Byline: Tom Murphy

It is debatable who has the toughest job in Detroit these days.

Some say Ron Gettelfinger, president of the United Auto Workers union; or Robert "Steve" Miller, chairman and CEO of bankrupt supplier Delphi Corp.; or Ford Motor Co. Chairman and CEO Bill Ford.

A fourth candidate with a solid shot at the title is Rick Wagoner.

As chairman and CEO of General Motors Corp., Wagoner presides over an enterprise long on the decline.

In 2005, alone, GM has been selling its stake in partner auto makers; struggling to maintain a steady flow of parts from its top supplier, now bankrupt; unable to kick the incentives habit; and, most recently, preparing to eliminate 30,000 jobs and shut down or reduce production at nearly a dozen U.S. facilities.

Few in the industry expect the world's No.1 auto maker to remain so for long, and Wagoner has about as much job security as a Detroit Lions beleaguered head coach.

Through it all, the former Duke University basketball player, who seems to thrive in the face of challenge, is attempting to remain calm and collected, providing steady leadership when it is needed most.

Wagoner is surprisingly upbeat during an interview with Ward's two days after announcing a comprehensive restructuring that will scale back GM's capacity to produce cars and trucks in the U.S. from 5 million units to 4.2 million.

Wagoner even manages to show a sense of humor. When asked for his projection for GM's market share in 2006, he deadpans, "We plan to have one."

Through October, GM's U.S. light-vehicle market share was 26.5%. The auto maker has been losing share since 1962.

On Nov. 21, Wagoner delivered the message that Detroit and GM employees had been dreading: By 2008, GM will close three vehicle assembly plants, two powertrain facilities and two stamping plants and slash hourly employment by 30,000.

Wagoner says that a day after announcing the cuts, he was in New York to meet with dealers, who expressed concern that GM would be unable to stock showrooms due to the plant closings.

He did his best to mollify those on the front lines of automotive retailing. "We can provide whatever you need, we can assure you of that," Wagoner recalls saying.

The restructuring, coupled with a recent deal with the UAW to address health-care costs, will save the auto maker $6 billion annually by the end of 2006.

But much of GM's savings will not come from labor costs because of the Jobs Bank, a security blanket negotiated in 1984 that guarantees full pay and benefits for UAW members in the event of a plant closure.

GM is hoping to achieve significant headcount reductions through natural attrition and a special early retirement plan. Union negotiations will ensue.

The company hopes to identify employees at the targeted plants who are considering retiring in the near future. A retirement program could free up jobs for the workers in the Jobs Bank. "People in the Jobs Bank can then flow to productive jobs, which most of those people want to do anyway," Wagoner says.

He declines to confirm a newspaper report suggesting GM has more than 5,000 people in the Jobs Bank, at a cost to GM of about $800 million per year.

Wagoner says the Jobs Bank is not as financially onerous as industry observers suspect. "It has not been a dramatic cost issue for us for a lot of the last five years," he says. Whether Detroit can sustain the Jobs Bank is an issue sure to complicate the Big Three's UAW negotiations in 2007.

Delphi, which spun off from GM in 1999, also is slated to negotiate in 2007 its first contract independent of the Big Three's master agreement. Those talks likely will be contentious, given Delphi's assertion that exorbitant hourly labor costs contributed heavily to its Oct. 8 bankruptcy filing.

Delphi admits it has 4,000 employees in the Jobs Bank, at a cost of about $100 million in each of the past two quarters.

Wagoner says Detroit can sustain the Jobs Bank, but only if few workers are in it and "if we can match capacity with demand and take advantage of natural attrition." GM's track record on the first two objectives has been abysmal.

"If we continue to shrink forever and we don't have retirements, which enables those people to flow to productive jobs, then it becomes a bigger and bigger drag," Wagoner says.

Still, GM agreed to the formation of the Jobs Bank more than 20 years ago, and Wagoner says the auto maker must live up to its obligations.

Rather than the Jobs Bank, Wagoner wants "a more robust system of addressing people that we don't have jobs for."

Meanwhile, the UAW is ready to fight for the program it worked so hard to negotiate years ago. "The UAW will do everything in its power to enforce those programs and protect the interests of the workers," the union says in a statement Nov. 21 in response to GM's cuts.

Keeping open a channel of communication with the UAW is a top priority for Wagoner, illustrated by the union and auto maker agreeing to a new health-care package designed to cut GM's total expenses by about $18 billion. It took seven months for GM and the UAW to reach the new terms, which require higher co-pay levels for medical benefits.

"It's a pretty significant occurrence and, I think, a very difficult but responsive action on the UAW's part to something that was clearly impeding the ability of the company to be successful and provide jobs today and in the future," Wagoner says of the health-care deal.

"I'm going to keep discussing issues like that with them. If we can get solutions better, fine," he says. "If we can't, we'll do what we have to do. It's better to try to work with them."

Speculation has been rife that Wagoner, perhaps too publicly associated with GM's recent struggles, might be forced out of the top job by a corporate board looking for a new direction and eager to generate a little enthusiasm on Wall Street.

But Wagoner vows to see the recovery through. "I wasn't brought up to run and hide when things get tough."

Wagoner says he has enjoyed "terrific support from the employees within GM," as well as from dealers and even the board. "I'm not saying they're happy about results."

Likewise, Wagoner dismisses the suggestion that GM could be headed for a Chapter 11 bankruptcy filing. "I will categorically deny that it's inevitable that we do it (file for bankruptcy), and I would say only if we don't play our hand in the right way is there even a risk that we'll do it... I don't think we'll be going that route."

The last time GM went through such a massive restructuring, in the early 1990s, Wagoner was president and managing director of General Motors do Brasil Ltda.

This episode is different, he says, because GM's product lineup is in better shape. Wagoner says GM's restructuring at the time "really did a great job" reducing costs. "I would say, three years later, we were lean in new product," he says.

By contrast, Wagoner points with pride to products that have launched in the past six months and are finding success: the Hummer H3; Pontiac Solstice; Chevrolet Impala, HHR and Corvette Z06; Cadillac DTS; and Buick Lucerne.

"There's something inherently different going on now," he says, referring to industry critics who have been uncharacteristically upbeat in reviews of recent GM products.

He recalls driving home recently in a current-generation Cadillac Escalade. The company had delivered a pre-production version of the next-generation Escalade to his home for a weekend of comparative driving.

"You look at the outside, and it's a big difference," Wagoner says. Inside, the upgrade to the new Escalade's interior made an even greater impression. "Wow, what was I just in, and what am I in today?" he says.

Wagoner is bullish on the future lineup, particularly Saturn's and the next Cadillac CTS, but he recognizes GM's brands need to "go a little harder on the design."

The strategy worked for Nissan Motor Co. Ltd., which put a daring face on products such as the Murano CUV and Infiniti G35 as part of its successful turnaround.

"Interesting, as bad as this year has been, we're spending more money on product and capital engineering, significantly more than the prior year," Wagoner says. "And next year we will continue to have a high level of spending in both those areas."

Product may drive GM's rebuilding, but the company now must focus on the bottom line. That includes exploring the possible sale of a controlling interest in General Motors Acceptance Corp., which has bolstered GM profits in recent years but is struggling with high lending expenses due to the auto maker's poor credit ratings.