General Motors At The Crossroads

As chairman and chief executive of General Motors, Rick Wagoner is in the driver's seat of the world's largest automaker. And the road ahead has become very slippery.

GM lost more than a billion dollars in the first 3 months of this year. Soaring gas prices have driven customers away from its most profitable products--the bigger SUVs.

Last week, at the company's annual meeting — in Wilmington, Delaware, where shareholders came to elect a board of directors. Wagoner had to answer for what he called "the sudden downturn in our performance here in North America."

And some shareholders let him have it.

"This company's sick," said Jim Dollinger, a Buick salesman from Flint, Michigan, who was nominated to the board by another shareholder. "I'm going to give you the ten reasons, Mr. Wagoner, why I believe you should step down as chairman."

And John Love compared the company to a sinking ship. "The Titanic ship sank because the directors ignored the warnings," He said.

Conspicuously absent from this annual meeting was one of GM's largest shareholders--a billionaire with a history of launching hostile takeovers. Kirk Kerkorian, who tried to take control of Chrysler in the mid 90's, recently has bought up more than 7% of General Motors stock.

"This doesn't look like a takeover attempt at this point, but it's real clear that he wants to increase his value, which means things are going to have to change," said Ed Lapham, editor of Automotive News.

Last week Wagoner announced sweeping changes. Over the next four years, GM will reduce its hourly workforce by more than 20%. That's 25,000 workers. It also will close an unspecified number of plants.

GM already had idled three plants this spring, including one in Linden, New Jersey, where George Hall, and Kathy and Ken Tirpak worked for most of their lives.

"I thought at the last minute they were going to come in with a new product for us to keep going so that all the people with 20 some years were going to be able to retire out of there, and it didn't happen," said Kathy. "If you put 30 years in on that assembly line, you worked hard for that pension, and they're becoming a thing of the past."

"The sad part is the kids that are following behind us. There're no jobs," added Ken.

"Because everybody's not designed for college and college is no guarantee that you're going to have a great job," said George Hall. "This plant down here was full of college grads that couldn't get a good paying job. They settled for work in an assembly plant because they had families and this was the best paying job they could find."

John Cardamone spent 35 years working for General Motors. "This period is devastating. Let me just put it in that word--devastating."

"Back in 1937, when I started, we were doing 60 cars an hour and we were making Buick, Oldsmobile and Pontiac at that time."

Those were the glory days. Founded as the Olds Motor Vehicle Company in 1897, the automaker quickly acquired Buick and Cadillac and became General Motors, boasting it had "a car for every purse and purpose."

By the time Cardamone retired in the early 1970's, GM had 600,000 employees and made nearly half of all the automobiles sold in America. Today, GM's marketshare has fallen to 25%. Its workforce is down to 150,000. GM now has two and half retirees for every current employee and is paying health care costs for more than a million people.

"We worked for this. Everything we got we worked for. They didn't give us anything. We had to go to the bargaining table to get that."

But analysts say those health care costs add nearly $1600 to the price of every car or truck GM makes. A handicap no other automaker has, according to Rebecca Lindland of Global Insight.

"It's a gigantic deficit that GM has to overcome from the very start. So they start out with a negative $1600 on every vehicle," she said.

But that's only part of GM's problem says Ed Lapham of automotive news. "There are a lot of different issues involved, but the main thing is they need to have products that people want to buy."

GM dealerships have been in Richard Lucas' family for 80 years. "This is a family business, started by my grandfather continued by my father."

"What's changed is that there are so many more choices," Lucas said. "GM has to continue to produce good models, stylish models. They have to continue to introduce new models as fast as their competition."

Cadillac has become a hot car again. But GM couldn't rev Oldsmobile back up, so they shut it down. And Buick and Pontiac are considered bland brands. Five years ago, CEO Rick Wagoner lured legendary car guy Bob Lutz to the company to oversee design.

"One of the reasons they brought in Bob Lutz, who is past normal retirement age, was to be sort of a bomb thrower inside and to break up that GM culture, which had deteriorated over the last decade or so, and to come in with some fresh ideas," said Lapham.

At the 2002 auto show in Detroit, Lutz unveiled his first GM baby, a concept car called the Pontiac Solstice. We looked at the vehicle with Car & Driver editor, Csaba Csere at the auto show that year.

"The details are nicely handled and it's simple. It's clean," he said then.

He called it the most exciting concept car there. And agreed with CBS News Correspondent Anthony Mason that the car represented the reason Lutz was hired at GM.

This summer, the Solstice will finally appear in Pontiac showrooms. But Csere says one car alone can't save gm.

"A car like the Solstice is great for image, but it's a pretty limited volume car. It's not going to turn around the company. They need several image cars like that. And then they need a couple of key high volume blockbusters."

And a confident Lutz is promising just that. "I will tell you that in the next 2 or 3 years you will see a product lineup that takes back seat to nobody."

But turning around a company this big takes time. And it's not clear how much time GM has.

At a press conference after the annual meeting, CBS's Anthony Mason asked CEO Wagoner about the health of General Motors.

"I would say we are facing some very challenging issues," Wagoner acknowledged. "It's not that the company's going to go out of business in the next 6 months. But I think what it highlights is that if we don't fundamentally get at these structural issues the risk of continually is being weakened is very real."

From the car dealers to the parts suppliers, by some estimates GM supports 900,000 jobs in this country. So as Rick Wagoner tries to hold the wheel at GM, the US economy could be along for the ride.