Sunday, June 5, 2005

Investors set to grill GM execs

At annual meeting, shareholders won't be shy with proposals to save ailing automaker.

By Ed Garsten / The Detroit News

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General Motors Corp.'s annual shareholder meeting Tuesday has the potential to produce one of those climactic cinematic moments where all the forces plaguing the main character converge.

Smack in the middle of its worst financial crisis in more than a decade, GM is facing a market share freefall in the United States, billions of dollars in health care and pension costs, and a move by a maverick billionaire investor to buy a major chunk of its stock.

Add the recent downgrades of GM's credit rating to "junk bond" status and a share price that's declined more than $30 since June 2004, and it's a recipe for disgruntled investors.

"GM's been grossly mismanaged for a while," said shareholder Joe Baker of Southaven, Miss.

"General Motors has done a miserable job of product support, and everyone knows it dropped $4.2 billion in the fiasco with Fiat," he said.

At Tuesday's meeting in Wilmington, Del., one shareholder plans to call for the resignation of chairman and CEO Rick Wagoner; another plans to nominate his own slate of candidates for the board of directors; and one will offer a proposal to eliminate the granting of stock options to anyone in the company.

Shareholders are anxious for Wagoner and other officials to address concerns about GM's direction after it lost $1.1 billion in the first quarter and withdrew earnings guidance for all of 2005.

With U.S. sales down 6.7 percent this year and losses mounting amid flat revenue growth and weak pricing, some analysts are calling for GM to close plants or eliminate a brand. GM is also expected to burn through $5 billion in cash this year, prompting some analysts to speculate the automaker's annual cash dividend -- $2 a share -- may be trimmed.

The company expects to spend $5.6 billion on employee and retiree health care this year and is in talks with the United Auto Workers union on possible remedies -- perhaps a reduction in benefits or increase in employee contributions.

"There is no direction," said John Lauve, a Holly resident who plans to nominate an alternate slate of candidates for the board of directors. "They don't know what to do, and they don't want to find out."

He compares GM directors to the crew of the ill-fated Titanic, which made the fatal error of hitting an iceberg at night that caused its sinking.

"They need people with clear vision," Lauve said.

Wagoner is expected to lay out his vision and the state of the company in a speech, before addressing shareholder questions and concerns. He has made few public appearances since taking over day-to-day control of GM's troubled North American operations in early April.

"We are going to approach this as a regularly scheduled meeting," GM spokesman Jerry Dubrowski said.

Shareholder activist Evelyn Y. Davis of Washington, D.C., will submit a proposal to do away with stock options, arguing "stock options awards have (gotten) out of hand in recent years, and analysts might inflate earnings estimates because earnings affect stock prices and stock options."

A proposal by Maryland shareholder Lucy Kessler calls for shareholder approval for lucrative "golden parachute" severance packages for senior executives. Another, put forth by The Community of the Sisters of St. Dominic of Caldwell, N.J., wants GM directors to form a committee to examine the automaker's efforts to produce vehicles that comply with more stringent greenhouse gas emissions regulations.

Flint resident and frequent GM critic Jim Dollinger says he'll call for Wagoner's resignation.

"Wagoner is a wonderful man, a family man," said Dollinger, who is on Lauve's slate of board candidates. "But in the time since he was first appointed CEO in 2000, the company's market capitalization has gone from $66 billion to $15 billion."

As of Friday, GM's market capitalization stood at $17.42 billion.

Dollinger -- a longtime Buick salesman -- has created a plan he calls "Return to Greatness" aimed at restoring GM's luster and sales superiority. He has been pitching the plan to GM executives for several years without success but plans to appeal to fellow shareholders to support him.

Elkton, Md., shareholder Tom McWilliams isn't pleased with everything GM's management has done, such as spending millions on developing hydrogen-powered fuel-cell vehicles, but he doesn't stand behind efforts to oust Wagoner.

"It's not even something that's appropriate," said McWilliams, a retired college dean. "I liked the way he handled difficult situations at one meeting. My impression of him is very positive."

One shareholder won't be in attendance but will cast a wide shadow over the meeting.

A tender offer by billionaire Kirk Kerkorian to buy 28 million shares of GM stock at $31 a share expires the same day as the gathering. The purchase would boost Kerkorian's stake to 50 million shares, making him GM's third-biggest shareholder.

Since making the offer on May 9, GM shares have hovered just above $31, and Kerkorian may extend the offer. Last week, he said he would not raise the price of his offer prior to its expiration. GM shares closed Friday at $30.93.

In the 1990s, the casino mogul pressured the former Chrysler Corp. for bigger dividends and stock buybacks following a failed 1995 takeover.

Kerkorian won't pry loose McWilliams' GM shares.

"That's just too low a price," McWilliams said. "It wasn't that long ago it was 60-something."

Baker says he's not ready to offload his GM shares but isn't opposed to Kerkorian's involvement in the company.

"He unquestionably did Chrysler shareholders a big favor. I hope he can do GM stockholders a big favor."

GM has made plans to accommodate more than the normal 100 or so shareholders who normally attend, Dubrowski said.

While Wagoner may feel like he's got a bull's-eye on his back, Lauve wants it made clear that the shareholders want what he wants -- success.

"This is too great a company and too big a stake for our city and our nation," Lauve said. "We just can't let it go."

You can reach Ed Garsten at (313) 223-3217 or egsraten@detnews.com.