GM CEO Hopes for Higher 2007 Retail Car Sales

General Motors hopes to increase its U.S. retail sales in 2007 despite what is expected to be flat growth at best for the U.S. auto industry, Chief Executive Rick Wagoner told reporters on Sunday.

The world's largest automaker -- expected to lose that crown this year to arch rival Toyota Motor -- sold 3 million vehicles to U.S. retail customers in 2006. "We'd like to tweak that up" in 2007, Wagoner told reporters at the North American International Auto Show.

Wagoner said he agreed with assessments the overall 2007 U.S. vehicle market will be flat compared with a year earlier. Almost 16.6 million vehicles were sold in the U.S. market in 2006. Analysts caution that a slower economy and housing market, which could squeeze consumer spending, may well lead to a weaker car market in 2007.

But Wagoner said GM remains more optimistic. "The housing situation seems to be settling down, interest rates are leveling out, energy prices at least for now have come down quite a bit, employment is strong. None of that suggests the U.S. is really headed for a disastrous year," Wagoner said.

"We expect a little weaker in the first half of the year, a little stronger in the second half of the year, and auto sales should move in that track as well."

GM, which lost $10.6 billion in 2005, is in the middle of a broad restructuring that includes slashing more than 35,000 jobs and closing 12 plants. The automaker is cutting structural costs by $9 billion but faces daunting challenges.

As the company heads towards formal contract talks with the United Auto Workers union this year, Wagoner said health care costs and competitiveness will be key issues. He cited a $4 billion to $5 billion health care disadvantage for GM compared to its competitors, saying it was a major drain on the company's cash position.

"I hope we take advantage of this next round of contracts to address broad-based productivity, competitiveness issues," Wagoner said. "They continue to be health care, they continue to be things like the impact of the jobs bank," he said.

The jobs bank allows laid-off workers to get paid nearly their full salary until retirement -- a clause written into the labor contract during GM's profitable years.

In 2006, GM negotiated health care concessions with the United Auto Workers union that could save it $1 billion in annual costs. But contract talks are expected to get very tense in 2007 as the automaker asks for more concessions. "It's just as important for the unions as it for us if we want to keep the job levels we even have now in this country," Wagoner said.

Speaking of further job cuts this year, Wagoner said he does not expect any large numbers but does not rule out the possibility of more limited cuts. "There are still some parts of the business we are more heavily vertically integrated. So there are still some opportunities there," he said. "In the end, it's going to be determined on 'Hey can we sell more cars and use our plants?' and if we can, frankly, the pressure to downsize will be significantly less."