Word: gm
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Dates: during 2000-2009
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What really scares Wall Street is the prospect of a Delphi strike. Goldman Sachs estimates that a Delphi work stoppage could shut down GM factories at a cost of $2 billion a month, causing GM to burn through its cash reserves at a deadly clip. "A strike could push them over the edge," says Steven Szakaly, an economist with the Center for Automotive Research. Unions representing Delphi workers have described the bankrupt company's latest offer--cutting wages from an average $27 an hour to $10.50 for production staff--as "insulting," and U.A.W. chief Ron Gettelfinger has described Delphi boss...
Another legacy of GM's pact with the union is its crushing pension burden. Having shed so many workers in previous rounds of cost cutting, GM finds itself in a demographic choke hold--paying for the pensions and health care of 400,000 retirees (plus benefits for their dependents)--with a shrinking company. GM's strongest rivals, such as Toyota and Nissan, haven't gone through decades of downsizing and don't bear that lopsided burden. At GM, each U.S. worker's production has to support 2.5 retirees, adding an average of $2,200 in legacy costs to the price...
Wagoner is playing an actuarial waiting game, betting that as the retiree population declines, health and pension costs will fall, helping the company swing to profitability. But on Wall Street, worries about how a smaller GM will pay its retiree obligations have sent its securities plummeting. GM says it owes $89 billion to current and future retirees, and if GM's pension plan were terminated tomorrow, it would be $31 billion short, according to the Pension Benefit Guaranty Corporation. GM says its pension obligations are more than fully funded and it has no intention of terminating its plan. But GM...
...Wagoner up to the task? Can an insider, who rose within GM, have the nerve to take the ruthless measures necessary to fix his ailing company? So far, GM's board is standing by its chairman's relatively cautious strategy. The same may not be said of Kirk Kerkorian, the casino mogul and billionaire who owns nearly 10% of GM shares. He has lost an estimated $390 million on his stake and has indicated he may seek board representation. Kerkorian tried to take over Chrysler, and while he isn't expected to try that with GM, he's likely...
...some of his customary cockiness, sounding more defensive in public appearances. He's also driving on a narrow mountain road. Even a slight slowdown in the economy or a spike in gas prices could put him on the edge as he braces for union negotiations that may determine whether GM survives intact. If there's any solace for Wagoner, it's that he isn't the only car guy in the hot seat. Even Carlos Ghosn, chief of Nissan, the automotive turnaround story of the decade, is experiencing a sales slump, and the company has announced plans to move...