Can GM fight back? Wagoner says it can with some help--not a bailout--from Washington.

General Motors chief executive Rick Wagoner, who has announced plans to cut 30,000 jobs and close nine factories by 2008, says the Bush Administration is making a mistake by targeting China's currency, not Japan's. Here are highlights of an interview conducted originally for The New York Times:

Q. Is GM going into Chapter 11?

I think we've got a good plan to get the business turned around. I think as we've sat back and looked at where we are this year as things turned south, I think we have a pretty clear understanding of the areas where we needed to make significant progress. We are now executing those, and we have a lot of confidence that we've also been driving hard on the revenue side. If we execute the plan as we intend to, we're going to see that things will turn and I hope all of this conversation around Chapter 11 begins to subside.

Q. What's it like personally to be in the eye of such a big storm?

I'd rather not be in the financial position that we're in, but I would use an analogy from when I played sports growing up. Is it more fun to play in a game that you won by 40 points? Or to play in one in which your backs were against the wall and you really had to use all of your capabilities and assets and your teammates' capabilities and get the game moving in the right direction? The latter is clearly more energizing and more satisfying when you get it done.

Q. Can you sleep at night?

I probably have had less sleep this year than I normally have but when I do, I sleep just fine.

Q. What would you say is the psychology now at GM?

I would say that our people understand this is one of those few defining moments in the history of our enterprise.

Q. What are the crucial elements of your strategy?

First, we're focused on product. I invite you to look at the next generation [sport] utility. The improvement is simply stunning. We need to keep that pace going. Second of all, we obviously have to step back and relook at how we're going to market from a sales and marketing strategy.

The third area is basically a frontal assault on all areas of cost to make sure we are driving to be the absolute most efficient manufacturer in the world. That's hard because it's meant significant capacity reductions and it means continuing to trim down work forces in the high cost countries, like the U.S. and Germany.

Fourth is the very challenging issue of addressing health care. We have a breakthrough agreement with the UAW. It's historic in its nature, but I would say it's a very important first step to getting health care costs and particularly the legacy aspect of those under control. It's a massive competitive disadvantage which we simply as an enterprise cannot carry.

Q. 2005 was the first year you sold more vehicles outside the U.S. than inside. What are the implications?

The implications are good and bad. It's good that we're growing so much outside the U.S. It's bad that we're selling less in the U.S. this year than we were last year by a small margin. That disparity is going to continue to grow. I want it to grow because we do well overseas. As the famous bank robber Willie Sutton said, "You rob banks because that's where the money is."

Q. When you say you want a "level playing field" from Washington, what do you mean by that?

The issue that has been particularly grating to us has been the policy of allowing the Japanese government to manipulate the yen valuation to provide export advantages. Japanese manufacturers are very competitive. They do not need currency manipulation to protect them. That policy has been followed for 20 to 30 years and it continues to be followed. It seems the U.S. government should be cracking the whip on them. Everybody's running around excited about China. It's fair that we should have the right kind of exchange rate policy out of China. But it all starts with Japan.

Q. Why are we not hearing a drumbeat out of Washington about the Japanese currency?

I don't know. Start with the global trade balances of the countries. Japan has a massive positive trade balance. This is a fully developed country with the second largest economy in the world, and they have a massive positive trade balance. That's relatively unusual, and a huge amount of that trade balance is in one area: vehicles.

China has a huge surplus with the U.S., but it is basically in total about imbalance with the world. I think a case could be made that a lot of the things that are purchased in China by the U.S. have simply slid to China from other countries, maybe from Korea. So it is interesting to see the specific focus on China. To be honest, I'm not sure I can give you a logical reason.

It's easier to pick on them. China has begun to move on its currency and I think that's the right thing to do. But what they're doing is not unusual. Developing markets, including Japan, have ridden a relatively undervalued currency as part of their economic development scheme. By any measure, China is still a developing economy. Japan is none of those things. I don't see why they just give Japan a complete free pass.

Q. Would changing the value of the yen have any impact on the transplant factories in the U.S.?

Massive. They have huge imported content. Don't forget that out of total transplant sales, a significant percentage, if not a majority, are exported into the U.S. If you look at their financial results, they acknowledge that a one yen move against the dollar moves their financial results by hundreds of millions of dollars.

Q. Are you saying that Washington is focused on the wrong target?

There are no Chinese auto sales in the U.S. at this point. What degree of factor difference is there between China and Japan? It's a million to zero.

Q. Where do you see the China market going?

Booming, growing again this year. It won't surpass Japan as the second-largest market in the world [this year]. But it will next year. You and I may not be in this business long enough, but at some point your successor and one of mine will be talking about China being the biggest market in the world.

[ILLUSTRATION OMITTED]

It's now shifting from a sprint into a steady gait that it can continue. Rather than this huge growth at the top of the market, which was driven by state enterprises buying vehicles, now it's moving to individuals buying cars. They're just getting into retail financing. So we're seeing the economic growth and the rise in real incomes in the big cities and those people are beginning to buy cars. It's the only place in the world that could be for our industry what the U.S. was from the 1930s through the 1960s or 1970s. That kind of extended growth opportunity is what we see for China. We see domestic Chinese manufacturers coming up and being big players. But unlike in Korea and Japan, where we were very skillfully sealed out during the growth period, we are able to participate in this growth.

For the full transcript, go to www.chiefexecutive.net.