Generous Motors

Posted by: David Welch on May 8, 2008

General Motors is down with O.P.P. By that I mean, Other People’s Problems. The company is stepping in to help stop a two-month old strike at American Axle and Manufacturing Co., one of its key suppliers. In an SEC filing, the company said today that it will spend up to $200 million for buyouts and early retirement deals for workers at American Axle, according to Bloomberg.

That should grease the wheels to stop the strike, which has idled or slowed production at 10 GM assembly plants. It’s easy to see why GM is doing it. GM claims that the strike cost the company $800 million in earnings and $2.1 billion in cash in the first quarter. So spending $200 million to help end the strike was comparatively a small price to pay.

But should GM intervene to help parts makers with labor problems? It’s pretty tough to make that argument. GM had to help bankrupt Delphi Corp. The auto maker spun Delphi off in 1998 but still had contractual obligations to the parts firm’s union workers and retirees. That isn’t the case at American Axle, which was formed by company Chairman Richard Dauch when he and some investors bought some weak-performing axle plants from GM in 1994. Dauch has done wonders for those parts-making operations. But he has also had 14 years to make sense of his labor deals and diversify the company to get more than 20% of its business from someone other than GM. He hasn’t. So after spending some $8.3 billion helping Delphi get out of bankruptcy and restructure, GM has to help him get end a standoff with the UAW. The only way this makes sense is if Dauch settles the strike, gets lower labor costs and passes some of the savings on to GM.

Reader Comments

Noz

May 8, 2008 9:31 PM

What can I say? What can anyone say that David Welch has not said so well?

I see the self-created pit getting both wider and deeper, the quick-sand lining deeper as well. Build what folks are not buying and lose $600/unit of whatever, not exactly a formula for success. And then consider the corolla--30 million of those hummers (NOT Hummers)) still moving around. Many blown to bits by the Islamofascists, of course.

In the mean time, Herr lutz is busy 'designing' a new fleet of errors, Richie is counting the days when he can take his parachute and leave a very wealthy man, finally free to buy a Lexus. And the new clown, well, who knows? Seems that within GM the ability to talk on one's feet is high priority and the fact that it makes no sense, those listening are pinching themselves to stay awake... Nasty picture.

The axle outfit is clearly a loser, and is being mangled by the self-serving suicidal UAW lead by the not so kind/wise Gentlefinger. Great Bleeding Scott! Some kind of drammer (Teddy Kennedy/Barney Frank-speak) playing out before our very eyes. And to be honest, most likely best viewed thru a very large glass of Guiness.

Robert Farago

May 10, 2008 10:33 PM

GM and the UAW are like the hero and the villain, locked in mortal combat, when a gun goes off. Except we don't know which is which and both of them fall to the ground dead.

Squeezebox

May 12, 2008 3:27 PM

It's all GM's fault for sourcing the axle to just one company. GM intervening in union negotiations is like a drowning man trying to teach someone else how to swim.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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