General Motors Death Watch 95: Dear John

Robert Farago
by Robert Farago
general motors death watch 95 dear john

According to the highly credible “Ford and GM set to merge” journalists over at Automotive News, The General has agreed to pay bankrupt parts supplier Delphi’s remaining union workers an unspecified amount of money for an unspecified amount of time to avoid a planet-killing strike. Yes, it’s The Mother of All Extortion Pay-Offs– providing you don’t count that huge pile of money GM’s already agreed to pay twenty thousand not-so-dearly departed members of the United Auto Workers (UAW) who labored on behalf of Delphi. And here’s the funny part: that’s the good news.

As always, you gotta read the fine print. As part of this deal, Delphi will renegotiate or dump 5,472 unprofitable GM parts contracts. Let’s be clear: by “renegotiate” I mean Delphi got GM to lock-in the contracts the parts maker wants to keep, at a price that will earn them cash money. So there’ll be no more of that margin squeezing routine GM’s been using to torture its other parts suppliers. So Delphi can now afford to pay the base salaries of those UAW employeees that GM didn’t pay to leave, whose paychecks GM is about to top up so they don’t go on strike and kill GM. So it’s win, win, lose. The General's cash flow takes another massive hit and everyone goes back to the business of pretending the next group of vehicles down the line will pay for, well, everything.

Let's get to the really exciting stuff: the looming proxy fight between investor Kirk “The Las Vegas Lion” Kerkorian and GM CEO "Red Ink Rick" Wagoner. The way the Institute of Shareholder Services (ISS) sees it, Kirk stooge Jerry York’s recent resignation from GM’s Board of Bystanders was the first step in his any-day-now nonagenarian boss’s plan to stir up a shareholder’s revolt. For those of us who can’t tell a rabid dog when they see one buying 9.9 percent of the world’s largest automaker, the ISS took a look at York’s resignation and decided them’s fightin’ words!

To paraphrase the document in question, things suck at GM and they might not get any better. And then… “But frankly, to get to the crux of the matter, I have not found an environment in the board room that is very receptive to probing much beyond the materials provided by management (and too often, at least in my experience, materials are not sent to the board ahead of time to allow study prior to board discussion).” Well now we know. GM’s Board of Bystanders is a board of bystanders who take Rabid Rick Wagoner’s assurances at face value and don’t mind if those assurances aren’t in writing, or, if they are, that they arrive too late to read and digest. Who’d a thunk it?

Only anyone who’s been watching The General’s market share sink like a stone thrown into a deep, dark, well. Mr. York’s description of GM’s most excellent rubber stampers shouldn’t come as any surprise to readers of this series, nor should York’s terse description of GM’s chances. York’s letter adds GM’s negative market share with its negative cash flow to come to a negative conclusion: “I have grave reservations concerning the ability of the company’s current business model to successfully compete in the marketplace with those of the Asian producers." Join the club.

Of course, Jerry's in Kirk's gang. Which makes his final parting words especially ironic: “I will shortly make arrangements to return the confidential company materials in my possession to the Corporate Secretary’s office.” This from the board member who swore to the SEC that he won’t reveal inside information to any third party, then jets off to France to meet with Nissan Prez Carlos Ghosn to offer him the keys to the GM castle on behalf of The General’s largest stockholder and chief boardroom protagonist. Does anyone seriously think Mr. York didn’t use his time in GM’s inner sanctum to gather-up enough damning evidence of management incompetence to convince outside investors to decapitate the capo di tutti capo?

Like I said, this is going to get ugly. And so it should. It’s hard to believe that the man who lost GM more than a dollar per person on planet earth and prestiged GM’s amazing shrinking market share is still large and in charge over at The General’s tower of power. The battle for control of GM is a yin yang thang– only there isn’t any yin. In fact, everyone who wields power in this sad saga of missed opportunity and unbridled greed is their own evil triplet; Kirk Kerkorian, Rick Wagoner and union boss Ron Gettelfinger are all as bad as each other.

The conflict between these three forces will eventually reveal the exact nature of their pernicious perfidy– at least to us. For them, it’ll be last man standing. Whoever wins will oversee a kingdom of sand, washed flat by an tide that’s been forty years in the making.

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  • Nino Nino on Oct 13, 2006

    If I remember correctly, the US State Department went to bat for US built Hondas and Toyotas a few years back when EU quotas against Japanese cars limited their importation into the EU. The US State Department said that US built Hondas and Toyotas were AMERICAN PRODUCTS and thus not subject to EU quotas. They were successful. And another point, American built Toyotas and Hondas use American parts to the point that domestic content is around 75% to 85%. That means that the majority of the money stays HERE. I'm guessing that when GM starts importing Chinese built cars like they do their Chinese built V6 engines to put in their Mexican built cars, they'll still be "American" to you.

  • SherbornSean SherbornSean on Oct 14, 2006

    The idea that "buying American" is a good thing because the profits stay in the US might have merit, except for the fact that the medium 2.5 lose money on every vehicle they sell. So when I buy a Honda, I'm actually doing GM/Ford/DCX (and, therefore, America) a favor by not increasing their losses further!

  • Sayahh Is it 1974 or 1794? The article is inconsistent.
  • Laura I just buy a Hyndai Elantra SEL, and My car started to have issues with the AC dont work the air sometimes is really hot and later cold and also I heard a noice in the engine so I went to the dealer for the first service and explain what was hapenning to the AC they told me that the car was getting hot because the vent is not working I didnt know that the car was getting hot because it doesnt show nothing no sign no beep nothing I was surprise and also I notice that it needed engine oil, I think that something is wrong with this car because is a model 23 and I just got it on April only 5 months use. is this normal ? Also my daughter bought the same model and she went for a trip and the car also got hot and it didnt show up in the system she called them and they said to take the car to the dealer for a check up I think that if the cars are new they shouldnt be having this problems.
  • JamesGarfield What charging network does the Polestar use?
  • JamesGarfield Re: Getting away from union plantsAbout a dozen years or so ago, Caterpillar built a huge new engine plant, just down the road here in Seguin TX. Story has it, Caterpillar came to Seguin City council in advance, and told them their plans. Then they asked for no advanced publicity from Seguin, until announcement day. This new plant was gonna be a non-union replacement for a couple of union plants in IL and SC, and Cat didn't want to stir up union problems until the plan was set. They told Seguin, If you about blab this in advance, we'll walk. Well, Seguin kept quiet as instructed, and the plan went through, with all the usual expected tax abatements given.Plant construction began, but the Caterpillar name was conspicuously absent from anywhere on the site. Instead, the plant was described as being a collective of various contractors and suppliers for Caterpillar. Which in fact, it was. Then comes the day, with the big new plant fully operationa!, that Caterpillar comes in and announces, Hey, Yeah it's our plant, and the Caterpillar name boldly goes up on the front. All you contractor folks, welcome aboard, you're now Caterpillar employees. Then, Cat turns and announces they are closing those two union plants immediately, and will be transporting all the heavy manufacturing equipment to Seguin. None of the union workers, just the equipment. And today, the Caterpillar plant sits out there, humming away happily, making engines for the industry and good paying jobs for us. I'd call that a winner.
  • Stuki Moi What Subaru taketh away in costs, dealers will no doubt add right back in adjustments.... Fat chance Subaru will offer a sufficient supply of them.