General Motors Death Watch 13: Steady as She Goes

Robert Farago
by Robert Farago
general motors death watch 13 steady as she goes

'We aren't going out of business in the next six months.' After yesterday's stockholder meeting, GM Chairman Rick Wagoner faced reporters and jokingly predicted that his company will last until November– just in time for the long-delayed launch of the new Pontiac Solstice. The irony would be delicious if there weren't so many diners at the table. GM's continuing slide threatens the financial future of hundreds of thousands of shareholders, workers, suppliers, dealers, even the Seven Million Dollar man himself. And yet Wagoner's "big idea" to revive The General's declining health is a sham.

While Wagoner unveiled a five-point plan for GM, the headlines focused on plant closures and screamed "GM to slash 25,000 jobs!" The Chairman's committment to downsizing was a guaranteed spin winner. You know the drill: American manufacturing jobs are disappearing. It's a crisis! Something must be done! Equally important from Wagoner's POV, there's a market-pleasing corollary: times are tough, but GM is taking tough action. News of the move sent GM's share price (which has lost over 50% of its value in recent times) up fifty cents.

The truth is less dramatic than Wagoner would have us believe. As Daniel Howes of The Detroit News pointed out, GM is currently shedding between five and six thousands workers per year through 'normal' attrition. GM will lose 25k jobs by '08 simply by continuing its present course. Lest we forget, it still has to pay out full health care benefits. And deep-sixing entire chunks of GM's workforce hasn't stopped the rot thus far. Since 1990, The General has closed six assembly plants, trimmed 117,065 hourly workers and decommissioned 14,296 bureaucrats. So much for magic bullet number one. Next round: new product.

Wagoner pledged to speed-up new vehicle development and invest another billion dollars in the process. A billion bucks is lot compared to most people's savings, but the extra money only brings GM's R&D budget up to $8b a year– compared to Toyota's $15b. While no one could criticize GM for trying to create vehicles people actually want to buy, there's disturbing news from the engineering front lines. GM recently scuppered its rear-wheel-drive program and the replacement for the Northstar V8 is rumored to be at least four years away.

It takes The General over two years to get a new machine off the drawing board and into production. At best. 'Speeding up' the introduction of new product sounds good on paper, but any greater rush to market could mean more Solstician holdups and/or quality issues. The General's immediate future depends on what Wagoner and his team hath wrought in the last five years. If GM's PT Cruiser wannabe bombs, if their new full-sized SUV's and trucks tank, well, there's not much GM can do about it in the short term.

Other than offer incentives. Which Rick plans to cut. Bullet three: eliminate discounts by "streamlining" GM's dealer structure, improving sales in metropolitan areas, loading vehicles with more standard features and advertising vehicles closer to their "actual" retail price. Is it me, or does this sound like firing blanks? It's not the kind of strategy I'd depend upon to shift 1.2 million unsold vehicles (and counting). Surely, the only way to eliminate discounts is to build the right product for the right cost, and then sell it at a price that generates enough profit to stay in business. Most of the other guys seem to get it.

Of course, most of the other guys don't carry health care costs that equal $1500 per vehicle. Bullet four: renegotiate the UAW's contract. Hmmm. So why hasn't Wagoner formerly requested re-opening their contract? Anyway, how are those "intense discussions" going? 'We have not reached an agreement at this time, and, to be honest, I'm not one hundred percent certain that we will,' Wagoner said at the shareholder meeting. 'If we can't do that we'll have to consider our other options."

Such as importing more parts from China. This is the final round in Rick's gun. Although it didn't get nearly as much media attention as the nominal job cuts, the Chairman's announcement that he'll reduce costs by replacing UAW-made parts with Chinese parts is big news. Given that GM is now manufacturing cars in Slave Laborland, the clear implication is that GM could move more production overseas. It's not a bad idea, financially, but it ain't gonna help if and when GM tries to play the patriotic card.

And there you have it: too little, too late. For whatever reason, Wagoner couldn't bite the bullet. He couldn't lop off dying brands. He couldn't go nuclear on the UAW's costs and practices. He couldn't reinvent GM. The ship is sinking, but as far as Wagoner is concerned, it's steady as she goes.

Join the conversation
  • Poltergeist Make sure you order the optional Dungdai fire suppression system.
  • Prabirmehta I charge my EV at home 100% of the time. The EV is used for in-town driving and the gas guzzling SUV is used for out of town trips. This results in a huge cost saving and rare trips to the gas station.
  • Conundrum Three cylinder Ford Escapes, Chevy whatever it is that competes, and now the Rogue. Great, ain't it? Toyota'll be next with a de-tuned GR Corolla/Yaris powerplant. It's your life getting better and better, yes indeed. A piston costs money, you know.The Rogue and Altima used to have the zero graviy foam front seats. Comfy, but the new Rogue dumps that advance. Costs money. And that color-co-ordinated gray interior, my, ain't it luvverly? Ten years after they perfected it in the first Versa to appeal to the terminally depressed, it graduates to the Rogue.There's nothing decent to buy on the market for normal money. Not a damn thing interests me at all.
  • Inside Looking Out It looks good and is popular in SF Bay Area.
  • Inside Looking Out Ford F150 IMHO. It is a true sports car on our freeways.