AGM Statement

GM Chairman Addresses Stockholders at Annual Meeting 
     
    WILMINGTON, Del., June 7  -- General Motors Corp. (NYSE: GM) Chairman and 
Chief Executive Officer Rick Wagoner today delivered a state of the business 
address at the company's annual meeting of stockholders.  The following are his 
remarks: 
 
    I'd like to focus my State of the Business comments today on recent 
developments, and specifically on the status of our plans to address the 
sudden downturn in our performance here in North America, which is our top 
priority in the company. 
    In the interest of time, then, I will comment only briefly on our other 
business units, all of which are running at or ahead of plan. 
    GMAC continues its strong financial and business performance, despite the 
challenges presented by credit rating pressures and restricted availability of 
funding from its traditional sources. 
    GM Europe is moving at a good pace in its turnaround, with significant 
progress in its structural cost reduction plan and positive sales momentum in 
the relatively weak European market. 
    GM Asia-Pacific continues its steady sales and share growth in the world's 
fastest growing region, and is resuming a stronger profit performance after a 
dip in the last two quarters.   
    And, finally, GM Latin America, Africa and Middle East, boosted by strong 
economic and industry growth, is continuing its recent track record of sales 
and profit improvement. 
    In all these business units, we for certain have plenty of work to do, but 
the trends are encouraging. 
    The most challenging and important operating issue we face is getting GM 
North America, our biggest business unit, turned around and back into a 
profitable position.   
 
    GM North America Performance 
    First, let me comment on GM North America's poor performance in the first 
quarter of this year, in which we lost $1.3 billion, and address the obvious 
question -- what happened?  The answer is pretty direct -- our North American 
business is highly leveraged from an operating perspective -- we have a high 
structural, or fixed, cost base and so when we lose revenue, it drops quickly 
to the bottom line.  And, last quarter, we lost revenue, due to lower retail 
sales -- we did not achieve our market share expectation; a significant, and 
needed, 100,000 unit year-over-year reduction in dealer inventories; and a 
much weaker sales mix -- fewer high profit SUVs, more lower profit cars.   
    In addition, our material costs came under pressure, due primarily to 
higher commodity prices, and finally, we continue to feel the ever increasing 
burden of higher health care costs.  These negative factors swamped our 
improvement in efficiency and structural costs, and so we registered an 
unacceptable financial performance.  
    As we implement our comprehensive plan to address this situation, we are 
focusing our efforts keenly on the areas of greatest impact.  What I mean by 
this is the following: 
    *  First, for the aspects of our business that have been moving in the 
right direction in recent years -- quality, product competitiveness, 
manufacturing productivity, and so on -- we need to pick up the pace, and 
elevate our targets from being 'competitive' to 'being the best'.   
    *  Second, there are some areas where we need to step back and ask, 'Is 
our current strategy effective?' -- and, where it's not, make the necessary 
changes.  Our sales and marketing approach is in that category -- more on that 
in a minute.   
    *  And finally, there are some structural issues -- difficult, long-
standing issues that we have to step up to and address.  In doing so, it will 
be challenging and discomforting, but it is clear that not addressing them 
will cause significant risk to the long-term viability of our business.  One 
example of a structural issue that we took on last fall at GM Europe, was our 
uncompetitive manufacturing cost structure.  You'll recall we negotiated a 
plan with our European unions to reduce our employment by 12,000 people over 
two years, including 10,000 in Germany.   
    *  Under the current challenging circumstances at GM North America, I put 
our U.S. health care costs in this category of challenging structural issues 
that we have to address, and do so now. 
    I wanted to give you that perspective on my thinking before I outline the 
four specific actions that we are taking now to get GM North America back on 
track.  Let me say up-front that our absolute top priority is to get our 
largest business unit back to profitability as soon as possible.  The four 
primary actions to drive this are as follows: 
 
    Great Cars and Trucks  
    First and foremost, we need to continue to raise the bar in the execution 
of our new products.  We know that you can't turn around, or be successful in 
our business, without great cars and trucks.  So, to address that, we are 
increasing our capital expenditures by nearly a billion dollars this year, 
with the increase mostly in North America, and focused on product.  We'll hold 
this higher level of spending in 2006.  
    We also re-energized our product portfolio over the near term, by 
advancing the timing of several high volume, high profit programs such as our 
large pick-ups and mid- and large-utilities.  Looking out a little farther, 
we're prioritizing our product development resources in the areas where we see 
the greatest volume, growth, and profit opportunities -- crossovers of all 
kinds; entry luxury and premium models; hybrids and other technologies to 
improve fuel efficiency.   
    Finally, we have now made all our appointments in our new global product 
development organization, and so Bob Lutz and his team will step on the 
accelerator and start delivering the benefits of globalizing product 
development -- crisper product execution, shorter life cycles, better quality, 
lower cost. 
    Let me close the product discussion by emphasizing that we're starting 
from a solid base ... we've had a number of successes over the past few years, 
such as the Cadillac line-up, and recent launches like the Chevy Cobalt and 
Pontiac G-6.  And, we're very excited about products just now, or soon-to-be 
launched, such as the Hummer H3, the Chevrolet HHR, and the Pontiac Solstice. 
 
    Sales and Marketing Strategy  
    The second key element of our North American turnaround is the re-tooling 
of our sales and marketing strategy here in the U.S. -- doing that will 
consist of four major initiatives: 
    *  First, we are clarifying and focusing the role of each of our eight 
brands, giving them distinctive, clear, compelling roles in the GM portfolio.  
We start with our foundation brand Chevrolet in the mainstream of the market, 
and Cadillac at the premium end.  Both of these brands are in good shape, and 
we have plans to make them even stronger.  Our other six brands -- GMC, 
Pontiac, Buick, Saturn, Saab and Hummer -- will focus on targeted market 
niches, offering distinctive, differentiated products with easy-to-grasp brand 
promises.  In some cases, such as Pontiac and Buick, it will mean fewer but 
stronger entries in the future.   
    *  Second, we'll go to market with a total value proposition.  This means, 
simply, going back to selling cars and trucks on the basis of the great value 
that they have to offer customers, with lessening emphasis over time on 
incentives.  It means strong product offerings at compelling prices that 
represent great value -- like the Chevy HHR at $15,995; the Pontiac Solstice 
at $19,995; and the Hummer H3 at $29,500.  It means improving our total value 
proposition by including industry leading content, features, and technology -- 
like offering OnStar and Stabilitrak as standard equipment on all GM cars and 
trucks.   
    *  Third, we'll focus on improving our sales performance in major 
metropolitan markets.  Simply stated, we need to perform as well in the top 25 
markets in the U.S. as we do in other parts of the country.  This means 
strengthening our position in markets like Miami, New York, Washington, and 
Los Angeles.   
    *  Fourth, we're accelerating our drive for consistent, world class 
distribution networks.  This means getting our dealers on channel -- Chevrolet 
and Saturn remaining as standalone facilities; Buick-Pontiac-GMC grouped 
together; Cadillac, Hummer and Saab as premium channels but in many cases 
under the same owner.  We'll work with our dealers to get in the right 
locations, with competitive facilities.   
    Overall, under Mark LaNeve's leadership, we have a revitalized and focused 
sales and marketing plan, and we are confident that it will yield positive 
results. 
 
    Cost Reduction 
    The third area of focus in getting GM North America on track is to pick up 
the pace in reducing our cost, and improving our quality.  With little pricing 
opportunity, we know we can't return to adequate levels of profitability 
without an extremely competitive cost structure, and without being among the 
very best in quality.  And, again, we have solid base to build on here.   
    Last week, the annual Harbour productivity study ranked our Oshawa plant 
as the most efficient assembly plant in North America, and placed GM assembly 
plants as leaders in seven out of 13 vehicle segments.  On the quality front, 
we've also received some excellent news recently.   
    In the latest J.D. Power Initial Quality Study, GM had the top three 
highest quality assembly plants in North and South America, and we took the 
top position in five vehicle categories.  And, we had similar favorable 
results in the Strategic Vision 2005 Total Quality Study. 
    We are pleased that consumers are recognizing our quality, but we know we 
can and must do better.  And the same is true for our cost position.  We have 
a number of cost reduction initiatives in place, but I want to briefly 
highlight three that we think are especially high leverage going forward. 
    First, we are re-energizing our global sourcing efforts.  While we've had 
an effective approach in purchasing for a number of years, our move to a 
global product development system, accompanied by the emergence of excellent 
supply capability in lower cost markets, provide us with some real cost 
savings opportunities.  Bo Andersson and his purchasing team, working closely 
with Engineering, are restructuring their purchasing model to take full 
advantage of this.      
    Second, Gary Cowger and his global manufacturing team are proactively 
driving best practice sharing on a worldwide basis now.  We believe that this, 
combined along with enhanced manufacturing flexibility and the ability to look 
at capacity utilization on a global basis, will provide significant structural 
cost savings going forward. 
    And finally in the cost reduction area, we need to get to 100% capacity 
utilization, or better.  With the plant closing and idling announcements in 
North America in recent months, we'll have reduced our annual assembly 
capacity from six million units in 2002 to five million units by the end of 
this year.   
    Going forward, in order to achieve full capacity utilization based on 
conservative volume planning scenarios, we expect to close additional assembly 
and component plants over the next few years, and to reduce our manufacturing 
employment levels in the U.S. by 25,000 or more people in the 2005 to 2008 
period.  We project that these capacity and employment actions will generate 
annual savings of approximately $2.5 billion. 
 
    Health Care Costs 
    The fourth, and perhaps the most challenging element of our North American 
turnaround, is addressing our health care burden.   
    Our $1,500 per unit health care expense represents a significant 
disadvantage versus our foreign-based competitors.  Left unaddressed, this 
will make a big difference in our ability to compete in investment, 
technology, and other key contributors to our future success. 
    We've worked the health care topic hard for a long time, and from every 
angle -- with governments, providers, consumers -- with a focus on better 
quality health care, and greater cost effectiveness.  And, we've made progress 
in these areas ... but, frankly, the continuing double digit U.S. inflation in 
health care costs is swamping that progress. 
    This rapidly rising health care burden is not, in fact, unique to GM -- it 
is a critical national competitiveness issue for the United States, affecting 
our entire economy's long-term strength.  It's clear that the health care 
crisis could benefit from stronger leadership by governments at all levels, 
and by business, and consumers, too -- and I want to assure you that we at GM 
are not giving up our commitment to work proactively and constructively in 
these areas.   
    But, it's equally clear to us that that these efforts are not yielding the 
progress that we need, fast enough, and that the health care crisis is putting 
our future at stake ... and so, we must act now. 
    In recent weeks, we have been in intense discussions with the UAW and our 
other unions focused on a cooperative approach to significantly reduce our 
health care cost disadvantage.  We have not reached an agreement at this time, 
and, to be honest, I'm not 100% certain that we will, but all parties are 
working hard on it, in the spirit of addressing a huge risk to our collective 
futures while providing greater security and good benefits for our employees. 
    What happens if we can't reach agreement with the UAW on this matter 
promptly?  Well, I don't believe that it serves a useful purpose to speculate 
on that.  Let me just emphasize that our very strongly preferred approach is 
to do this in cooperation with the UAW, because we're convinced that is the 
best way for our employees, our stockholders, all our constituents.   
    Frankly, over the past decade, we've had periods of conflict with the UAW, 
and periods of cooperation.  While both may have yielded improved 
competitiveness for GM, it is clear to us that working this challenging issue 
together, on a cooperative basis, is the best alternative for all concerned.  
So, we owe it our best efforts to try to make that work, and if that takes a 
little longer that way, then we need to give it that time. 
    But either way, it is crystal clear that we need to achieve a significant 
reduction in our health care cost disadvantage, and to do so promptly.  We are 
committed to do that.   
 
    Balance Sheet Strength, GMAC 
    Finally, today, I want to comment briefly on our balance sheet, liquidity, 
and GMAC.  The recent credit downgrades have put a lot of pressure on us, 
especially GMAC.  But they highlight the importance of the strong liquidity 
position that we've built up in recent years under John Devine's leadership, 
and validate the need for a solid cash base in our business -- which is very 
cyclical, and requires heavy capital spending even when times are lean. 
    We are very cognizant of the pressures that the credit ratings and 
resulting restrictions in funding availability have placed on GMAC.  GMAC is a 
business that is very important to GM.  Besides their steady contribution to 
our overall earnings and financial strength, GMAC provides significant support 
in the sale of GM's cars and trucks around the world, at both the wholesale 
and retail level.  This 'hand-in-glove' working relationship between GM Auto 
and GMAC provides ample benefits to our dealers and our stockholders, and is 
critical to our ability to compete in the marketplace.  Also, through its 
association with GM, GMAC benefits significantly in its insurance and 
residential mortgage businesses, as well.   
    So, our challenge now is to find a way to maintain and even grow these 
important benefits to our stockholders, while proactively addressing the 
impact of our credit situation on GMAC's competitiveness.  We are now in the 
midst of a detailed study of the strategic options that are available to us.   
    Our objective is to insure GMAC's access to liquidity and funding cost 
competitiveness, and continued support of mutual synergies -- all of which 
will optimize the value of GMAC for our stockholders.  In the meantime, GMAC 
has robust liquidity, and so is effectively positioned to continue to support 
auto sales and its mortgage and insurance business, and contribute strong 
earnings. 
 
    Conclusion  
    I appreciate your patience and your support in our plan to get GM North 
America back on track.  We have some serious challenges to address, but we 
also have a solid base to build off.  We've got a clear focus on the necessary 
steps to get GM North America back to profitability as soon as possible, and 
we are addressing them with intense focus and a great sense of urgency.      
Combining this with the positive performance we see in our other four business 
units -- GMAC, GM Europe, GM Asia Pacific, and GM Latin America, Africa and 
Middle East -- I'm confident that GM's overall business and financial 
performance will be back to the level that our stockholders expect, and 
deserve. 
 
    Thank you. 
 
    In the presentation that follows and in related comments by General Motors 
management, our use of the words 'expect', 'anticipate', 'estimate', 
'forecast', 'objective', 'plan', 'goal', 'project', 'outlook', 
'priorities/targets' and similar expressions is intended to identify forward 
looking statements.  While these statements represent our current judgment on 
what the future may hold, and we believe these judgments are reasonable, 
actual results may differ materially due to numerous important factors that 
are described in GM's most recent report on SEC Form 10-K which may be revised 
or supplemented in subsequent reports on SEC Forms 10-Q and 8-K.  Such factors 
include, among others, the following: changes in economic conditions, currency 
exchange rates or political stability; shortages of and price increases for 
fuel; labor strikes or work stoppages; health care costs; market acceptance of 
the corporation's new products; pace of product introductions; significant 
changes in the competitive environment; changes in laws, regulations and tax 
rates; and, the ability of the corporation to achieve reductions in cost and 
employment levels to realize production efficiencies and implement capital 
expenditures at levels and times planned by management. GM is recording the 
remarks and visuals presented today which are copyrighted by GM and may not be 
reproduced, transcribed, or distributed in any way without the express written 
consent of General Motors.  Neither the audio or video portions of this 
presentation may be recorded by any party other than GM.   
 
SOURCE  General Motors Corporation 
    -0-                             06/07/2005 P 
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