The End Of An Era For GM Workers
The implied promise of a lifetime job with benefits is no more at America's biggest industrial company
For GM, the buyouts are a baby step on a journey through a minefield. Its overall predicament is so convoluted that measures to resolve one problem contribute to another: Even though the buyouts will help reduce the company's bloated workforce, its lopsided retiree-to-worker ratio--already about 2.5 to 1--will go even higher, adding to a crushing retiree healthcare burden. Other problems make profitability seem distant. One of the biggest is a lack of exciting new cars. New full-size SUVs, starting to roll out now, will gain some traction, but with consumers fretting over high gas prices, the carmaker's lineup thins out considerably when it comes to compelling crossovers, sedans, and smaller cars. And despite quality marks that have been improving--and are near the top for some nameplates, such as Buick--consumers have a sour view of GM products. Research conducted by Kelley Blue Book, for example, shows that consumers rate GM below average on a wide range of attributes key to a buying decision, such as value, fuel efficiency, safety, and style.
Then there are nagging questions about GM's finances. The carmaker recently announced that it will restate earnings for the past six years, partly because of its exposure to Delphi's woes. GM has already boosted its 2005 loss, originally reported as $8.6 billion, by $2 billion, not the kind of do-over that wins friends on Wall Street. And other surprises may lurk. The company is still working up an explanation of its altered finances and has delayed filing its 2005 annual report with the Securities and Exchange Commission. The agency is investigating.
With so much uncertainty, there's mounting speculation that CEO Rick Wagoner may soon be escorted to a cushy Cadillac and offered a ride out of Detroit. Wagoner is widely regarded as a financial whiz, as capable as anybody of tackling GM's gargantuan problems. But Wagoner has also presided over many of the recent debacles that have derailed GM. The addition of Jerry York to the company's board, at the insistence of billionaire investor Kirk Kerkorian, who owns nearly 10 percent of GM stock, increases the pressure on Wagoner to make rapid, sweeping changes or go. York is an aggressive reformer who helped engineer turnarounds at Chrysler in the 1980s and IBM in the 1990s. But along with massive change came fresh management. There may still be a few buyout offers on the way in Detroit.
More on GM at www.usnews.com/gm
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