Why GM's Plan Won't Work and the Tough Road Ahead - Bus.Wk.

[JPZenger]

www.businessweek.com

"GM is in a horrible bind. That $1.1 billion loss in the first quarter doesn't begin to tell the whole story. The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits...GM has lost a breathtaking 74% of its market value -- some $43 billion -- since spring of 2000...GM has reached the point at which it actually consumes more cash than it brings in making cars, for the first time since the early '90s...If market share continues to slip, its losses will rapidly balloon.

...for GM, shrinkage is not much of an option. Because of its union agreements, the auto maker can't close plants or lay off workers without paying a stiff penalty, no matter how far its sales or profits fall. It must run plants at 80% capacity, minimum, whether they make money or not. Even if it halts its assembly lines, GM must pay laid-off workers and foot their extraordinarily generous health-care and pension costs. Unless GM scores major givebacks from the union, those costs are fixed, at least until the next round of contract talks in two years...

How bad could it get? BusinessWeek's analysis is that within five years GM must become a much smaller company, with fewer brands, fewer models, and reduced legacy costs...Wagoner has ratcheted up the urgency level in recent weeks, signaling to unions that he needs relief from GM's $5.6 billion in annual health-care costs..."

[okieinpain]

1. I feel sorry for the unions, but they have got to do something to

remove themselves out of the reason why gm is losing money.

[Technowitch]

4. I see it more as scapegoating the unions

Unions are why we have the 40 hour week, labor safety laws, and health coverage.

All too often, when a company gets in trouble because it's made bad strategic decisions, they then turn around and blame the unions for being 'greedy'. And in the midst of it all, the CEOs give themselves huge bonuses for running their corporations into the ground.

[okieinpain]

5. true, but the unions still have to do P. R. on this. or you;re right

they will be the scapegoat. all I keep hearing is union health cost are killing GM, and Ford.

And while I'm on this subject wouldn't that tell the most average intellegent person that we need some type of universial health care to save big business.

[aneerkoinos]

10. Yeah

Really smart to blame Unions for privatized social security.

[orwell]

2. Epitath

How bad could it get? BusinessWeek's analysis is that within five years GM must become a much smaller company, with fewer brands, fewer models, and reduced legacy costs...

That will be the best thing that could happen to them. They are too large and too ossified to compete.

OTOH: If BW is writing their epitath...maybe the worst is over...

[phantom power]

3. For the sake of the workers, I hope Toyota will open more plants here.

Maybe they can buy some of GM's plants off of them.

[JPZenger]

6. Japanese Companies Won't Buy GM Plants

The Japanese companies always build their own plants from scratch. This is because they want to build in "right to work" states that don't require union membership. They also don't want to inherit a workforce used to working in a union. They also can get huge financial incentives from states for building a new plant.

[Lydia Leftcoast]

7. It's bad management on the company's part

They acted as if oil prices were never going to go up, so instead of making fuel-efficient cars and hybrids they cranked out SUVs.

They need to retool fast and switch over to making smaller cars, hybrids, and buses for public transit systems.

[barb162]

11. agree; I'd hate to see GM go down the tubes. We hardly make

anything in this country any more. ANd it is just thousands more out of work who have high paying-jobs

[shantipriya]

8. Legacy Cost

GM & others keep citing Health Care costs as the main factor in their race against survival.Yet,they and all the major employers do NOT support or do not promote National Health Care.Why?I really don't understand this suicidal policies of the big employers.

[hecate77]

9. It is simply refusal to see where the market is headed.

They put it all into monstrous SUVs and didn't even try to go anywhere with hybrids. How stupid are these people? Aren't they aware that oil prices had to go up and that would make their behemoths extinct?

All they would have had to do was pursue the hybrid or fuel-cell models a bit more and they could be selling as many cars as they could make. If I could see this coming, and I am not a business genius, then how could these idiots have missed it?

No sympathy for them. None. I have sympathy for their workers who are now facing the consequences of the idiocy and blindness of the bosses.

Also, these clowns give money to the Repugs who keep thwarting any form of national health care. With national health care, how much less would all those Legacy costs be? Half as much? A quarter as much? No sympathy for people who vote against their own interests and the interests of people in general.