Re: GM bankruptcy

GM has probably held onto GMAC, its one-shot potential cash infusion
(and short-sighted cash infusion) until it sees what may be done to GM
by a potential strike at Delphi (which could bankrupt the company even
with a GMAC sale) and until it sees what long-overdue large concessions
it can get from the UAW. (The UAW is antagonistic, and even wants to
fight for the ridiculous "jobs bank" so its members continue to get
paid for nothing.)

GM and Delphi aren't done after a possible strike related to Delphi's
reorganization in bankruptcy. GM needs to assume liability for Delphi
workers, if not for employment then for retirement and health care
benefits (which are sinking the company and already burning its cash
reserve). In fact, that will be part of bankruptcy reorganization.
(Certainly it makes no sense to take back people into a company that
itself has long needed to shrink! This will amount to nothing but
additional costs for GM.) The obsolescent retirement setup at these
companies makes many eligible for retirement, but they are unwilling to
retire unless they get buyouts. These buyouts will cancel cost savings
from reducing current employees (losing them to retirement). (And in
fact, GM's latest proposal, that was answered by a prompt loss in its
stock value, had among its flaws the failure to do more about these
costs of buyouts, along with the jobs bank -- the company has done
nothing about the latter.)

The sale of GMAC (and GM's big income source) would be an obvious
desparation measure, and impossible to repeat.

Add to the cost problems the "inbred" management history and lack of
innovation and development of products that people in the major markets
want to buy. People have to be bribed to buy GM products.

....

"The plan is essentially as expected, meaning not terribly aggressive,"
said Rob Hinchliffe of UBS Securities. "We estimate the cuts imply that
GM is expecting to operate at 25 percent share. Given steady share
losses, this may prove optimistic."

"While GM's continued decline in market share is not the fault of
workers or our communities, it is these groups that will suffer because
of the actions announced today," Gettelfinger said.

"I think this could get ugly," said another analyst, Brad Rubin with
BNP Parabis. Other industry observers said the explosive labor
situation at bankrupt parts-maker Delphi Corp. complicates any UAW-GM
talks going forward.

"Buyouts would have to be considered as part of the mix (in a Delphi
reorganization)," Miller said in an interview. "What we need is a
financing source, and that financing source could be GM."

"The skeletons are starting to come out of the closet for this
company," said analyst Lache of Deutsche Bank. "The sheer proportions
of GM's problems may prove too difficult to fix."

"Here we go again," said Al Wojczynski, 58, a worker at GM's parts
distribution center in Ypsilanti. "GM is blaming the unions and saying
it's our fault when they're the ones designing cars that aren't
selling."

"This is especially disconcerting given the consistent decline in GM's
market share over the last few decades," said Casesa of Merrill Lynch.
"When and how is the downward trend reversed or even stopped?"

http://www.detnews.com/2005/autosinsider/0511/22/A01-390434.htm


GM, just weeks after wresting historic health care concessions from the
United Auto Workers, now plans to jettison 30 percent of its membership
from GM plants and then use the 2007 national contract talks to shut
them down.

Ford Motor, considered the kinder and gentler Detroit automaker, is
readying its own restructuring for January that will close plants and
likely eliminate tens of thousands of hourly jobs.

The UAW, first among industrial America's labor elite, is on the
defensive. Its leaders are smart enough to understand the real troubles
bedeviling Detroit's automakers and their union's responsibility in
them, but too weak to oppose the painful solutions visited on their
members.

And Toyota Motor Corp., the Japanese auto giant whose U.S. plants the
UAW has failed utterly to organize, is preparing to unseat GM as the
world's largest automaker. For that, thank the steadily growing support
of American consumers who abandoned GM and Ford after they felt GM and
Ford abandoned them.


The success of their actions will depend more on the design,
engineering, purchasing and marketing decisions made by management and
whether their products resonate with American consumers and less on the
men and women walking through plant gates every day.

Yet they will pay a price for the shortsightedness of their union
leaders and company management, who cut deals that weren't wise or
sustainable when competitors hailed from beyond southeast Michigan.
Perhaps nothing typifies that attitude more than the "jobs bank," a
creature that forces the automakers to pay laid-off workers not to
work.

http://www.detnews.com/2005/autosinsider/0511/22/A01-390436.htm


"It's always tough for unions in that situation. They have a real stake
in keeping American automakers viable and able to compete," said
Zachary Hummel, an attorney specializing in labor law at Bryan Cave LLP
in St. Louis.

"Both sides will differ on where to draw the line, but there's a
realization at the UAW that they have to be careful about pushing too
hard because they might end up with a worse situation than they have
now," he said.

"I don't underestimate the political problem they have in helping their
membership make this transition," Miller said. Gettelfinger is up for
re-election next year.

GM, which has lost more than $4 billion in North America so far this
year, announced a restructuring plan Monday that would close five
assembly and four component plants and downsize others. In all, 30,000
jobs will be eliminated.

Because the current labor contract bars GM from closing plants, it will
idle some of them until it can negotiate the closures at the next
contract talks in 2007.

"Today's announcement clearly makes those negotiations much more
difficult," Gettelfinger said in a statement.





"GM's return to prosperity depends on its offering products that
consumers find attractive, exciting and want to buy," Gettelfinger
said.

"Being successful in this regard is the exclusive responsibility of
management."

http://www.detnews.com/2005/autosinsider/0511/22/C01-390273.htm


Finally, a restructuring plan from General Motors ...

But dragging GM's North American business back in the black will depend
on how quickly Wagoner can get the union to agree to cut workers. He
said in a press conference that he will be negotiating early buyouts
with the United Auto Workers.

GM will be paying any idled workers who don't take retirement 75% of
their pay. That alone stands to cost the ailing auto giant $500 million
this year.


This year, GM's sales finally dropped to a point at which the company
cannot make money with its level of discounting. But analysts reckon
that GM will get better pricing if it isn't trying to force feed cars
on the market. "They will be selling to the people who actually like
their cars and trucks," says Sean McAlinden, chief economist of the
Center for Automotive Research in Ann Arbor, Mich.

But Wagoner has to get workers to retire, and fast. If not, he would be
paying thousands more to do nothing. When GM lays off workers, they get
sent to a jobs bank where they sit while the company finds something
for them to do. GM has 5,000 workers there now.

He may have to spend his bargaining time getting deeper health care
concessions. As Wagoner shrinks the company, he has to spread the
company's massive retiree pension and health care costs over a smaller
fleet of cars sold. That means he will have to go back to the union for
deeper health care cuts than he got last month.

Wagoner could demand more health care cuts in 2007, when the current
labor pact expires. But he may have to go back the UAW even sooner ...

http://www.businessweek.com/bwdaily/dnflash/nov2005/nf20051121_7305_db016.htm

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