GM in survival mode

Posted by: David Welch on November 5, 2008

Desperate times call for desperate measures. General Motors Corp. will announce some tough actions this Friday, Nov. 7, when the company announces its third quarter earnings. Losses are expected to be big since auto sales have taken such a big swoon.

An email sent out Monday said that Wagoner and COO Frederick A. “Fritz” Henderson will tell employees and Wall Street how the company will have to operate in the current environment, say sources who saw the email. With credit markets being extremely tight and the economy in recession, auto sales fell to their lowest level in 40 years.

GM will slash spending on new products in 2009. Sources in GM’s product development group say that nearly every product except a new Cadillac sedan that would compete head-to-head with a BMW 3-series in 2011 or 2012 have been delayed. Even key models like the Chevrolet Cruze compact and Malibu family sedan could be delayed, as BusinessWeek reported in this story on Oct. 23.

Clearly, GM is looking at every way possible to conserve cash. The company was burning $1 billion a month before third-quarter auto sales took a nose dive. During the last week of October, Vice Chairman Robert A. Lutz and GM’s top product planners met in a closed-door session that required attendees to sign confidentiality agreements.

Sources in the company say attendees have been tight lipped. Other engineers and product developers were left to speculate. The betting odds were that GM’s planners were either war gaming how it would fold Chrysler in to the company or cut spending. Maybe both. Bottom line: GM is scrambling to find a survival plan.

Reader Comments

US automakers Crap

November 6, 2008 3:06 AM

Cut the crap out, I am sure Gm would die in this economic turmoil so are the other 2 of big 3...Japs and Europeans and now chinese automakers will rule US

C LaVoie

November 6, 2008 3:48 AM

It goes to show you how sins of the past come back to haunt you. Management's short sighted decisions, led them to make a lot of sub par products - sending consumers elsewhere. Their poor treatment of workers led to unions. The unions and their agreements are now keeping GM from fixing itself. No matter what happens - to save GM or Chrysler - independent or merged - people are going to loose their jobs. A lot of them. The sooner GM fixes its balance sheet (shedding excess everything) & regains its footing, the sooner they will start hiring again. If GM goes under - it will be the short sighted union bosses who will have made the final, fatal blow. As they stoically walk away from the last shuttered factory door, they can take comfort and pride in showing the management - that the unions are indeed a force to be reckoned with.

Charles

November 6, 2008 9:43 AM

The unions have been in place for over a three generations of working families. They have been there since a time when they were needed and still needed... Just because other countries can use slave labor, and the government has such lax import tax laws with the Asian market, has nothing to do with the quality of what is on the market. Have the big three been Greedy? Yes! But the quality of an American car can not be questioned in this day and age.... And maybe just maybe since it seems OK to not have loyalty to the country where you live and the products it manufactures, may just have something to do with sales.

Lawjos

November 6, 2008 10:02 AM

@ C LaVoie

well said, i most certainly agree!

c.l.shannon

November 6, 2008 10:27 AM

there is NO reason to bail these idiots out - but pelosi and reid will do it anyway. so just hand over your wallet and checkbook mr. and ms. taxpayer (but keep depositing money in the checking account) because they're going to 'redistribute' your money to these companies who sold you junk for decade after decade and developed an SUV/Truck crack addiction after that.

thanks to pelosi - the american public will keep these dead corpses stuffed and looking 'life-like' until the smell gets to be too much to bear.

Uncle Sam

November 6, 2008 10:44 AM

In good times the Big Three signed up for unsustainable labor contracts with the union and since then the choke hold has been in place. You cannot expect a company to stand when it can't manage its own business versus demand because of a labor contract. Jobs are not entitlements. The quality of the overal product has slipped as more cost goes into retiree health care than componet quality. People can say BUY AMERICAN all they want.. At the end of the day the consumer works hard for their dollar and deserves a value. Isn't that a fundamental rule of a capitalistic market? Build a better product and price it right (minus the legacy costs) and perhaps the sales trend for the big 3 would change. Remind yourself to buy American the next time you walk into a Wal-Mart.

econguy

November 6, 2008 10:53 AM

The most brilliant aspect of the Japanese car companies was to bring their own mild version of a union with them, rather than none at all while risking a turn to the UAW along the way. It is now time to teach some hard lessons in Mich and Ohio. Bury them with cap and trade taxation and dismantle their coal power stations too. Call it CHANGE and let them eat that for 10 years. I think we also need to send a few wake up calls to New England and Calif. cities also.

The recipe of disaster

November 6, 2008 11:24 AM

The problem with GM is the lack of innovation. Always following the market vs. guiding it. FYI - the first Prius was sold in 1997 in Japan (when a hybrid wasn't really needed).

"Just because other countries can use slave labor" - so, is either GM way or slavery? no middle?

mark twain

November 6, 2008 11:25 AM

GM makes crappy cars. That is the bottom line. Cutting wages and benefits will never change that. They pay assembly workers $4.00/hr in Mexico. So don't think the labor force is the problem--it is lousy, uninspiring cars. in the past GM was profitable for two reasons: they made good profitable trucks and two, they had a huge labor force(their 500,000 employees, plus vendors/dealers accounted for nearly 30% of their sales, now that base has shrunk and no one is loyal). They are swirling down the toilet in a mess of their own making.

Wiseguy

November 6, 2008 11:52 AM

The unions did not break GM. It was their sinfully OVERCOMPENSATED management teams. GM has never been able to do more with less. Even with all of their subcontracting, they haven't been able to break even because they overpay every last one of their managers. GM has one of the biggest management lists in town. The managers who are currently getting paid 20 and 30 million dollars a year to do little other than sign forms to pay other managers should be ashamed of what they've done to GM.

super

November 6, 2008 12:09 PM

Compare the big 3 top brass wages to the other car companies. There is a LOT of fat to be trimmed. they should lead by example. The excess fat around the world from these guys is abundant and needs to go.

simon

November 6, 2008 12:58 PM

Ladies and Gentlemen, put politics aside, and stop the cynicism for just a moment, I read the comments and see a lot of resentment, why is that? This is the time to come together not fall apart. As an American, I guarantee you that you do not want GM out of business. The last think we want is for Toyota like companies to take over. Yes, GM needs to keep changing and they have been investing Millions in finding new technologies. Change is inevitable for anyone in any market, they will change and that is a fact, but the impact on the US is what I am talking about. We must support US companies especially companies like GM. If you travel the world, Brazil Europe, Israel, the far east you will see that Ford and GM are the most cars on the road. it is an American company and our job is to support them through this change. Hard times lead to change not extinction.

wtbirds92

November 6, 2008 1:11 PM

The workers at GM will have to decide which is more important to them, being part of a union, or having a job because GM, Ford and Chrysler cannot compete in this environment. I am also amazed buy how much animosity American's have for US auto makers. If you look inside Consumer Reports of all the imported brands only Toyota and Honda have constantly high quality ratings. The European car makers have the worst record on quality and many brands like Ford, Buick and Cadillac are rated high, but there is an impression out there that all imported cars are good.

Jan R. Smith

November 6, 2008 1:32 PM

I gave up on Chrysler 10 years ago, after 3 transmissions, 2 air conditioners. Bought a Toyota Avalon. Ten years, no problems. We should allow all three to go belly-up, and start anew.

Edward

November 6, 2008 1:35 PM

It is easy to blame the UAW for the by now unsolvable problems of GM. But union contracts aren't imposed on management--they are bargained and agreed to by both sides. There were management negotiators for every contract, boards of directors who signed off on the contracts and accountants who figured out how much they would cost.

MANAGEMENT of GM agreed to the contracts. If they were too short-sighted to see past the next three years and if the UAW took advantage of that, who is really to blame?

Gumby

November 6, 2008 2:06 PM

GM will cut Cobalt, Aveo, other small car prices to win market share with savings from future model development expenses.. GM can add mild hybrid to all small car models as options to boost sales even further..

Cato

November 6, 2008 2:41 PM

Well, I'm reluctant to give a blank check to any company, much less automakers with their incompetant managers and corrupt union boss big shots.

But if a taxpayer-funded loan can tide them through this downturn and result in a complete retooling of the industry to produce greener, cleaner, and more fuel efficient cars and trucks, this could be seen as a national security issue.

Preserving our industrial base and cutting our imported oil bill from hostile nations could be in our longterm national interest.

But this should be a temporary loan not a giveaway. And I expect serious changes and compromises from both management and union workers to sell this deal to the American People.

Face it, we're all tired of footing the bill for people who were free riding during the good times and now come crying to Uncle Sugar for handouts at our expense.

earl

November 6, 2008 3:43 PM

The cost of baling out the automakers is relatively insignificant compared to the tax payer liabilities if they were to fail. The pension liabilities alone that would be assumed by the government would be in the tens of billions. Not to mention the trickle down effects of other businesses that would be shuttered in the wake of the bankruptcies.

Matt

November 6, 2008 5:10 PM

Seriously? Let the big three fail? Brilliant. Maybe people should learn how to spell and write coherent sentences before they leave their opinions on such a serious issue. The cries of "Let them fail" are absolutely ridiculous. Calling for the failure of these three companies is akin to asking for the entire economy of the midwest to fail. In addition, the impact on the national and global economies would be disastrous. Keep asking for the big three to fail. Enjoy a prolonged recession and unbelievably high unemployment. These two things would be the price of ignorance.

Norm

November 6, 2008 7:10 PM

I am hopeful that General Motors will survive in one form or another. It would probably be wise for them to take a small percentage of their new funding and try building tiny cars for use in the country. Perhaps a modern version of the Citroen 2 CV, a 62 mph car with a BMW 500 or 375cc motorcycle engine requiring maintenance at 160,000 km intervals. Perhaps they could team up on a small scale with solar cars or 3-wheeled vehicles. Some of those small companies would love to rent the General Motors facilies and have their talented engineers on standby for them.

jordan

November 6, 2008 8:00 PM

Did you know GM has more vehicles that get over 30 MPG than any other manufacturer? What drives me CRAZY as a GM employee is that GM can make vehicles that run on Ethanol all day (Actually there are over 3 million E85 capable vehicles on the road NOW, and E85 reduces Gas dependancy by 85%!) but you need the infrastructure to support the change! In case you have not noticed there are hardly any E85 fill stations! GM is not in the Fill Station business! GM cannot put the needed infrastructure in place to support a major change like everyone expects! The government needs to support building the needed infrastructure if they expect people to make a dramatic change to an alternative fuel. US Auto manufacturers make great products, and anyone who thinks foreign quality is better than American quality is just plain wrong! Check your facts! JD Power often rates GM products higher than Lexus, Toyota, or Honda! As a matter of fact, NUMMI (New United Motor Manufacturing Incorporated) is a joint venture between GM and Toyota in California. Pontiacs go down the assembly line next to Toyotas. The same people build them. And throughout all GM plants we use the EXACT SAME MANUFACTURING SYSTEMS as Toyota. GM also offers more customer service activities than any auto manufacturer. People do not realize that you buy the car once, but you service it for the life of the vehicle. Think about your service after the sale and I promise you GM does more than anyone! Trust me, I know because I am a GM field rep and it is my job to compare GMs customer service activities to all other manufacturers and GM beats them all in every category! ) Simply put, GM makes the best cars and trucks on the planet and there is no other company that does more for its customers after the sale and even after their warranty expires in the case of loyal, appreciative, and deserving customers! WHERE DO YOU LIVE? SUPPORT YOUR COUNTRY AND YOUR NEIGHBORS!!! BUY US MADE PRODUCTS!! Anyone who thinks they are "A Patriot"; if you drive a foreign manufacturers’ vehicle, then you cannot be a TRUE Patriot!

Happy Americans

November 6, 2008 8:30 PM

Burn Baby Burn. Burn the hell out of Detroit together with UAW. $25 billion plus another $25 billion would surely bring the USA into toilet along with GM. Let's do it.

GM will be back in game

November 6, 2008 8:56 PM

@ US Automakers Crap

I agree they are in trouble...but please make an educated comment, if you want to....haven't u heard "a fool is smart until his mouth is shut" so don't behave like that.....

to educate you a bit...go refer to their financials...they have a manageable debt position, so this excludes them from filing chapter 11. Also their cash position at present is sufficient enough to keep them operating for next 12 months given markets don't revive.....also some of their non performing assets and divisions can be liquidated to generate cash....also don't forget Chrysler acquisition leads to a cash infusion worth 11 billion.....

they will come back....just wait and watch...

noland

November 6, 2008 11:24 PM

Uncle Sam

Keep talking that trash, thats why you house isn't worth anything now. And I have never shopped at Walmart.

Enjoy you rice burner!

Don't be a terrorist buy American!

sam

November 7, 2008 12:39 AM

For many years the auto makers used their lobbying power to defeat higher mileage standards. Why should tax payers bail out hereditary executives who ignored reality for decades?

David

November 10, 2008 8:23 PM

How many of you get excited about a Vega, Pinto, Pacer, Focus, Malibu, Taurus, Stratus? How many who own one have them for a company car or they had to settle for one because that is all the bank would approve them for? Yeah lets put tax money into companies that think those cars were good! Honda makes more cars in America than Chrysler, Toyota makes more here than Honda! Who works at those plants? AMERICANS! Why are they making it when the broke 3 arent? UAW! 1500 out of the purchase price of EVERY GM car sold goes to retirement accounts.

Honda and Toyota broke the UAW. They just told out of work people in Missouri, Alabama, Ohio and Texas if you want a job here one is but NO UNION...funny, those cars are still more reliable and they are made in closed down UAW plants....hmmmm yeah lets bail them out, but only if they change their practices. No more rebates! No more stupid 0% financing buy down rates! Engineer the cars to last 20 years not 5! Quit trying to profit on parts! Finally, go back to basics, make the best car in the world and the people will buy. Give us Vegas and Pintos and we will buy Civics and Corollas!

Tyron

November 13, 2008 9:08 AM

I hereby announce that I am willing to make the tough choices as CEO of GM. I am willing to due the necessary cost cutting and product elimination to bring a profit back to this company. I will start with my own salary of a mere $1 million. I would then go down the management line from there. How is it that the management thinks that they are worth 6000 times more than the factory worker. The spread of wages in the rest of the world is no where that high. To increase morale and dedication to quality I would make equitable bonuses applicable to everyone in the company upon meeting certain profit quotas. Let me know if I can be any help. I am available for immediate employment.

Rus

November 17, 2008 9:24 PM

GM, Ford, & Chrysler all did some really stupid things in the past, built crappy quality cars, now they are as good as anything else the world builds anywhere, but like it or not the US auto industry employ's a ton of people, if we were in anything other than this cluster that we were in I would say let them fail, but with sales what they are it would start a domino effect that would destroy our economy, and raise costs on import manufacturers even if they would be able to find enuff parts to assemble in the us until other parts suppliers could make parts for them, and once we are in the depression this would cause who needs to buy a car when we have 10-15-20 percent unemployment. we were short sighted as a nation as we gave the Japaneese companies freedom to sell here if we sold there there governmetn tacked on 20% or 25% import tariff we did not and we wonder why everything is made anywhere but the good ole USA

Norm

November 23, 2008 7:56 PM

If GM management lived like the rest of us, they would begin to understand what we want in a car. We want affordability, durability, reliability and dirt cheap repair costs with extended warrantees. Throw in reasonable gas mileage and I would buy a car from them.

Looks are not as important as fuctionality.

They can keep their sleek $30,000 gas powered cars and $40,000 battery powered cars. I will pay $10-15K tops and the darn thing had better be perfect.

~JSK~

February 16, 2009 10:46 PM

Please?????? GM claims that their models will compete with the BMW 3 series in 2 years.

That is a joke, they don't have the recourses or the time.
I'm a designer, I know how long and hard the design process is, you can't just say that your cars will be as good a another that costs twice as much.

Billy Ray Roy

February 17, 2009 11:23 PM

LOL.

$40,000. for a fisher price electric joke called the Volt...

And Honda and Toyota will have the same thing for $10,000. less.

The joke that is the UAW is destined to die a welcome death. A new financially stable company that will employ most of the out of work assemblers will be a breath of fresh air in this country of automobile crap.

Good riddance GM and Chrysler.
Your stone ages are over. Hello new automotive world with a bright future.

Post a comment

 

About

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

BW Mall - Sponsored Links

Buy a link now!