GM Chairman Looks to Future On and Off the Road – Rick and Kathy Wagoner Partner with Cornerstone Schools

Kathy and Rick Wagoner with Cristy Miles. Photo by Pat Chapman

The 16-year-old girl in the corporate office seems both at home and out of place. While those around her are wearing business attire, she sports a uniform equally businesslike -“ a white blouse, striped tie, dark jacket and gray skirt. Her eyes are bright and intelligent. A couple gathers around her for a photo. They are smiling and at ease. The executive is tall and determined-looking, yet friendly. His wife wears a gray jacket with a scarf tied loosely around her neck, and smiles affectionately at the teen.

They are not a family in the traditional sense of the word. In fact, they come from worlds so different that if not for the speech of a Detroit archbishop and a determined group of leaders, they would not be posing together for a magazine photo.

The teen, Cristy Miles, an 11th grader who lives in Detroit, aspires to be a cardiologist, at least to start; at 50 she says, she’ll switch to medical journalism. The couple determined to help make that possible: Rick and Kathy Wagoner, who a decade ago joined the Partner Program at Cornerstone Schools.

What would prompt Rick Wagoner, chairman and CEO of General Motors, and Kathy, a high school counselor at Detroit Country Day School, to connect with someone who might not otherwise visit GM’s executive suite?

Coincidence? A twist of fate? Providence? Whatever the reason, the outcome is powerful, says Cornerstone Schools CEO Clark Durant. “When any person gives, they are bringing the greatest gift -“ who they are as human beings and what they have been successful at and quite frankly, what they have not been successful at,” says the attorney. “These people make it possible for children to become value added players in the world.”

In October 1990, when newly installed Detroit Archbishop Adam Maida challenged the city “to make all things new” for its children, Durant wasn’t at the Economic Club of Detroit luncheon; he was busy running on the Republican ticket for the Michigan Supreme Court. But not long after the speech, a Detroit News reporter, interviewing Durant, suggested he get a copy of Maida’s remarks.

“When I read the archbishop’s vision for the school that had no name, but would break down barriers -¦my heart leapt and I knew somehow or another I would help him bring that to reality,” recalls Durant, a native of Grosse Pointe and graduate of both Tulane University and Notre Dame.

Durant, invited to a meeting of business, civic and religious leaders, ended up sitting with the late William Cunningham, co-founder of Focus: HOPE. Told it would take three years for the school to become a reality, Durant remembers the reaction. “Father Cunningham banged his fist and said ‘Three years! Kids are dying now!’ I said ‘Father I am with you.'”

Indeed, just 10 months later, Durant and a small group of leaders would turn the archbishop’s vision into reality, with Cornerstone Schools opening its first two schools in August 1991, welcoming some 165 children to a different kind of learning.

Durant, founding chairman for the next 14 years, became CEO in 2004.

Walter Czarnecki, current Cornerstone board chairman and one that has also been with the organization since the beginning, says the motivation has always been the students.

“What keeps me involved are the children,” says Czarnecki, an executive vice president with Penske Corporation who grew up on Detroit’s east side. “I see the way they are prepared academically, spiritually, intellectually and socially. I have to do what I can to help.”

Today, Cornerstone educates over 1,100 children in six schools (four campuses) in both Redford and Detroit; 95 percent of its students will go on to complete high school in a city where the graduation rate is among the lowest in the country.

An alternative to public schools, this ISO-certified institution for pre-kindergartners through the eighth grade, where every third grader learns violin, is open to children on a first-come, first-serve basis. While no child is denied because his family cannot pay full tuition (30 percent of Cornerstone families are at or below the poverty line), all families are required to pay according to their means.

Cornerstone’s Partner Program -“ a blend of fundraising, mentoring and relationship building — is the result of a friend advising Durant to “create relationships around these children where people give of themselves for others to have a better life.”

Trending Bank of America Opens Rochester Hills Financial Center Kathy Wagoner, mother of three sons, admits to requesting a female student at Cornerstones Schools, in this case young Cristy Miles. Photo courtesy of Kathy Wagoner.

The Partner Program creates a relationship between partner and student -“ one that might last a student’s entire education, as it has with the Wagoners, who partnered in 1998 with first-grader Cristy Miles. Partners join their students at four Partner Mornings during the school year; partners also contribute at least $2,500 annually, important since Cornerstone receives no public financing.

Kathy Wagoner says she remembers her first Partner Morning with Cristy, then 6 years old, like it was yesterday.

“She was just this shining, smiling face. I sat down next to her and she gave me a hug. Just a delightful little girl,” says Wagoner, who has three sons and admits to requesting a match with a female student. “The impression I have of that meeting was that Cristy was well-liked and respected among her classmates and she respected herself.”

It was also a memorable moment for Miles. “I was pretty excited when I met her. Over the years I’ve gotten to love her as a second mom.”

While the Wagoners recently partnered with two first-graders, Cristy is the first CS student they partnered with, the result of a friend’s recommendation.

“A friend mentioned to me that fall (1998) that she thought we would really enjoy this type of volunteer work,” says Kathy, who earned a master’s degree from Oakland University and has been a counselor at Country Day for the last eight years. “It’s a lot more than just writing a check, or organizing a luncheon. It’s actually fostering a relationship, creating a friendship and checking in on someone on a quarterly basis.”

The relationship has grown through the years for Cristy, the first Cornerstone graduate to attend Country Day (others have since followed). “Mrs. Wagoner’s advice, ‘don’t give up’ was big, because during my eighth grade year, I didn’t know if I was going to Country Day or not based on financial difficulties.”

Kathy Wagoner remembers the encouragement. “I knew that Country Day wanted her to come and the financial situation was very tight. Then Clark Durant was able to collect enough support to contribute to her ability to come to Country Day.”

Cornerstone Board Chairman Czarnecki, who along with his wife has partnered with several students over the years, says the Partner Program is a key component of the school. “It’s allowed people to connect with these kids in a positive way.”

Rick Wagoner, too, has seen the results. “As we’ve had a chance to see the progress of the school as it’s grown and a chance to see people like Cristy grow up through the system, it’s been rewarding to see what Cornerstone’s been able to accomplish.”

He’s not alone in his view.

The Wall Street Journal, in an October 12, 2001 editorial called the Partner program “the lifeblood” of the school.

While the Cornerstone program has been a rewarding one for those who participate, Rick Wagoner still has a job to do, running one of the world’s largest corporations as it prepares to celebrate its 100th birthday on Sept. 16, 2008. As one might expect, there’s a lot on the mind of GM’s chairman and CEO.

Jackie and Ben Lee get a closer look at the Chevrolet Equinox Fuel Cell vehicle in their Burbank, Calif. neighborhood. The couple will take part in GM’s national market test – “Project Driveway” – which provides free use of Equinox Fuel Cell electric vehicle. Photo by Steve Fecht for General Motors.

Speaking about the change in market share (shrinking in the U.S.), Wagoner understands what’s at stake, yet keeps it in perspective. “I think back in 1950, 67 percent of the vehicles sold in the world were sold in the U.S.

Now, not because the U.S. has shrunk, but because the rest of the world has grown, we’ll sell 16 million out of 72 million vehicles in the U.S. So the percentage is going down,” says Wagoner, who began his GM career as an analyst in the treasurer’s office in New York in 1977.

“If we want to be competitive in the future and successful we not only need to keep doing well in this market, which is still the biggest in the world, but we need to do well around the world. Our management team needs to reflect people who understand different cultures and who can work together to take our great resources and brands and expand them most effectively and aggressively in the emerging markets.”

With gas prices soaring, Wagoner also understands the race for alternative methods to power cars and trucks is one that GM wants to win. On whether the development of the lithium-ion battery technology will make it possible for GM to introduce a 2010 model of the Chevy Volt, he is cautiously optimistic.

“We probably watch battery technology development as much as anything that’s going on inside the company today. So it’s got people cheerleading it and a lot of smart people working on it. It’s progressing and we remain optimistic, though we still need a few more breakthroughs on the batteries.”

Battery technology is not the only thing that occupies the attention of General Motors; the bigger question is what the future holds for the entire auto industry.

“I think it’s a little early to call what technology will win,” says Wagoner. “The way we’re looking at today is somewhat like the early days of the auto industry. If you go back to the late 1800s when the auto industry was formed, for a period of a decade or so, it wasn’t really clear which technology would be used to power vehicles. There were a lot of people who thought the steam engine would be the winning technology. A lot of people, including Thomas Edison, thought batteries would win.”

What did win -“ the internal combustion engine powered by petroleum-based fuels -“ is one that Wagoner says GM has succeeded at for 100 years.

“But it’s beginning to feel like it’s time for a change. So we’re opening up a range of options, which consist of making internal combustion engines better and more efficient. Hybrids help to do that. Battery-powered vehicles such as the Chevy Volt, or conceivably even fuel cells, also have received a lot of development.”

As far as Wagoner can see, total reliance on petroleum is going to give way to other sources, such as bio-fuels.

GM CEO Rick Wagoner says the auto industry will “see a lot of change over the next 20 years.” Photo by Pat Chapman

Change -“ something GM has faced frequently in the last 30 years -“ is still a watchword. “We’re going to see a lot of change over the next 20 years. The high prices of oil simply reflect the fact that demand for oil is going up because the growth of emerging countries like China and Russia has been amazing,” reflects Wagoner. “We need to get out in front of that, so it’s a particularly exciting time. We need a lot of smart people -“ graduates from places like Cornerstone and Country Day.”

And smart people are trying their best to keep GM at the front of the pack. One of those, Lawrence D. Burns, Ph.D., GM’s vice president of research and development and strategic planning, told the 2008 Annual U.S. Hydrogen Fuel Conference that the industry was at a critical juncture in a journey to realize the full potential of hydrogen fuel cell-electric vehicles. “While we have made impressive progress, we have now reached a point where the energy industry and governments must pick up their pace so we can continue to advance in a timely manner.”

His boss, Rick Wagoner, smiles and nods his head when the quote is read to him. “Part of the reason he was making the appeal was that he had to come to me and get the okay to spend money for refueling stations ourselves. For personal transportation, we’ve got to develop the cars and technologies, but we’ll rely on other parties to develop the infrastructure and the fuels. That’s worked pretty good, obviously with the oil companies and refueling stations that we have now. But there will need to be changes and those have seemed slow to come from our perspective.”

While Burns’ speech was chock full of convincing reasons to support hydrogen as an automotive fuel, perhaps the most compelling evidence came in May 2007, when the Chevrolet Sequel became the world’s first fuel cell vehicle to go 300 miles on a single fill-up of hydrogen.

That success led to Chevrolet’s launch of Project Driveway, the largest-ever market test of fuel cell vehicles. Burns said Project Driveway will field over 100 Chevy Equinox Fuel Cell vehicles equipped with the same fuel cell technology that powered the Sequel. Almost half of the vehicles have been built, with more than 1,500 people having driven them on public roads.

Yet the problem of fueling these vehicles remains.

“You can imagine the challenge of getting people to put in hydrogen refueling systems, which are completely different than today’s gasoline stations,” says Wagoner. “Changing our personal transportation infrastructure here is really going to be a team sport and we need government and regulators and the fuel suppliers to work closely with us.”

Yet while GM looks positively toward the future, there’s no denying that the current economy and global competition are factors. GM’s preliminary sales figures for the first quarter of 2008 showed increases across the globe -“ except in North America, where sales declined 10 percent compared to last year.

“We’re optimistic for the long term, but the last six months have been pretty difficult with the housing issue,” says Wagoner. “Our expectation is that hopefully the economy will continue to come back as the year progresses. We are seeing a shift away from some of the traditional truck-based products to cars and so-called crossover vehicles. That is something that is both an opportunity and a risk that we need to manage. In the meantime, we are seeing terrific growth in places like South America, Russia, India and China. So what we need to do is take full advantage of that growth to maintain our scale.”

Wagoner is also conscious of the elephant in the room -“ that being Toyota. While GM’s first quarter sales figures came in at about 2.25 million cars and trucks, Toyota sold 2.41 million vehicles. So how is GM doing at preventing Toyota from leaping ahead?

“It’s probably getting more coverage on the outside than it is on the inside of GM. We are trying to run our business the right way. Last year at this same time, a lot was written because Toyota passed GM in the first quarter and then by the mix of our sales we came back by the end of the year,” says Wagoner. “Our focus really is we want to grow in the emerging markets and fully participate in our traditional markets. We’ve got to do it in a way that we continue to drive profitability based on products and technology rather than just trying to beat somebody in sales. We’ll see how it plays out.”

While the challenges are great for GM and Wagoner, it seems there’s palpable excitement in the air, especially with the automaker’s centennial on the horizon.

“I do think this is a period of massive change in our business. Maybe as much as GM’s early days because of this focus around energy supply, energy security and the important role the auto plays in that.”

While most Michiganders know the corporate citizenship of GM -“ the development of the Detroit Riverfront is one example, along with supporting organizations like the Prostate Cancer Foundation and nonprofit group Autism Speaks -“ the Wagoners (and others including Edsel Ford II and Bob Lutz) have quietly stepped up to personally support charities like Cornerstone Schools.

“I think they do it for the same reasons we do -“ because everyone feels a responsibility to give back to a community which has been good to all of us. I think more importantly we are very supportive of what Cornerstone Schools has done. It’s combined the importance of education, the opportunity to give students a chance to do the best they can and it’s a system in which kids work hard and are rewarded for their achievements,” says GM’s CEO. “There are a lot of things that people can, and do, contribute to in Detroit. They’re all important, whether it’s arts or other civic activity, but probably the opportunity to contribute to education is one of the most important ones.”

For Kathy Wagoner, personal involvement with Cornerstone has meant more than just supporting education.

“I’d say that this has given me perspective to develop a relationship with a child that I would never have an opportunity to meet,” she says. “I think whatever Cristy has learned from me, I have probably learned 10 times more from her. This has been a wonderful experience.”