GM Said to Seek Cut in Debt, New Union Rules to Win U.S. Aid

[steinravnik]

Nov. 24 (Bloomberg) -- General Motors Corp. , in danger of running out of cash this year, will seek to negotiate a cut in debt levels and new union work rules to help boost its chances of winning federal loans, people familiar with the plan said.
The largest U.S. automaker also may ask to delay a $7 billion payment to a union retiree health fund, drop more brands and rework an accord with GMAC LLC to prove it can survive and repay the government, said the people, who asked not to be named because the details haven’t been presented to Congress.

Chief Executive Officer Rick Wagoner is under a Dec. 2 deadline set by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to show how he’ll reshape operations as a condition of a $25 billion industry rescue. Congress may vote on the package on Dec. 8.

Directors are scheduled to meet by phone today, Nov. 26 and Nov. 28, and then gather Nov. 30 and Dec. 1 to review the plan, the people said. GM expects to produce a 10- to 12-page public report for a Dec. 5 congressional hearing and an 80-page semi- private report with background material, the people said.

Besides courting a skeptical Congress, Wagoner would have to persuade debt holders to go along with paring GM’s debt and the United Auto Workers to amend its 2007 labor contract. The debt and union accords likely won’t be done by Dec. 2, the people said.

2-Day Grilling

Lawmakers grilled Wagoner over two days of testimony last week before deadlocking over how to let GM, Ford Motor Co. and Chrysler LLC tap $25 billion in low-interest borrowing amid U.S. sales that may slump next year to the lowest since 1991.
Pelosi and Reid agreed to a second lame-duck congressional session and instructed Wagoner and fellow CEOs Alan Mulally of Ford and Robert Nardelli of Chrysler to prepare specifics on how they’ll navigate past the crisis.

While Republican critics such as Senator Richard Shelby from Alabama have said the auto chiefs were “arrogant” last week and that management changes might be needed, neither the government nor GM’s board has signaled Wagoner will need to leave to get an agreement, people said.

GM now has $43 billion in debt , and will need to reduce that total significantly, even after a government loan that may be $12 billion, the people said. Analysts have said any increase in GM’s debt load will make it uncompetitive.

http://www.bloomberg.com/apps/news?p...BKE&refer=home

[Buickman]

more cuts, more takeaways, more of the same old Wagoner. the plan doesn't have to be more reductions. then again, the guy has no clue how to grow the business. therefore, it is certain that his plan is doomed to fail just as the so called "turnarounds" of the past have failed miserably. wish they'd send me to Washington. I'd explain Return to Greatness, get the loan, and come back to Detroit and make it happen.

[Kennyboy]

IMO, this will finally break the camel hump on unions causing American manufacturers to be uncompetitive against their foreign competitors. Unions for years has been causing the manufacturing sector to deteriorate over time.

Unions are bad for several reasons.

1. They limit competition by imposing a tariff on imported good, thus limiting product diversity.

2. They want to make their goods and services to be inelastic, making their services invaluable and causing a monopoly on labor. .

3. They artificially inflate wage and salary rates above the market demand for wages and what firms are willing to pay, causing more unemployment.

4. Limits domestic competition by restricting those firms from suppliers and the market.

[Gm_Tooler]

Originally Posted by Kennyboy

IMO, this will finally break the camel hump on unions causing American manufacturers to be uncompetitive against their foreign competitors. Unions for years has been causing the manufacturing sector to deteriorate over time.

Unions are bad for several reasons.

1. They limit competition by imposing a tariff on imported good, thus limiting product diversity.

2. They want to make their goods and services to be inelastic, making their services invaluable and causing a monopoly on labor. .

3. They artificially inflate wage and salary rates above the market demand for wages and what firms are willing to pay, causing more unemployment.

4. Limits domestic competition by restricting those firms from suppliers and the market.

Translation please.

[1G6]

This country has needed to "limit product diversity" ever since the first Japanese electronics hit these shores in the late 1960s. No one has the balls to do so.

[sigma]

Originally Posted by Kennyboy

Unions are bad for several reasons.

1. They limit competition by imposing a tariff on imported good, thus limiting product diversity.

Unions don't do that. Trade policy does.

2. They want to make their goods and services to be inelastic, making their services invaluable and causing a monopoly on labor. .

It's called group bargaining. Consumers do it all the time. It's called COSTCO.

3. They artificially inflate wage and salary rates above the market demand for wages and what firms are willing to pay, causing more unemployment.

Unlike generic management and executives who do what to earn half a billion dollar pay packages?

4. Limits domestic competition by restricting those firms from suppliers and the market.

Um... what are you saying? The UAW puts handcuffs on GM procurement? MUAWHAHAHAHA.

[mikmak]

Originally Posted by Kennyboy

IMO, this will finally break the camel hump on unions causing American manufacturers to be uncompetitive against their foreign competitors. Unions for years has been causing the manufacturing sector to deteriorate over time.

Unions are bad for several reasons.

.....

.....

3. They artificially inflate wage and salary rates above the market demand for wages and what firms are willing to pay, causing more unemployment.

......

Whilst Sigma addressed your other comments to varying degrees, it is this one which I think needs more attention.

Without unions, the wages and entitlements of workers would be far less (obviously), which would make GM more competitive (yay).

The only problem is that current workers would have (hopefully) budgeted against their forecast income, but (more likely) have loaded themselves with massive debt, to buy homes, cars and over sized TVs. Whilst this action, with hind sight, was foolish, it seemed to be the order of the day and did actually give rise to massive (illusionary) wealth and a very mobile economy.

Up to the eyeballs debt of the common populace, is a cultural problem. It is not borne of Union agreements. Everyone else was trying to get a piece of the action too, not just the unions.

GMs inability to put their foot down and say enough is enough, is a major contributor to their current situation. It's a unions job to squeeze employers as hard as they can.

IMO, GM needed to take a harder stance on Union argy-bargy, through explaining the repercussions of tendered contract alterations.

Even without the current credit crisis, it was clear that GM was paying too much per car to remain competitive in the long term.

[mikmak]

Originally Posted by 1G6

This country has needed to "limit product diversity" ever since the first Japanese electronics hit these shores in the late 1960s. No one has the balls to do so.

That is the best way to kill competition. We had massive import tariffs on our automotive industry many moons ago. The result was sub par products (though I loved many of them dearly).
It may be satisfying in an insular sort of way, but you have to remember that limiting domestic competition also reduces the need for domestic companies to make better products. The run off is a less competitive export market. Plus, if someone finally decides to remove the import tariff (in exchange for some more important trade policy), you end up with a flood of more competent and affordable imported product.

Essentially you are investing in an industry that can only grow as big as the domestic market, for as long as it can sustain its own protection.

Okay all you eggs: get in this here basket and don't move.

[wildgoosechase]

Originally Posted by sigma

Unions don't do that. Trade policy does.



It's called group bargaining. Consumers do it all the time. It's called COSTCO.

But we have the choice to go to Sam's Club too. What needs to happen is have several unions, low bidder gets the contract.

[ModerateRight]

Originally Posted by mikmak

Without unions, the wages and entitlements of workers would be far less (obviously), which would make GM more competitive (yay).

That's not necessarily true, with GM able to reward its best employees and able to cut dead weight it's more likely the average compensation for workers would increase, while still keeping GM's cost for manufacturing much lower due to an overall more efficient workforce.

Joemac, posted figures in another thread that seem to reinforce this – the figures are UAW -vs- non-union/transplant average compensation:

Originally Posted by joemac

US median wage (2007) $40,405
UAW tier 1 ($14.20 p/h 2007) $29,536
UAW tier 2 ($27 p/h 2007) $56,160
Honda US wage ($26.20 p/h 2006) $54,496
Toyota US wage ($30 p/h Georgetown 2006) $62,400

I honestly don't know where the figures came from or how accurate they are, but similar results happen in other non-union industries all the time.

It really comes down to maintaining high retention of quality workers (which makes the company more efficient) and minimizing turnover (turnover makes the company less efficient).

[adplusone]

It's time for the UAW and CAW to acknowledge that their economic model is a dinosaur and until there is a fundamental shift in the way they do business, Detroit it doomed.

They need to come out and say "We will work for the same monies, benefits and employment rules as the non-union transplants in the South". This would include pensions, health benefits and the ability to terminate employees at will.

Anything less will hasen the demise of the Big 2.5.

[PhishPhood]

Originally Posted by 1G6

This country has needed to "limit product diversity" ever since the first Japanese electronics hit these shores in the late 1960s. No one has the balls to do so.

Unfortunately your simplistic solution was tried already on a huge macro stage. For the better part of 20 years the integrated steel makers lobbied for and got trade protection in the form of huge tariffs and limitations in the quantity of imported steel allowed into the country.

The result. They laughed themselves all the way to liquidation.

The only one to survive this governmental largess is US Steel. Every other one went out of business.....fat, happy and stupid comes to mind. It doesn't work no matter how good it makes you feel inside personally.

[Smoke]

Originally Posted by Buickman

more cuts, more takeaways, more of the same old Wagoner. the plan doesn't have to be more reductions. then again, the guy has no clue how to grow the business. therefore, it is certain that his plan is doomed to fail just as the so called "turnarounds" of the past have failed miserably. wish they'd send me to Washington. I'd explain Return to Greatness, get the loan, and come back to Detroit and make it happen.

Right now isn't the best time to grow a business. Not sticking up for Wagoner but...

[Sal Collaziano]

"drop brands" is what caught MY eye.. I wonder which.. HUMMER, for sure.. Pontiac, maybe? Saturn, possibly? I doubt Buick as they sell too well in China.. But maybe Buick will be history in the U.S...

[Lichtronamo]

Originally Posted by Sal Collaziano

"drop brands" is what caught MY eye.. I wonder which.. HUMMER, for sure.. Pontiac, maybe? Saturn, possibly? I doubt Buick as they sell too well in China.. But maybe Buick will be history in the U.S...

That was the big news in the story for me too.

GM could easily to kill off Buick (US only w/ redone Holdens/Daewoos/Opels in China), Pontiac and GMC.

Saturn could go too or they could keep it if they follow through with the Opels in the US strategy. However, that strategy assumes that people accept Saturn as an uplevel brand like Acura is to Honda. Difficult sell IMO. Also, isn't that what Saab should be???