- The Washington Times - Tuesday, June 6, 2006

WILMINGTON, Del. (AP) — General Motors Corp. has made significant progress with its turnaround plan in the past year, reducing costs and rolling out new products, the company’s chairman and chief executive officer told shareholders yesterday.

Rick Wagoner told shareholders at their annual meeting that GM’s first-quarter earnings of $445 million were a good sign that better times are ahead for the nation’s largest automaker.

“It’s important to understand that our goal in this restructuring is not just to change GM’s bottom line from red to black. Our goal is to structure GM for sustained profitability and growth to set us up to be successful for years to come,” Mr. Wagoner said.

At the meeting at the Hotel duPont, two shareholder-sponsored proposals that would change the way the board is elected were approved, according to preliminary vote totals. It was the first time in the company’s history that such shareholder initiatives won majority votes, but any changes still would have to be approved by the board.

Yet a plan to replace the entire board was shot down, with each of the current directors getting 96.6 percent of the vote.

Mr. Wagoner touted increased sales in Europe and Asia and pointed to successful new product debuts in North America. He said new product debuts will account for nearly 30 percent of U.S. retail sales volume this year and about 40 percent next year as more new models roll out.

In North America, Mr. Wagoner said the company expects to cut costs by $7 billion by the end of this year, a big step toward the goal of reducing costs from 34 percent of revenue last year to 25 percent in 2010.

“These are huge reductions for GM and any other corporation anywhere,” he said.

GM’s first-quarter profit this year compares to a loss of $1.3 billion in the January-March period a year ago. It was the first quarterly profit since 2004 for the world’s largest automaker, which lost $10.6 billion in 2005.

But GM continues to face significant hurdles. The company is in talks with its former parts division, Delphi, and the United Auto Workers on a deal to lower wages at the supplier, which has filed for bankruptcy protection.

GM also continues to struggle in its home market. U.S. sales fell 8 percent in the first five months of this year as high gas prices took a toll on trucks.

and GM pulled back on sales to rental fleets. The company has pledged to stick to its strategy of cutting prices instead of relying so heavily on incentives, but some analysts question whether that can continue.

GM is facing several federal investigations into accounting practices and recently was forced to restate five years of earnings. Mr. Wagoner has called the accounting errors “extremely disappointing and embarrassing,” and the company has hired an outside accounting adviser.

Also, GM and its unions will begin negotiating a new contract with the UAW next year. The talks could be contentious as the automaker tries to get its labor, health care and pension costs under control.

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