Auto-going-through-the-motions

Pressure grows for GM's Wagoner to step down

As General Motors prepares to turn its ailing business around by cutting jobs, plants and payrolls, the pressure on its ceo is mounting amid concerns that nothing short of a change at the top will help the world's largest automaker. Investors and analysts are losing confidence in GM's chairman and ceo Richard Wagoner, who took the helm of the world's largest auto maker in 2000 and took control of daily operations at its struggling North American unit in April, 2005. This year alone, the carmaker has lost almost US$4-billion, shocked investors with earnings restatements, seen its stock plunge to new lows, come under investigation by federal regulators and lost significant US market share to foreign rivals. "When Wagoner took over for GM North America, he essentially implied that it was all on his shoulders now," T. Rowe Price analyst Brian Ropp said. "By taking on that role, he took full responsibility for North America, where the key issues are. And things have only gotten worse."

To compound matters, a possible strike at GM's main parts supplier -- bankrupt Delphi -- could shut down a few plants and force GM to burn through billions of dollars in cash in a matter of weeks, analysts have said. Adding to the pressure on Wagoner is investor Kirk Kerkorian, who owns 9.9% of GM's stock, and is widely anticipated to demand a seat on the board next year. "Based on analysts' writings and comments, it is clear a sizeable number and arguably a majority believe Wagoner should be removed from the top position at GM," marketing and research firm CNW said in a report yesterday. Despite the pressure, some analysts believe Wagoner will see the auto giant through much of its planned restructuring, including the closing of plants and cutting of 25,000 jobs through 2008. Analysts also believe a bankruptcy is highly likely, even though GM has said it is not considering Chapter 11 an option.

In other news, GM is in talks to sell two hotels in Japan to Lone Star Funds and Ishin Hotels Group to raise cash, people involved in the sale said. General Motors Acceptance is seeking at least yen 10-billion ($83.8-million) for Renaissance Okinawa Resort and Coco Garden Resort Okinawa, said the four people, declining to be named. The two hotels have a combined 500 rooms. GM is selling assets to raise cash after its junk-status debt ratings were further cut by Fitch Ratings and Moody's Investors Services.
(National Post, Wall Street Journal 051117)

Delphi to ax 24,000, unions say

Delphi's labor unions vehemently rejected a new "final" offer that still would radically cut workers' compensation and revealed that the bankrupt auto parts giant wants to slash 24,000 US factory jobs within three years. United Auto Workers President Ron Gettelfinger on Wednesday called the new offer "insulting" and said the unions and the company may be on a "collision course." The impasse raises the likelihood of a work stoppage at Delphi as early as January that could cripple both the parts maker and its largest customer, General Motors. The offer Delphi presented to its unions this week would increase the average base wage for production workers from US$10 an hour to $12.50 an hour and calls for less severe benefit cuts. Still, Gettelfinger and other union leaders said at a news conference that the offer was not worth taking to their rank-and-file members and shows that Delphi is determined to terminate its union contracts in bankruptcy court. Delphi spokeswoman Karen Healy confirmed the supplier proposed new wages and benefits this week, and defended them as competitive when compared with other parts suppliers. Also on Wednesday, Gettelfinger said the UAW and Ford have had meetings about lowering the automaker's health care costs before the 2007 renegotiation of their labor contract. Last month, the UAW and GM reached a similar deal to cut GM's nearly $6 billion-a-year health care tab by $1B. The UAW said it has begun reviewing Ford's finances to determine if cuts are necessary.
(Detroit News 051117)

Chrysler plants face temporary closings

The Chrysler group is shutting four assembly plants for one week or longer and reducing or eliminating overtime at four more in a sign that the North American auto sales slump is affecting even the healthiest of the Detroit-based auto makers. The production cuts affect eight of the auto maker's 13 vehicle assembly plants in Canada, the US and Mexico, with the biggest trim coming at a minivan plant in Windsor, ON, which will be shut for the week of Dec. 19 and eliminate all overtime for the rest of the year. Those moves will reduce output of minivans and Chrysler Pacifica sport utility vehicles in Windsor by more than 15,000 this month and in December.

The Windsor cut worries Ken Lewenza, president of Canadian Auto Workers local 444 in that city, which represents about 5,500 workers at the plant, one of the largest factories in the Chrysler group. “I'm disappointed and I'm nervous because the Dec. 19 week was quite a surprise,” Lewenza said yesterday. “This is rare for the minivan plant.” Two assembly plants in St. Louis, MO, that assemble minivans and full-sized pickup trucks are shut this week, according to a DaimlerChrysler planning document obtained by the Globe and Mail. The auto maker's specialty car plant in Detroit, which assembles the Dodge Viper, will be shut the last week of November and the first two weeks of December. Ed Saenz, a spokesman for the Chrysler group in Auburn Hills, MI, confirmed the shutdowns at the St. Louis plants, but said the company's policy is not to comment beyond about a week.
(Globe and Mail 051117)