Bailout Watch 479: GM Saves $1 Billion on Labor Costs! Asks for Another $14.4 Billion
The Detroit News has secured GM’s 17-page “progress report” to the U.S. Treasury (link anyone?). Somewhere within that riveting document’s revelations: “GM’s hourly employee costs in 2003 were $18.4 billion in 2003, including its so-called legacy costs. Last year, hourly costs fell to $7.6 billion and the company projects they can be further trimmed to $6.5 billion this year, and to $4.8 billion by 2012.” Sorry, guys, a billion dollars ain’t what it used to be. For comparison, yesterday, GM CEO Fritz Wagoner—I mean, Henderson just kinda glided over the fact that GM will need somewhere between $2 billion and $4.1 billion for the next sixty days. Oh, and by the way? “GM also disclosed it has now sought a total of $10.3 billion in Energy Department loans from the government’s $25 billion low-cost loan retooling program.” The News is non-plussed. “But because the Obama administration said GM’s viability plan isn’t currently viable, and rejected that proposal Monday, it’s unclear if the Energy Department can legally go ahead with any loans to GM.” Sure! Why not!
All this economizing and cutbacks puts me in mind of the shaggy dog joke from the days of 4-engine propellor aircraft trans-Atlantic flight. It goes like this: The cabin is dark and everyone is beginning to doze off, when one of the engines catches fire. Everybody watches, nail-biting, as the pilot triggers the fire extinguishing gear, the fire goes out and he feather the prop successfully. He comes on the PA in best cool as ice Chuck Yeager right-stuff voice and allows as how they had a little problem, everything's under control and they be 30 minutes late getting to Heathrow. Some thirty minutes later, every one is calmed down when an engine on the other wing catches fire....and is again succesfully dealt with. Same PA announce, 'cept this time they'll be two hours late getting to Heathrow. At this, one passenger turns to his seat mate and says, "Golly, I hope we don't lose the other two engines or we could be up here forever" Does no one at Detroit have the balls and vision to actually start doing things? Or is hope their action plan? Wish I could believe. All those big salaries and the whole executive suite has "eggs" the size of sesame seeds.......
How many billions did GM lose last year? Even $3B doesn't mean much when you're losing $30B.
At the same News Conference, the new CEO said he was quite happy with the CAW new agreement for GM Canada, it hardly seems possible then why the Canadian Government seems to want the CAW to give more still? interesting times, also the CAW have given up on trying to get Chrysler to agree to the same contract, they said they would move on to Ford instead.
I like Stew Deans analogy, it seems like GM has been up there defying gravity forever. If you think the pittance the government has given them can do more that a month or two of operations you are delusional. It now becomes clear that GM was going to go on a vast money vacuuming scheme hitting different govt departments for different loans. Thus at no one place would the size of this disaster be seen. Perhaps Obamam's people realized that it might be cheaper to pay to retire all the UAW people still working for GM and Chrysler than to keep paying their wages indirectly. There is and this is the big negative, no guarentee that GM and Chrysler ever have the confidance ack of the buying public to sell their wares again. There is a certainty that the competition will have next generation versions of their already successful models on the street before GM can get turned around. A prime example is playing out with the electric cars. Toyota and Honda are fighting it out for the bottom (price that is) as to who can sell the most hybrids in the US. The volt isn't even in the game and were in the second round. There was a hint from GM that perhaps govt. energy credits would help get the volt started.(see above for new ways to get money.) You can only be a new startup company where a virgin market exists. The Japanese and Koreans don't compete with the American mfgs, they compete with each other. Put another way, they are in the major leagues. The game has moved, like the proverbial floating craps game, look over across the street and you will see where all the action now is.