GM Chairman Jack Smith Plans to Retire Next Year on Reaching 65

WILMINGTON, Del. Ed Garsten reporting for the AP reported that General Motors Corp. chairman Jack Smith said Tuesday he will step down in April 2003 when he reaches age 65, in accordance with the world's biggest automaker's retirement policy.

Making his announcement at the end of the company's annual shareholder's meeting, Smith, who has been chairman since 1996, said, "It has been an honor for me to serve General Motors over four decades."

At a news conference following the meeting, Smith said he did not know who his successor would be.

GM has momentum due to improving quality and productivity and strong truck sales but still faces tough competition on prices and incentives in selling its industry-leading automotive lineup, president and CEO Rick Wagoner told shareholders.

"We're improving our fundamentals ... while moving with a renewed sense of urgency in everything we do," Wagoner said.

But he said that despite GM's progress, it faces several obstacles to keep the company's momentum going including "an extremely challenging pricing and incentive environment."

Wagoner said the industry is in its fifth straight year of price discounting in the United States, and the company's response would be to look for ways of reducing operating costs.

He said the company was disappointed with its 2001 financial results in which earnings per share dropped from $8.58 in 2000 to $3.23 excluding special items.

The combination of cost-cutting efforts and increased sales and production will result in a better financial performance for the automaker this year, Wagoner said.

More than 100 people attended the meeting at the Hotel duPont.

In trading on the New York Stock Exchange, GM shares fell 2.9 percent, or $1.80 a share, to close at $59.45.

On Monday, GM reported its vehicle sales last month were down 12.4 percent from May 2001.

But the company also raised its second quarter earnings guidance from $2 per share to $2.50, excluding its Hughes Electronics unit, which is being sold to Littleton, Colo.-based EchoStar Communications Corp.

Antitrust ramifications of the deal are being scrutinized by the U.S. Justice Department, Wagoner said, and the company is optimistic the sale will be complete by the end of the year.

For the full year, GM estimates its earnings, excluding Hughes and special charges, will be $6 per share, up from prior guidance of $5 per share.

During the first three months of the year, GM earned $228 million including one-time charges.

Wagoner said the company's incentive program, which started after Sept. 11 also played an important role in its strong performance. The program sparked an industry incentive war with its offer of no-interest financing.

He told shareholders the company anticipated a 4- to 5-percent improvement in productivity in the annual Harbour Report to be released later this month.

Wagoner said there were no discussions about moving up the timetable for exercising its option to buy the 80 percent of Italian automaker Fiat sPa it does not already own.

Fiat Auto is 20 percent-owned by GM. Fiat has a deal with GM to sell it the remaining 80 percent if it decides to do so starting in 2004.

Shareholders generally were upbeat about the company's performance.

Joe Baker, a shareholder from West Memphis, Ark., thanked the company for hiring ex-Chrysler Corp. vice chairman Robert Lutz last spring to lead product development.

"Robert Lutz is exactly what General Motors needs to keep the company strong, the product line good and dividend coming to those of us who depend on it," Baker said.