job and a volunteer job. No pay. It is a chance to repay some of the benefits you have received from going to the university by serving the university. You can provide advice and support, and use some of the expertise you have to make the university better, so that people who come to the university after you get the same opportunity you had or even better. It is a model here in the US. Many people work on community boards, work on the Red Cross. It is a part of the US model. It is a free market system, providing opportunities for you to work hard and succeed. Many people feel an obligation to give back to their community, to their church, to their favorite charities or to their universities, to help make society better for the next person.

Yong Tang: As GM CEO, you are very busy. Do you have enough time for this part-time job?

Wagoner: It doesn't take a huge amount of time, to be honest. I do reading in advance. It is not a huge time commitment.

Yong Tang: Do you need to make donations in order to be elected as the trustee?

Wagoner: They didn't say, "Give us money to get on the board." But they have not turned down any of the check that I have offered to them yet. (Laugh)

Yong Tang: How many checks did you offer?

Wagoner: There are a lot. (laugh)

Yong Tang: Can you tell me the exact figure so that Chinese CEOs could learn from you? Most rich people in China are not generous in charity.

Wagoner: I am not comfortable giving you numbers. Let me give you an example. The President of Duke University called me about one year ago and said he wanted to create a fund to provide more scholarships for students who didn't have enough money to pay for the university, so they can say, "You can come to the school, and we don't care if you can pay or not." They needed more money in a scholarship fund to offer that. So they asked me to help lead a fundraising campaign to raise 300 million dollars to provide this kind of support. I don't have to put in that money myself. I tried to get other people put money in. So that is the kind of thing we do to try to enable people who don't have enough money from their families to attend the best universities in the country.

Yong Tang: Chinese CEOs should learn from their American counterparts in this regard. Is that right?

Wagoner: It is a model that works well here. I know of some Chinese people who I think are supporting universities. I believe it will be developed over time in China.

Yong Tang: I hope so. You began your GM career in 1977 as an analyst in the Treasurer's Office in New York. You were named president and chief executive officer of GM on June 1, 2000. So you have stayed in GM for almost 30 years. So far you have worked for GM only. Why didn't you work somewhere else?

Wagoner: It is important to recognize that within GM I have worked in many different places. I started in New York, I moved to Brazil, then I moved to Canada, then I moved here in Detroit for six months, then I moved to Zurich, Switzerland, for two years. Then I moved back to Brazil for a year and half, then I moved back to the U.S.. My point is, while I work in the same company I had a chance to do and learn many different things. It is very interesting and exciting.

Yong Tang: You don't need to change your job frequently to globalize yourself because GM is already very globalized.

Wagoner: Right. This is one of the things we offer people who work at GM. You can work in your home country. If you are interested in being considered to work in a different country, we can offer that kind of career opportunities. A lot of young people like that.

Yong Tang: What is the most exciting and disappointing thing for you during your stay at GM?

Wagoner: I have been involved in a lot of exciting things, but I have been very close to one great example of positive things happening at GM, and that is the development of our business in China. Jack Smith, my predecessor, was the person who cut the ribbon for GM SAIC agreement ceremony. I was pulling the ribbons up so he could cut them. I have seen the progress and development. That is a good example of a really positive development.

A negative one. Obviously, last year was a difficult one in the US. We had to trim back some of the social welfare benefits and reduce a number of positions. That was really a hard thing to do, to cut those back. Those are disappointing things. But we have to do those to make sure our business can survive and be successful and grow again in the future.

Yong Tang: How do you describe your typical working day?

Wagoner: Every day is different. The best way to describe it is very diverse. I spend a lot of time talking to dealers, employees, suppliers and journalists. We deal with a very interesting range of important issues, from the most advanced technologies to working and negotiating with unions to overseeing new products programs to developing our business in Russia and China. The point I would leave with you is that my job is very dynamic and exciting every day.

Yong Tang: How do you think of wealth as a CEO of such a big company?

Wagoner: Personally it is better to have than not. If you want to make the maximum amount of wealth, there are professions in the US that are more lucrative than doing what we do. Investment banking, for example, makes a lot of money. But I think jobs like this provide opportunities for a very good standard of living for many people. The range of experiences may be worth more than just money can buy. For example, how many times do I go to China and get a chance to meet with Shanghai Mayor Han Zheng? Or on occasion, I have had the opportunity to meet with Chinese Premier Wen Jiabao? How many people can do that?

Yong Tang: Someone said CEOs from European and Japanese companies are not paid well enough while American CEOs are generally overpaid. How do you think of that?

Wagoner: I think Europeans are catching up with us pretty quickly. I don't know how Japanese CEOs are paid. They don't disclose the data publicly. But I know that the compensation policies in Japan are very different. For me, it is fine, I don't have any complaint. There are plenty of opportunities to make ample money. But I look what I am paid versus my counterparts at Ford and Chrysler and other industries. We try to be in the middle of the range, not too high, not too low.

Yong Tang: So you are not overpaid?

Wagoner: No, I don't think I am overpaid, Honestly in the last several years we have not had any bonus payment. Last year top people on the board and I voluntarily reduced our salaries, by 50% in my case. This shows support for the difficulties of the company. I don't complain about what I make, but I don't think I am overpaid either.

Yong Tang: What is your hobby and how is your family life?

Wagoner: I like to do things with my family and that is where I spend most of my time. We have three sons, 22, 20 and 16. So when I am free I try to spend time with them and go see their sporting events with my wife. I like to exercise, run our treadmill and try to stay in shape. I like skiing but I have not done that for two years. I am too busy.

Yong Tang: Why do you value your family so much? Back in my country, family value is breaking down right now. Many businessmen are too busy to take care of their families. They often think career is more important than family.

Wagoner: It is an individual choice. I grew up with a very good family and my parents were very supportive. I enjoy the same relationship. It is important, but it is an individual call. You know here in the US, different people have different philosophies on that. I think family is an important part of your life. You will have your career for 30 or 40 years but your family will be with you your whole life. I think you don't want to mess up your family life. Fortunately I am able to do both. I have a terrific wife who has made family a top priority. She spent more time doing that and I appreciate that. It is important to me to have that balance.

Yong Tang: Some Chinese people thought Americans, successful persons in particular, don't value families.

Wagoner: I don't think it is generally true. I know a lot of very successful people. When you start talking to them, the first thing everybody wants to talk about is family and kids. I think there is probably a pretty strong commitment to families among almost all Americans.

Yong Tang: My last question: California's attorney general recently filed felony criminal charges against former HP chairman Patricia Dunn and four others in connection with the company's internal probe into boardroom leaks to the news media. Do you have any comment on HP case?

Wagoner: It is very important for boards to be able to have confidential deliberations. I can understand the frustration about leaks out of boards. By the same token, mostly these are not life and death situations. Having confidentiality is a serious matter and it helps the board work better. But you also have to have a measured response to challenges and difficulties. There is an understandable concern: can we stop the leaking? Let's use appropriate actions to do so. By the way, the guy who runs HP, Mark Hurd, has done a very good job. He is very good at dealing with customers. So I hope he can be successful.

By Yong Tang, People's Daily correspondent based in Washington DC.