GM slowly charts path to revival

[pupp1]

Sunday, May 22, 2005

Robin Buckson / The Detroit News


GM Chairman Rick Wagoner, left, shown with GM group vice president Troy Clarke, has been meeting almost daily with UAW Vice President Richard Shoemaker and UAW President Ron Gettelfinger , right.

GM slowly charts path to revival

Four-part strategy calls for brand revamp, health care deal with UAW

By Daniel Howes / The Detroit News
Patience, everyone.

We know General Motors Corp. plans to bring its new big trucks and SUVs to market sooner to get itself out of a deep hole. And we know it has radical plans to realign its eight divisions because its top marketing guy can't stop talking about it.

What we don't know yet, because GM and the United Auto Workers have the lid on excruciatingly tight, is their framework for reining in health care costs and closing plants that both sides are crafting to steer the General out of a deep ditch.

GM's most senior executives, often including Chairman Rick Wagoner, are meeting almost daily with their UAW counterparts to seek ways to ease GM's crushing cost burden until national contract talks with the union conclude more than two years from now.

There's clear acknowledgement atop GM that it needs to show movement in talks with the union and how they may impact prospective plant closings, and it needs to do so soon.

Patience, everyone. It's only been a month since GM's abysmal first-quarter numbers started an avalanche of bad news -- a credit downgrade to "junk" status, constant venting about GM's product gaffes (real and imagined), and billionaire Kirk Kerkorian's bid to acquire 8.8 percent of GM.

The voices that love to hate GM all have their own cures for what ails Detroit's largest automaker -- kill Pontiac or Buick, close more plants, fire executives, make every GM car look like a BMW and last like a Toyota, regardless of reality.

GM's brass has a prescription, too. It's a four-part strategy that, two weeks before the automaker's annual meeting in Wilmington, Del., is only about half revealed because doing so prematurely would back union leaders and suppliers, among others, into very prominent corners.

Don't like waiting? Neither do I. But GM may have finally learned that the over-promising and under-delivering talk of its past was more counterproductive than constructive.

If the silence yields tangible results and defined goals that the public and investors can actually see, it will have been worth the wait. If the next few months yield only promises, the logical conclusion would be that GM doesn't actually have a workable plan or, even worse, can't find a way out of its predicament.

Two pieces of GM's four-part plan already are out there. Its reorganized product cadence will pull forward the launch of all-new, revenue-rich full-size pickups, SUVs and midsize SUVs. Additionally, 14 new crossover vehicles of all sizes are scheduled to be introduced between now and the 2009 model year.

The second piece is a revamped North American marketing strategy, first detailed in The Detroit News. The plan envisions Chevrolet and Cadillac as full-line divisions; positions Saturn, Hummer and Saab as smaller niche brands; and combines Pontiac, GMC and Buick into a complementary distribution channel that could account for at least 1.2 million cars and trucks annually.

The third piece, still under wraps, calls for cutting costs through savvier purchasing, improved first-time quality (which reduces, among other things, warranty costs) and perhaps closing more plants in the United States, which would require UAW involvement.

The final piece: Cutting health care spending, which, along with the potential plant closings, is the subject of intensive and ongoing talks with UAW leaders, including President Ron Gettelfinger and **************** Shoemaker, vice president of the union's GM department.

Is there a deadline? Not officially. But the window of six weeks or so between the June 7 stockholders' meeting and the release of GM's second-quarter financials in mid-July is likely to be a pivotal time for both sides.

Driving the unprecedented talks are two intertwined realities.

GM, the third of Detroit's automakers to slip "into the tank" since 2000, is under immense pressure to detail its restructuring plan. Postponing action with the UAW until the '07 talks, betting that "the market" and big-dollar trucks will save it, or assuming that rivals like Ford, Chrysler, Nissan or, especially, Toyota will stumble -- none of those is a strategy.

They're hope.

Both DaimlerChrysler AG's Chrysler and Ford Motor Co. issued detailed turnaround plans after hitting bottom. Chrysler's turn-up has been more clearly definable than Ford's, but both laid out clear plans that included job cuts and plant closings. Their actions set expectations among investors, employees and the public that GM, the most susceptible to equity market forces, would do the same.

The second reality is the certainty that GM's cash hoard of nearly $20 billion would disappear quickly should its new cars and trucks fail to stem its market share and revenue slide with a business model that remains mostly unchanged.

The faster the cash goes to fund obligations to employees, retirees and operations, the faster GM becomes a candidate for takeover, dismemberment or ends up in bankruptcy court -- none of which are good options for the UAW, GM communities nationwide or the state of Michigan.

Another option: An internal insurrection in the form of a proxy fight, led by Kerkorian and one or two other institutional shareholders, to gain control of GM's board of directors to force change.

They aren't saying, but you could bet that GM's current leadership has no intention of letting it get to that point. If nothing else, Kerkorian's stake in GM is a vote of confidence in the automaker's inherent value, even if his presence pretty much assures that the go-slow status quo is dead.

Which is a good thing. GM has changed more in the past decade than most folks understand, but not enough. This is the crisis it needs to get where it should be.
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[Cortazzo]

They need to stabilize share before they can do anything else. You can't plan a giant like GM with such high fixed costs w/o having a good idea of what your share of the market is. Hopefully these big trucks will stop the bleeding, i think hybrids and other fuel saving technologies are on tap, and if it's true, it could be a huge differentiation from its competitors.