Word: gm
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...have owned the Dodge Aries K cars, Mercury Montereys and Chevy Chev-ettes they produced. So the citizens and the pols are irked to have to throw these companies a lifeline, even though they probably should do it for the good of the economy. An out-of-business GM (or even a bankrupt, reorganized one) is more than just a dead factory here and there. "There are real risks of cascading bankruptcy and then supply-side seizures," Columbia economist Jeffrey Sachs warned Congress, meaning that the ability of all car companies simply to make cars would be in jeopardy...
...GM, which is burning $2 billion a month, requested $18 billion in loans and credit lines - $4 billion for December. For that money, it will slash the number of plants it runs, the number of brands it makes and the number of dealers who sell them. It proposed cutting its hourly manufacturing costs in half. CEO Rick Wagoner agreed to work for $1 a year. GM's business is going down fast because consumers are already shying away from a potentially bankrupt company - which is part of GM's argument for immediate funding...
...Most of these plans were on the drawing board before the global financial collapse made the situation more dire. This, in essence, is a last-chance opportunity. If Congress provides cover, the Detroit Three can try to rescale their manufacturing capacity to their respective market shares - or even below. GM, for instance, has lost 7 market-share points, falling to 22%, in the past 10 years. It plans to slash costs by an additional $7 billion by 2012. "It's all about survival," says Van Conway of Conway MacKenzie & Dunleavy, a crisis-management and turnaround firm in Birmingham, Mich...
...Resizing the business will alter the number of nameplates that the Detroit Three market and the number of dealers that sell them. GM will sell or close Saturn. Pontiac and Saab could end up joining Oldsmobile and Plymouth in the hood-ornament graveyard because the cost of supporting a brand with a small market share doesn't make sense, nor does maintaining a dealership network created for an era when Chevy and Buick could support separate distribution systems. GM plans to reduce its dealer count 27%, to 4,700. "Certainly, having seven or eight brands for 25% of the market...
...death throes of the Benevolent Manufacturing State, however, have been costly. GM alone has paid out $103 billion in pension and retiree-health-care costs over the past 15 years. "The legacy costs were designed in an era when people retired at 65 and died at 66. We weren't wrong to give it to them 30 years ago. Now they retire early and live longer," says Conway...