Author : Peter J.H. Johnson
There has been buzz in the auto industry for quite a while that GM will have to go in
to bankruptcy protection to save its North American operations. Dwindling sales, a
shrinking market share, and production facilities running well below peak levels add
up to a very difficult situation. Add in the fact that GM's biggest supplier, Delphi,
entered into bankruptcy protection in October, and a few accounting errors have
added an addition $2 billion loss for 2005 (for a total of $10.6 billion) and things
don't look any better.Rick Wagoner, CEO and Chairman of General Motors Corporation, can't be held
responsible for all of GM's woes. Sure, it was under him that GM failed to invest
seriously in hybrid technology that is fueling (pun intended) the rise of Toyota and
Honda. And he was at the top of GM while they introduced such flops as the Aztek
and Chevrolet SSR. But those aren't the real problems. GM's underutilized
production capacity in North America is a result of decades of missed sales targets.
GM's bloated payroll for blue-collar workers is rooted in over half a century of union
greed and corporate indifference. Though Wagoner is not responsible for many of
GM's woes, it is up to him to fix them.Over the last 6 months, Rick Wagoner has been working on a turnaround plan that
is intended to restore GM to profitability and realign its North American production
capacity with its market share. This plan calls for a reduction of 30,000 blue collar
workers by 2008, the closure 9 manufacturing facilities, renegotiated healthcare
benefits for all employees, a product offensive throughout all of GM's brands, and
the selling off of non-core business assets.What's been done so far:
GM has offered generous buyout packages ranging from $35,000 to $140,000
to 113,000 hourly employees in hope of negating the need for extensive layoffs to
achieve a reduction of 30,000 hourly employees.Cut executive pay by 10%-30%. GM also cut bonuses and other executive
compensation.Hourly employees must now contribute to their healthcare plan. The change will
reduce GM's annual healthcare liabilities by about $1 billion.Sold a 17.4% stake in Suzuki Motor Corporation for $2 billion.Sold their 20% stake in Fuji heavy Industries (maker of Subaru) for $315 million
in cash.Unlike restructuring of the past, General Motors is heavily investing in a product
offensive, introducing up to 15 new vehicle this year alone. The most important was
the introduction of the GMT900 platform that underpins large SUV's and pick-ups.
So far sales of the Yukon, Tahoe, and Escalade have been very strong. The new
Silverado and Sierra will be introduced later this year.General Motors has also reduced its dependence on incentives. Today, the
amount of money GM is spending on incentives is at its lowest point in almost 3
years. Incentives undermine the value of a brand and drive resale prices lower.
But the biggest news so far may be the sale of 51% of GMAC to a consortium of
investors for $14 billion. This will restore the division's debt rating, making it easier
and less expensive to borrow money. This, along with other steps made in the turn
around plan will provide GM with considerable liquidity, strengthen their balance
sheet, and help fund future growth initiatives.Will Rick Wagoner be able to restore GM back to health? Only time will tell with
certainty, but if I've learned one thing about North American cult
ure, it's that we
love a comeback story.Peter Johnson is the chief writer for http://www.all-about-car-selection.com
Keyword : General Motors
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