General Motors Death Watch 50: 399 Days and Counting

On Tuesday, the elephant in GM's boardroom removed its cloaking device. In the heart of GM's corporate HQ, in the middle of the Detroit auto show, Jerome P. York told GM's management to fall on their swords. More specifically, the man behind The Man Who Would Be King told The General's generals to prune their salaries, big style. Sure, Kirk Kerkorian's proxy also recommended killing brands, halving dividends, eliminating production capacity and a bunch of other turnaround type stuff. But his call for deep cuts in executive compensation was the exec's most chilling suggestion– at least to the people pulling the strings at the world's largest automaker. RenCen shuddered in horror.

Characteristically, the West Point grad was happy to put some hard numbers to his personal attack. According to York, GM's Board of Bystanders should work for "significantly less" than $200k per year. The company's top five officers should take a "significant" hit to their $7m per year salary. Management further down the "pyramid" should suck up double digit reductions, until "you got to the lowest levels in the plants and offices, where the percentage would hopefully be only a single digit number." In short, Mr. York seems Hell bent on turning on the lights and sending GM's lifelong party-goers home to their parents.

And why not? Obviously, Kirk "Mr. Las Vegas" Kerkorian doesn't have the juice to whack GM CEO Rabid Rick Wagoner and his Board of Bystanders and replace them with made men like York. Captain Kirk knows if he leaves it too long, it'll be too late: they'll be nothing left to plunder. So Kirk decided to kick 'em where it hurts. You know, wake 'em up a little. And just in case GM's fat cats were too stupid to feel the pain, York pointed to the time bomb ticking in the corner: "…the current cash burn rate of $24m per day would keep GM going for another thousand days or… roughly three years." Whew! "But of course that's if conditions remain the same as they were in the first nine months of 2005." Stop it Jer; you're killing me!

York's speech gave three reasons why GM's thousand day march to bankruptcy might take a bit longer (The General's new SUV's, the Chevy Malibu "renewal" and the Saturn Aura), and a more complete and plausible list of reasons why the gig could be up by next Friday (a weakening US economy, the cost of Delphi's union peace and downsizing production, the loss of GMAC income and market share). As far as veiled threats go, this one arrived buck naked on a white charger, and I don't mean the sexy new Dodge. In fact, it was so compelling it probably scared GM's top dogs for a full ten minutes.

Despite York's ability to spell-out GM's clear and present danger, his speech lacked sufficient animus to light a sustained fire under GM's corporate butt. It was couched as "tough love", suffused with compliments and reassurances. "We're not waiting to feast on GM's dismembered body," York as-good-as declared. "We're here because we want to see GM restored to its former glory– well, OK, profitability." Call it the Home Depot approach: You can do it. We can help. To which GM's Car Czar Maximum Bob Lutz immediately and publicly replied: I can do it and you can piss off. And leave your hands off my salary, Bub.

If only York hadn't pulled his punches. As TTAC's Deep Throat points out, York's estimation of GM's cash stockpile included money that isn't there: gains from the sale of GMAC, Saab, Hummer and anything else that isn't nailed down. Also, GM would be forced to declare bankruptcy well before it runs out of cash. Analysts say The General needs at least $10b on hand just to run the business (York uses $5b as an acceptable minimum). My Go-To Guy says GM currently can get its mitts on about $5b (above the $10b bankruptcy threshold), plus an equal amount from its VEBA fund (Volunteer Employees' Benefits Association, whose use is restricted). So, at $24m a day, GM's nest egg will be gone in 400 days.

That's IF things stay on an even course. York's doomsday scenario was bleak, but it didn't include the fact that a new pension funding rule could wipe out GM's entire hoard. Or the cataclysmic effect of recent price cuts and incentive reductions on GM loyalists, who are already so far backwards on their loans they can't afford a new car. Or what happens if fleet buyers– 25% of GM's business– smell bankruptcy. Or what's going on with the SEC probe. Or, let's face it, any number of nasty things currently hidden and vaguely hinted at in York's "aside" calling for greater transparency. When you think about it, York's audience may not know the half of it– literally. Clearly, they should.