GM taps labor expert to lead U.S. operation
Wednesday, May 31, 2006
GM taps labor expert to lead U.S. operation
Brett Clanton / The Detroit News General Motors Corp. Chairman Rick Wagoner's life is about to get a little less complicated.
Wagoner announced Tuesday he will shed his second job as president of GM North America in July and named a successor for the key post in a sign the automaker's turnaround is effort is entering a new phase.
Troy Clarke, president of the automaker's Asia Pacific region and a company veteran with a background in manufacturing and labor negotiations, will take the reins from Wagoner, who assumed day-to-day control of North America last year amid stunning losses.
The appointment of Clarke puts a seasoned labor negotiator at the helm of GM's largest sales region -- a year before the company renegotiates a critically-important labor contract with the United Auto Workers.
It also signals that GM, after completing a series of restructuring moves in North America including a massive buyout program, is prepared to entrust the unit to someone other than Wagoner.
"While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year," Wagoner said in a statement. "This is the right time to turn over the day-to-day operations to Troy, who has the experience and skills to lead the GM North America team as it continues this unprecedented restructuring."
Also Tuesday, GM said Vice Chairman and former CFO John Devine, who said in December he would retire this year, will leave the company on June 1.
The personnel moves were largely overshadowed by a Wall Street report that cast doubt on GM's turnaround prospects.
In a report Tuesday, Deutsche Bank analyst Rod Lache downgraded GM shares to "sell" from "hold" on signs that GM's vehicle sales are softening, pickup demand is weakening and that the company's recent cost-cutting moves don't go far enough in addressing its staggering cash burn.
"The turnaround plan GM articulated last October still doesn't appear sufficient to turn the company around," Lache said.
Investors responded by pushing GM shares down 5.4 percent Tuesday to $26.57 a share after a rally last week.
The report came in contrast to recent optimism that the automaker is rebounding from a $10.6 billion loss in 2005, which propelled a 40 percent increase in GM's stock price in recent months. Yet many challenges remain.
GM needs to reach a resolution with bankrupt auto supplier Delphi Corp. and the UAW that avoids a strike, which could tip the world's largest automaker into bankruptcy. It also must stop its U.S. market share slide, deal with several federal investigations into its accounting practices and complete plans to close or downsize 12 factories and cut 30,000 jobs by 2008.
"The turnaround is making progress, but there's still a lot of wood to chop," said Jon Rogers, analyst with Citigroup Global Markets in New York.
Wagoner and his senior leadership team will remain involved in the North American turnaround plan after Clarke takes over July 1.
Clarke's plate will be plenty full.
GM's North American automotive division, which accounted for $8.2 billion of the automaker's $10.6 billion loss last year, has struggled under high labor costs, a shift away from its hugely-profitable SUVs and intensifying competition from Asian rivals. In the first quarter, the region's losses narrowed to $462 million from $1.5 billion a year ago.
Clarke's varied experience -- manufacturing and labor negotiations to sales and marketing -- will be an asset, GM says.
Clarke has been president of GM Asia Pacific since 2004, but most of his career has been spent in less exotic locales. Clarke, 51, joined GM at the Pontiac division in 1973 and spent more than a decade there in several manufacturing and engineering jobs.
He was named director of manufacturing for GM de Mexico in 1997, and president and managing director in 1998. Three years later, he was appointed vice president of labor relations in Detroit, and in 2003 he presided over contract negotiations with the UAW.
Clarke's appointment suggests that GM still sees labor issues as a key piece of its restructuring plans and is looking to the 2007 renegotiation of its union contract as a chance to reduce costs.
"It's clear that the 2007 negotiations are a big part of the turnaround and that they're putting emphasis there, as they should," Rogers said.
Though Clarke has a reputation as a tough negotiator, the 2003 UAW contract was not considered a big victory for GM. With GM hemorrhaging money and losing sales, there may be more pressure to wrest concessions from the union next year.
GM officials who know Clarke say he has an intellectual demeanor that belies his factory floor background, and that he is very demanding of his staff.
He is a protégé of Gary Cowger, the former president of GM North America, who also came up through GM's manufacturing and labor ranks. Cowger was abruptly replaced in April 2005 when Wagoner took control of the region, and was promoted to group vice president of global manufacturing and labor relations.
Following the move and a reorganization of top officers, the role of GM's regional presidents has been diminished. Rather than operating as stand-alone companies, the operations now function more as sales and marketing arms, with manufacturing, product development and other tasks being carried out by global officers.
In that capacity, Clarke will be charged with ensuring a smooth launch of 20 new vehicles this year and shoring up the company's withering market share.
Through April, GM's U.S. sales were down 6.8 percent, and its market share was 23.8 percent, down from 25.4 percent a year ago, according to Autodata Corp.
Clarke's will be replaced at GM Asia Pacific David "Nick" Reilly, a GM vice president and president and CEO of GM Daewoo Auto & Technology Co. in South Korea. The move is also effective July 1.
You can reach Brett Clanton at (313) 222-2612 or bclanton@ detnews.com.
GM boosts its bets on Russia
Tuesday, May 30, 2006
GM boosts its bets on Russia
Automaker juggles plans to build plant there, mending joint venture with state-owned company.
Christine Tierney / The Detroit News General Motors Corp. plans to build its own factory in Russia as well as try to salvage a troubled joint venture with the country's largest carmaker in an effort to beef up its presence in the fast-growing Russian auto market.
Deep strains in GM's relationship with Avtovaz, the state-owned manufacturer of Lada vehicles, emerged early this year after a new slate of government-appointed directors clashed with GM over the venture's parts procurement. A dispute over price increases demanded by Avtovaz-owned suppliers led to a 10-day production halt in February.
On Monday, the Russian government took action to defuse the situation by replacing two of its three directors on the GM-Avtovaz board, including the venture's chairman Igor Yesipovsky, who is also head of Avtovaz.
"What this means is that the new board members will be able to concentrate on running the joint venture's business more effectively than when the joint venture chairman was also the head of the key supplier," Warren Browne, GM's executive director in Russia, said in a telephone interview from Moscow.
Browne said the venture's shareholders -- GM and Avtovaz, with 42 percent each, and the European Bank for Reconstruction and Development with 16 percent -- all endorsed the new directors at a meeting Monday in Moscow.
While the board changes are a step in the right direction, the two automakers have a long way to go to align their agendas and make the venture work, say industry experts familiar with the situation.
GM is banking on growth in booming overseas markets, such as Russia and China, to offset a decline in its U.S. market share. But its difficulties with Avtovaz illustrate the risks automakers face in forging partnerships with local, state-owned firms in countries with vastly different business cultures.
A Moscow source close to the venture pointed out that the new directors, including GM-Avtovaz Chairman Viktor Baunov, come from Rosoboronexport -- the state arms trading agency that seized control of Avtovaz last December in a surprise maneuver.
"The arms export agency has consolidated its position," said the source, who spoke on condition of anonymity. Its leaders have close ties to Russian President Vladimir Putin.
The source said GM's plans to build a factory on the outskirts of St. Petersburg might be the start of an alternative strategy -- a scenario that GM flatly denies.
"GM enjoys 75,000 units of capacity that we have in Togliatti," Avtovaz's huge plant on the Volga River near the Kazakhstan border, Browne said.
"Any strategic move we could make in Russia would be viewed only as incremental to that capacity," he said. "We've made that clear to our partners and to the government."
The Russian market is growing by double digits each year, and most analysts expect sales to total at least 1.8 million vehicles in 2006 -- making it one of Europe's biggest markets. GM's goal is to double its stake to 10 percent, but it faces a crowded field as new rivals pile in.
"It's more attractive than unattractive to go into Russia," said Juergen Pieper, auto analyst at Metzler Bank in Frankfurt.
Auto executives say doing business is still tricky in Russia, where the transformation from communism to capitalism has been bumpy. But the economic outlook has improved, with a middle class emerging in the cities, inflation under control and foreign investment on the rise. Foreign auto manufacturers also avoid high import duties by setting up local production.
Russian brands are still the top sellers, but the biggest growth is occurring among foreign nameplates, with Hyundai in the lead and Chevrolet in second place.
Last year, Toyota Motor Corp. broke ground on a $140 million facility outside St. Petersburg.
In comparison with other emerging markets, "there's potential in Russia for sales growth because they have plentiful natural resources," Shinichi Sasaki, president of Toyota Motor Europe, said in a recent interview.
Renault and the city of Moscow have a production venture, and Renault's alliance partner Nissan Motor Co. said in April it would invest $200 million to build a factory in St. Petersburg.
In 2001, when GM forged a $340 million partnership with Avtovaz, the U.S. automaker appeared to have secured a choice position in Russia.
The venture is profitable and debt-free, but it hasn't met expectations. Both parties at times failed to deliver on promises: Avtovaz wanted modern technology on the cheap, and expectations on both sides were too high, say sources familiar with the venture.
Its recent results have been hampered by rapid increases in component costs that appeared to benefit other parts of Avtovaz.
GM's objectives now are to lower the venture's costs, improve quality and help make the Avtovaz suppliers more efficient.
GM declined to confirm plans to build a new plant, also confirmed by wire reports citing government officials. GM is expected to make an announcement in June when Chairman and CEO Rick Wagoner will travel to St. Petersburg for an economic forum.
GM also has a kit-assembly facility in Kaliningrad with a private Russian partner.
GM shares are up - but don't throw a Motown party yet
Monday, May 29, 2006
Daniel Howes
GM shares are up - but don't throw a Motown party yet Why, the reader wanted to know, "would GM stock go up when the company faces bankruptcy?"
My reply: "Who said GM faces bankruptcy?"
A big chunk of the conventional wisdom, that's who. But conventional wisdom in a dynamic global business, influenced every day by human decisions good and bad and buffeted by brutal economic forces, has an annoying tendency to be mistaken - and usually unrepentant whenever it's wrong.
Don't look now but shares in General Motors Corp., the purportedly oafish behemoth that defines Old Economy ineptitude, are a top performer on the bellwether Dow Jones Industrial Average. Analysts who just a few months ago had given the General up for dead are upgrading the stock. And hourly workers are fixing to flee the plants in droves.
Altogether this amounts to one thing: An easing of the pressure that just a few months ago marked Chairman Rick Wagoner Detroit's Dead Man Walking. He may still be, but the trend of the past few weeks suggests that would be a harder case to make inside the boardroom.
Is the reprieve fleeting?
The landmark buyout offer targeted to eliminate 20,000 hourly workers from GM's payroll is past that internal bogey and climbing, with four weeks to go before the June 23 deadline. Translation: More people leaving means less pressure on GM and what it needs to solve the conundrum called Delphi Corp.
Second, financial markets reward measurable progress, not spin. Yes, there's still a chance - despite the greater-than-expected response to buyouts by GM and bankrupt Delphi - that the former GM parts unit won't be able to reach a concessionary deal with the United Auto Workers, among others, and they'll strike.
But I'm guessing the likelihood of a strike diminishes in inverse proportion to the number of union members who head for the exits. Why? Because union negotiators will have fresh impetus to get a deal that doesn't screw up the futures of all those new retirees - and an ugly strike would do just that.
Third, GM is doing a fairly effective job making its public case and its new cars and trucks are helping - not perfect and not always believable, but credible. The full-size SUVs are off to a promising start; new Saturns, decidedly unlike the plasticky Saturns of old, are just around the corner.
Nasty surprises can kill
If, however, inventory levels get too high as we get deeper into the summer and sales boss Mark LaNeve can't resist the urge to crank up the incentives, then GM and Wagoner will slide back into the hole they've been climbing out of the past six months or so. And predictions of his imminent ouster will come roaring back.
They'll revive if there's another nasty surprise from the federal investigations into GM's accounting practices. Or if another ratings downgrade imperils the GMAC deal with Cerberus. Or if the easing of gas prices from the $3-a-gallon range reverses course and stays there.
Never one to say it straight when a sports analogy will do, Wagoner likens GM's predicament to being down 20 points at half-time, and his job is leading the team to a comeback. GM is still down, but it's closing gaps.
Want a sure thing? Buy a dog, but don't bet on the end of GM. It ain't a sure thing.
Daniel Howes' column runs Mondays, Wednesdays and Fridays. Reach him at dchowes@detnews.com or (313) 222-2106.
Big Three CEOs flip out in D.C.
Saturday, May 27, 2006
Big Three CEOs flip out in D.C.
Business Insider When the Big Three CEOs met with Congress last week to talk about pressing issues, a behind-the-scenes drama was playing out worthy of a "Desperate Housewives" Vanity Fair cover shoot.
After some negotiations, it was agreed that GM CEO Rick Wagoner would take the podium first in a media briefing on the lawn outside the Rayburn office building, home to the U.S. House of Representatives, because he had more seniority than Chrysler CEO Tom LaSorda and Ford CEO Bill Ford Jr.
The real wrangling started over how the three alternative-fuel vehicles the automakers brought to show off in Washington should be positioned at the event. Having conceded that Wagoner would be the first speaker, Ford argued its ethanol-powered F-150 should be parked right behind Wagoner for optimum photo-op visibility and the Chrysler and GM vehicles would flank it on either side. Oh no, Chrysler's PR team said. Why shouldn't its bio-diesel Jeep get the middle spot?
With no one giving an inch, the multibillion dollar global automakers opted for the only fair solution -- a coin toss. But no simple coin toss would do.
Ford's Mike Moran and Chrysler's Dennis Fitzgibbons met on a neutral street corner, each with quarter in hand. They both flipped at the same time and Moran called out "even" -- meaning he was banking that both coins would land either on heads or on tails.
But to Fitzgibbons' delight, one quarter turned up heads and the other tails -- "odds" was the result. So Chrysler won the right to park its vehicle in the middle.
Alas, with the crush of media and lawmakers at the news conference, it was difficult to see any of vehicles behind Wagoner. Chrysler, though, chalked it up as another sign that it should not be lumped in with GM and Ford, who can't seem to win for losing these days.
Ford 'pimps' biggest dealership
Galpin Motors Inc., the world's largest Ford Motor Co. dealership, has yet another claim to fame: It is now home to television's most popular car show ever, MTV's "Pimp My Ride."
"I'm loving it," Beau Boeckmann, Galpin's vice president and the son of owner Bert Boeckmann, told Business Insider. "I always felt that we'd have a show -- I just didn't know that we'd have this show."
Of course he's loving it. Not only is Boeckmann's Van Nuys, Calif., dealership getting some incredible publicity out of the deal, he himself is co-starring alongside the show's hip-hopping host, Xzibit.
Fans of the show may be surprised to see Galpin replacing West Coast Customs when the new season debuts on June 15. Hollywood insiders tell Insider that friction between the shop's owner, Ryan Friedlinghaus, and the show's producers led to the change.
West Coast's loss was Galpin's gain, thanks to Ford's secret weapon in Hollywood, Al Uzielli.
"Al made the introduction" "One day, one of the producers came to me and said, 'Could you do the show?' "
The great-grandson of Henry Ford, Uzielli is a Hollywood producer who has hung up his beanie and monocle to help open doors for the automaker in Tinsel Town. Ford will get plenty of product placement opportunities through Galpin's involvement in "Pimp My Ride." In fact, MTV will be giving away a pimped-out Lincoln Mark LT pickup to help launch the new season.
Honda's brainchild
Thomas Edison meets Timothy Leary in Honda Motor Co.'s latest research effort: "brain-machine interface" technology that may someday let people order robots around just by thinking. Developed by the white coats at the Honda Research Institute and Advanced Telecommunications Research Institute International in Japan, the technology enables robots to duplicate a person's hand movements by decoding their brain signals.
So robots can now mimic simple hand gestures, such as the children's rock-paper-scissors game, 85 percent of the time with a lag of only seven seconds. Sounds a bit scary but Honda says the technology could increase auto safety, for instance, by allowing drivers to command functions without fumbling with controls. Best of all, the technology does not require "an invasive incision of the head and brain," according to Honda's news release. Phew. But Insider wants assurances that Honda has figured out a way to neutralize back-seat drivers.
Every million counts
You know the economy is bad when a Realtor has to the lower the price of a home by $1.5 million to find a buyer. That's exactly what Joy Morris of Hall & Hunter in Birmingham has done with the most expensive home on the market in Metro Detroit.
The 22,000-square-foot manor on Vaughan Road in Bloomfield Hills was painstakingly built over four years by Sally Russell of Birmingham.
Insider swooned over the features, including hand-hewn wood floors, an exercise room with a bouncy floor and a fireplace, a royal theater and dishwasher just for the china. But only so many people can afford a $3 million down payment and $60,000 monthly note.
Morris reduced the price this week in a concession to "Detroit's economy."
Sad but true; in a recession, even the outrageously rich suffer. Whatever happened to: "If you have to ask, you can't afford it?"
Contributors: Bryce G. Hoffman, Mark Truby and Christine Tierney.
Corvette tops flying off, leading to recall
Saturday, May 27, 2006
Corvette tops flying off, leading to recall
Brett Clanton / The Detroit News
General Motors Corp. is giving new meaning to the term "drop top."
The automaker is recalling more than 30,000 Corvettes because of a defect that causes the roof of the pricey sports car to fly off while driving. GM discovered the problem last year, and asked customers to have the problem fixed at dealerships.
But after 21 complaints were filed with the National Highway Traffic Safety Administration and GM learned the glitch also affected 2006 models, the company issued a formal recall Friday.
It affects 2005 and 2006 Corvette models that have painted, removable hard tops, which come on about 40 percent of the $45,000 sport coupes.
The recall is embarrassing for GM, which prizes the Corvette as one of its best engineered and designed vehicles.
The Corvette's hard top is comprised of a magnesium frame and hard plastic roof panel and weighs between 5 and 10 pounds. The roof panel has blown off when adhesive that attaches the roof to a frame separates, GM spokesman Alan Adler said.
No one has been injured or killed as a result of the glitch, he said.
While GM should be commended for issuing a recall, highway safety advocate Clarence Ditlow worries the defect could be deadly if it is not fixed quickly.
"Every year, road debris kills a significant but unknown number of people," said Ditlow, executive director of the Center for Automotive Safety in Washington.
A flying roof panel, he said, could pose an especially grave threat to drivers. "You do not want to hit a 10 lb. object at 70 miles per hour."
Also Friday, Germany's Volkswagen AG said it will recall 362,000 Jetta sedans and Beetles because of a faulty brake light switch.
The flaw -- affecting 1999 to 2002 Jetta models, 1999 to 2000 Jetta III models and 1998 to 2002 Beetles -- may cause the vehicles' brake lights not to work or to remain on.
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Delphi exec: Firm might force cuts
Thursday, May 25, 2006
Delphi exec: Firm might force cuts Restructuring chief says supplier could consider 'drastic' measures, but says there is no timetable.
David Shepardson / The Detroit News
NEW YORK -- The standoff between Delphi Corp. and its labor unions heated up Wednesday after a federal bankruptcy judge declined to postpone hearings on Delphi's request for permission to void labor agreements with its unions.
Following Judge Robert Drain's denial of a request by General Motors Corp. for a 60-day delay in the hearing to allow the sides to negotiate, Delphi's chief restructuring officer John Sheehan was pointedly asked by union lawyers whether the supplier planned to unilaterally cut the wages and benefits of its U.S. hourly work force.
Sheehan said Delphi preferred to negotiate an agreement with the unions representing its 33,000 U.S. hourly workers, but said its hand eventually may be forced.
"If we get to a point in time in the future where the company can find no solution where its liquidity is evaporating or is being used up, we'd have to consider drastic circumstances," Sheehan said. "There would be a point where we would seek to enforce (a new labor agreement)."
Such a move would almost certainly provoke a strike that could devastate Delphi and GM, its largest customer.
But Sheehan said the company has no plans to set a deadline to reach an agreement and wants to avoid imposing cuts because a strike would lead to a massive disruption of the auto industry and likely "destroy more value than it would create."
He said a strike would cause serious problems at GM for at least six months. Sheehan said Troy-based Delphi, the nation's largest auto parts maker, hopes to save $9.2 billion in labor costs by 2010 by cutting jobs and reducing pay and benefits for remaining workers.
At that point, the company expects to generate profit margins of 6 to 8 percent in the United States -- about the same as its foreign operations, where workers make far less.
Drain said he declined GM's request because Delphi wanted the hearing to go forward.
Delphi, Sheehan said, is expected to post an operating loss of $2 billion and a net loss of $2.5 billion for all of 2006.
Lawyers for five unions that represent most of Delphi's hourly employees suggested Delphi is overstating its finance problems to win more concessions from the court and the unions.
Under questioning by Tom Kennedy, a lawyer for the IUE-CWA union, Sheehan acknowledged that the company was seeking identical concessions from workers at profitable and unprofitable U.S. plants. Delphi also wants all workers to accept higher medical co-payments -- even if they work at some plants where they make as little as $8 an hour.
Union lawyers pointed out that Delphi told the Securities and Exchange Commission that its estimated post-retirement health care liabilities were about $800 million a year through 2010. But in some court filings, it estimated the liability at $1.16 billion a year.
Kennedy suggested that Delphi had already decided to file Chapter 11 bankruptcy and then created a business case to support the decision.
Kennedy asked if it was "just coincidental" that Delphi began work on its worst-case scenario soon after Robert S. "Steve" Miller joined the company as CEO on July 1, 2005.
Sheehan insisted that was a standard business practice and had nothing to do with Miller's arrival. Sheehan largely avoided answering most specific questions about the state of the company's finances.
He said Delphi has $3.6 billion in available cash, and has used $300 million of a $2 billion line of credit it obtained after seeking bankruptcy protection.
Delphi was spun off from GM in 1999 has seen its hourly work force drop from 63,000 then to about half that number today.
Without relief from federal regulators, Sheehan said Delphi will not be able to meet its pension obligations, but has resisted suggestions that it will transfer the obligation to the Pension Benefit Guaranty Corp., which partially covers pension payments for workers when companies default.
The lead attorney for the United Auto Workers, Bruce Simon, sharply questioned Sheehan why Delphi would rather "slash wages" than save at least $3.1 billion in pension obligations due by 2008 by defaulting.
"The workers would suffer no loss and you would save $3.1 billion," Simon said. "What do you accomplish (by not defaulting)?"
Sheehan said the company had considered the idea, but didn't believe it had met the legal requirements necessary to do so.
He said Delphi had no plans to freeze the pensions of its 600 top executives, as it has proposed doing for hourly and salaried workers next year.
Delphi has also sought approval to create a $300 million supplemental retirement fund for those top executives -- which could top, on average, $500,000 per executive if Delphi decides to exclude its 150 executives located abroad.
Delphi filed for bankruptcy in October after failing to secure wage and benefit concessions from the UAW, and to speed a restructuring as a result of mounting losses from production cuts at GM. It said it couldn't afford its $27-an-hour labor costs for most of its U.S. work force and complained it couldn't close unprofitable American plants. It has sought court approval to cancel its collective bargaining agreements and close all but one plant in Michigan.
You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.
GM believes ethanol can become mainstream fuel
E85 Alive
GM believes ethanol can become mainstream fuel despite hurdles
By RICHARD TRUETT AUTOMOTIVE NEWS
AutoWeek Published 05/23/06, 2:48 pm et
Because of its heavy dependence on sales of big trucks, General Motors has the most to lose if high fuel prices lead buyers to other vehicles. This year GM has been trying to raise awareness of E85 ethanol and other alternative fuels.
Elizabeth Lowery, 50, GM vice president of environment and energy policies worldwide, spoke with Automotive News Staff Reporter Richard Truett last month at the New York auto show.
What chance does E85 have of becoming a mainstream fuel?
I think it has a great chance. We've been building consumer awareness since January with the "Live Green, Go Yellow" campaign. So far, consumers are very interested.
And then we have a number of projects in various states to see if we can help bring parties together to figure out how to build the infrastructure. We have a project in California with Pacific Ethanol and Chevron Technologies, California and GM working together to figure out what the infrastructure should look like in California. That project is well under way. The state is buying flex-fuel vehicles so that they can force some of the infrastructure, at least for fleet sales.
We also have projects in Minnesota and Chicago.
There are only about 600 filling stations in the country that sell E85. How are drivers going to know where to buy it?
OnStar has the information when a station goes online. When you press the OnStar button when you are traveling, you can find out where to get E85 fuel. I think that is a huge competitive advantage and creates demand for that infrastructure. It also gives those that are putting in the pumps some incentives, because General Motors and its customers really are going to help get customers to use E85.
Why does GM care what fuels people put in their vehicles?
We do care, because we think we do have a role to play. Our view is we are the provider of transportation, and the fuel is an integral part of that. We really do care what consumers put in the vehicle, not only for a societal benefit but also because of the performance of the vehicle. People are very interested in greenhouse-gas emissions. People are interested in energy independence and the price of fuel.
I think the most important thing is that customers have shown a great interest in choice. So if they can have the flexibility to buy a product, and they can use E85 or gasoline depending on its availability or depending on the pricing, they like having some control over that. Right now people don't feel as if they have a choice.
Why not get together with other automakers and build an E85 infrastructure?
Right now GM, Ford and DCX have the most vehicles out there that use E85. So we do have conversations with them, and they have projects out there as well. We are just getting pretty aggressive with the marketing campaign because we think it is a leadership issue. We all have something to contribute, so we are all playing roles, and there is no reason we can't work together on projects.
What prospects are there for biodiesel? Will GM push biodiesel the same way it has E85?
We think biodiesel has a role to play along with E85 and ethanol and other renewable fuels. There is a lot of research and experimentation going on with biodiesel. Right now I can't say we have any huge campaign under way or that we are thinking about one. We certainly are working at the research level, and our vehicles are capable of working on (biodiesel).
Another fuel GM is interested in is hydrogen for fuel cell vehicles. Does helping popularize E85 and biodiesel offer any lessons for later when hydrogen is ready for prime time?
We've learned a lot on infrastructure development. We have a study under way on how the hydrogen economy can be developed and what kind of infrastructure changes will be needed. We've always believed that you don't need a hydrogen station on every corner. We have learned from E85 how some of this will naturally occur. Some of it has to be driven by people coming together to figure out the best way to do it. A hydrogen infrastructure will be a challenge.
Big buyout response buoys GM
Thursday, May 25, 2006
Big buyout response buoys GM Early-leave sign-ups race past 20,000, may put automaker ahead of schedule on turnaround.
Brett Clanton / The Detroit News
DETROIT -- More than 20,000 U.S. factory workers at General Motors Corp. have accepted buyout offers, surpassing the automaker's internal target with a month to go before the deadline, according to people familiar with the situation.
The stronger-than-expected response means GM is well on its way to reaching and eventually exceeding its goal of eliminating 30,000 U.S. hourly jobs by the end of 2008 -- a central piece of its North American restructuring plan.
The automaker, which made the offers to all 113,000 of its U.S. hourly workers in one of the biggest buyout programs in corporate history, had expected 20,000 employees to come forward by the June 23 deadline, the sources said.
Though it has surpassed the goal, GM will continue to offer buyouts to workers who sign up by the deadline. Under an agreement with the United Auto Workers, there is no maximum number of buyouts that GM can accept. Sources say the automaker plans to take as many as it can get.
On Wednesday, GM's stock price rose 9 percent to $26.70 after Merrill Lynch upgraded the automaker from "neutral" to "buy" in a report that expressed optimism about the buyout program's early returns.
Merrill Lynch -- which based its call on a weeks-old UAW update that 12,400 GM workers had accepted buyouts -- estimates that GM will get 30,000 takers before the deadline.
"That would represent a significant acceleration in GM's restructuring plan," said Merrill Lynch's John Murphy in the report.
Citing savings from the buyouts, he raised his estimate of GM's 2007 profit to $4.10 a share from $1.90. He also raised the shares' target price to $37.
GM, which lost $10.6 billion last year after a steep drop in SUV sales and steady market share losses to Asian rivals, could use the boost.
The company is implementing a sweeping restructuring of its North American auto business that aims to close or downsize 12 plants by 2008 and cut $7 billion in costs by next year.
But the process is slow and Wall Street is growing impatient. The threat of a massive strike at its largest supplier, Delphi Corp., is not helping. Nor is a continuing probe into the company's accounting practices, bankruptcy speculation and a recent spike in gas prices, which could wreck sales of GM's profitable SUVs and pickups.
But a victory on the buyout program could go a long way toward putting GM back in the game.
In March, GM and the UAW reached a deal to offer buyouts to thousands of highly paid union workers at the automaker and Delphi, the bankrupt auto parts maker spun off from GM in 1999, to help the struggling companies pare their payrolls and become more competitive.
The "accelerated attrition" plan offers $35,000 and full retirement benefits to workers at both companies with 30 years or more of service and a full retirement to workers with 27 years or more who leave now. GM workers with fewer than 27 years but more than 10 may receive a one-time payment of $140,000 to walk away and sever all ties, while those with fewer than 10 years can take $70,000 to leave and forgo benefits.
Since the plan was introduced, GM workers such as Marty Thompson have been mulling their options. The 49-year-old production worker at GM's Hamtramck large car plant has 29 years, but is not eligible for the $35,000 lump-sum payment. That's why he thinks he'll stay.
"I'm ready to go," he said. "But I'm going to wait till September 2007 to see what's in the new contract."
Next fall, the UAW and GM will renegotiate terms of their national agreement, which could provide incentives for early retirement.
Katie McBride, a GM spokeswoman, would not comment on specific buyout numbers the automaker has received. But she did say "we are very pleased with the response so far."
If too many workers accept the offers, GM can activate a provision in the buyout agreement that permits it to hire lower-wage temporary workers to fill the gaps. GM can also hold on to buyout takers until Jan. 1, 2007, if it is short-staffed at certain facilities.
McBride said a "limited" number of temporary workers have already been hired at several GM plants because the response to the program has "exceeded expectations." Those workers, she said, earn about $18 per hour, compared with $27 per hour for existing GM workers.
Temporary workers will be used as a "bridge" until GM can find permanent replacements, which will come from a jobs bank of idled employees and other GM plants that are closing, McBride said.
GM is also reclaiming 5,000 former workers from Delphi as part of the attrition program.
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Thursday, May 25, 2006
Delphi exec: Firm might force cuts
Restructuring chief says supplier could consider 'drastic' measures, but says there is no timetable.
David Shepardson / The Detroit News
NEW YORK -- The standoff between Delphi Corp. and its labor unions heated up Wednesday after a federal bankruptcy judge declined to postpone hearings on Delphi's request for permission to void labor agreements with its unions.
Following Judge Robert Drain's denial of a request by General Motors Corp. for a 60-day delay in the hearing to allow the sides to negotiate, Delphi's chief restructuring officer John Sheehan was pointedly asked by union lawyers whether the supplier planned to unilaterally cut the wages and benefits of its U.S. hourly work force.
Sheehan said Delphi preferred to negotiate an agreement with the unions representing its 33,000 U.S. hourly workers, but said its hand eventually may be forced.
"If we get to a point in time in the future where the company can find no solution where its liquidity is evaporating or is being used up, we'd have to consider drastic circumstances," Sheehan said. "There would be a point where we would seek to enforce (a new labor agreement)."
Such a move would almost certainly provoke a strike that could devastate Delphi and GM, its largest customer.
But Sheehan said the company has no plans to set a deadline to reach an agreement and wants to avoid imposing cuts because a strike would lead to a massive disruption of the auto industry and likely "destroy more value than it would create."
He said a strike would cause serious problems at GM for at least six months. Sheehan said Troy-based Delphi, the nation's largest auto parts maker, hopes to save $9.2 billion in labor costs by 2010 by cutting jobs and reducing pay and benefits for remaining workers.
At that point, the company expects to generate profit margins of 6 to 8 percent in the United States -- about the same as its foreign operations, where workers make far less.
Drain said he declined GM's request because Delphi wanted the hearing to go forward.
Delphi, Sheehan said, is expected to post an operating loss of $2 billion and a net loss of $2.5 billion for all of 2006.
Lawyers for five unions that represent most of Delphi's hourly employees suggested Delphi is overstating its finance problems to win more concessions from the court and the unions.
Under questioning by Tom Kennedy, a lawyer for the IUE-CWA union, Sheehan acknowledged that the company was seeking identical concessions from workers at profitable and unprofitable U.S. plants. Delphi also wants all workers to accept higher medical co-payments -- even if they work at some plants where they make as little as $8 an hour.
Union lawyers pointed out that Delphi told the Securities and Exchange Commission that its estimated post-retirement health care liabilities were about $800 million a year through 2010. But in some court filings, it estimated the liability at $1.16 billion a year.
Kennedy suggested that Delphi had already decided to file Chapter 11 bankruptcy and then created a business case to support the decision.
Kennedy asked if it was "just coincidental" that Delphi began work on its worst-case scenario soon after Robert S. "Steve" Miller joined the company as CEO on July 1, 2005.
Sheehan insisted that was a standard business practice and had nothing to do with Miller's arrival. Sheehan largely avoided answering most specific questions about the state of the company's finances.
He said Delphi has $3.6 billion in available cash, and has used $300 million of a $2 billion line of credit it obtained after seeking bankruptcy protection.
Delphi was spun off from GM in 1999 has seen its hourly work force drop from 63,000 then to about half that number today.
Without relief from federal regulators, Sheehan said Delphi will not be able to meet its pension obligations, but has resisted suggestions that it will transfer the obligation to the Pension Benefit Guaranty Corp., which partially covers pension payments for workers when companies default.
The lead attorney for the United Auto Workers, Bruce Simon, sharply questioned Sheehan why Delphi would rather "slash wages" than save at least $3.1 billion in pension obligations due by 2008 by defaulting.
"The workers would suffer no loss and you would save $3.1 billion," Simon said. "What do you accomplish (by not defaulting)?"
Sheehan said the company had considered the idea, but didn't believe it had met the legal requirements necessary to do so.
He said Delphi had no plans to freeze the pensions of its 600 top executives, as it has proposed doing for hourly and salaried workers next year.
Delphi has also sought approval to create a $300 million supplemental retirement fund for those top executives -- which could top, on average, $500,000 per executive if Delphi decides to exclude its 150 executives located abroad.
Delphi filed for bankruptcy in October after failing to secure wage and benefit concessions from the UAW, and to speed a restructuring as a result of mounting losses from production cuts at GM. It said it couldn't afford its $27-an-hour labor costs for most of its U.S. work force and complained it couldn't close unprofitable American plants. It has sought court approval to cancel its collective bargaining agreements and close all but one plant in Michigan.
You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.
GM seeks more time for Delphi labor deal
Wednesday, May 24, 2006
GM seeks more time for Delphi labor deal
Brett Clanton / The Detroit News
General Motors Corp. asked the bankruptcy judge overseeing Delphi Corp.'s reorganization to postpone hearings on the supplier's controversial motion to reject its labor contracts, and allow more time to reach an out-of-court deal and avoid a strike.
In a letter sent Tuesday to U.S. Bankruptcy Court Judge Robert Drain, GM requested that the hearings, set to resume today in New York, be adjourned for up to 60 days while discussions between the automaker, Delphi and UAW leaders continue.
GM's letter contends the hearings, begun earlier this month, have been a distraction from complex negotiations among the automaker, Delphi and the United Auto Workers designed to craft a bailout for Delphi and provide a soft landing for thousands of the supplier's factory workers.
"We would like to allow all of the parties to focus all of their time and energy on reaching a consensual agreement," said GM spokesman Jerry Dubrowski, who confirmed the letter had been sent but would not provide a copy or discuss details.
If granted, GM's request could lower the temperature of the negotiations, which were inflamed in late March when the supplier filed a court motion to reject union contracts protecting the wages and benefits of 33,000 U.S. factory workers.
Delphi said Tuesday it is opposed to postponing the hearings.
GM's letter also marks the first time the automaker has put a timetable on reaching an agreement with Delphi. It suggests the automaker, after entering the talks in November, may be closing in on a deal.
An agreement would remove one of the biggest sources of anxiety over GM's outlook and its own efforts to avoid bankruptcy. But any pact is sure to be costly for the struggling automaker.
GM, which spun off Delphi in 1999, estimates its liability to former workers at Delphi will be at least $3.6 billion and could hit $12 billion.
Strike would be costly
A strike by UAW workers at Delphi, GM's largest customer, could be far more expensive and could even topple the auto giant into bankruptcy.
That is why GM is pushing Drain to go slow in considering Delphi's motion to reject its labor agreements.
Delphi, which filed for bankruptcy in October, claims that high labor costs inherited from its spinoff from GM are hurting the company's ability to compete. After failing to win concessions from the six unions representing its U.S. workers, the supplier on March 31 filed a motion to dismantle union contracts and eliminate post-retirement health benefits.
The move riled the unions, which viewed it as a step backward after reaching a historic agreement earlier to provide buyout offers to more than 40,000 workers at GM and Delphi.
But the GM letter will likely spur the judge to postpone the hearing and send the camps back to the bargaining table, said Van Conway, a bankruptcy attorney with Birmingham-based firm Conway MacKenzie & Dunleavy.
"Judges always lean toward letting parties continue settlement discussions," he said.
Still, the judge will want to hear the three sides are making progress, not simply drawing out the process, he said.
Delphi spokesman Lindsey Williams said Tuesday that Delphi opposes the adjournment request and wants to continue the hearings to seek a negotiated settlement. He said Delphi has already delayed the motion to void the contract twice, with no results, and there has been no counteroffer from the UAW during that time.
"To date, no consensual agreement has been reached. Additionally, (neither) the UAW, IUE nor USW have provided counterproposals on a comprehensive agreement," Lindsey said.
In addition to covering pension and health benefits for former workers, Delphi wants the automaker to subsidize wages until the parts maker can adjust them lower to industry average of $12 to $14 an hour.
Under a March 24 proposal, Delphi told its unions that it wanted to cut its $27 per hour wages to $16.50 and then phase in lower wages after 2007 in exchange for a $50,000 lump-sum "buydown." But the proposal assumed financial support from GM that, so far, has not been pledged.
Without support from GM, Delphi said it will cut wages to $12.50 per hour and also reduce other benefits.
Judge backs talks
Drain has favored continued negotiations between GM, Delphi and the UAW over a ruling on the contracts. When the hearing adjourned on May 12, he urged Delphi and its unions to use the time before the next court date for serious discussions.
The hearings are set to resume at 10 a.m. today in New York and pick up again on Friday.
John D. Sheehan, Delphi's chief restructuring officer, is scheduled to testify today and would be the company's highest ranking executive to participate in the hearings.
But if Drain accepts the GM motion, the hearing could be quickly adjourned.
George Anthony, chairman of UAW Local 292 that represents Delphi workers at a Kokomo, Ind., factory, said he hopes Drain gives the sides more time to talk.
"I'd rather see it done at the bargaining table than seeing a judge make a decision," he said.
But whether it comes from the bench or at the table, an agreement is likely to mean concessions of some kind.
Don Thomas, a machine operator at Delphi's Rochester, N.Y., plant with nearly 30 years of service, said he can't stand to watch it all play out. Wage cuts. Plant closures. More uncertainty. He's had enough.
That's why he is going to accept a buyout offer that ushers him into a retirement away from all of it.
"We're basically being forced out," he said. "There's really no point in staying."
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
GM Offers Gas-Price Cap for SUV Buyers
GM Offers Gas-Price Cap for SUV Buyers
Wednesday May 24, 2006 3:46 AM AP Photo NYET820
By DEE-ANN DURBIN
AP Auto Writer
DETROIT (AP) - Aiming to capitalize on consumer angst about the high cost of gasoline, General Motors Corp. on Tuesday said it would cap pump prices at $1.99 for customers in California and Florida who buy certain vehicles by July 5.
One hitch to the promotion is that customers must also agree to enroll in the OnStar vehicle diagnostic service, which is free for the first year but after that will cost $16.95 a month. The other is that many of the eligible vehicles are serious gas guzzlers.
The offer is good for 2006 and 2007 model year vehicles. In California, eligible vehicles are the Chevrolet Tahoe and Suburban sport utility vehicles and Impala and Monte Carlo sedans; the GMC Yukon and Yukon XL SUVs; the Hummer H2 and H3 SUVs; the Cadillac SRX SUV; and the Pontiac Grand Prix and Buick LaCrosse sedans. In Florida, eligible vehicles are the Impala, Monte Carlo, Grand Prix and LaCrosse.
Customers must buy or lease an eligible vehicle between May 25 and July 5 and enroll in the OnStar diagnostic service, which automatically runs checks on the vehicle and sends e-mail notices to owners each month.
Each month for one year, GM will give drivers a credit on a prepaid card based on their estimated fuel usage. Fuel usage will be calculated by the miles they drive, as recorded by OnStar, and the vehicle's fuel economy rating.
GM will credit drivers the difference between the average price per gallon in their state and the $1.99 cap. The credits can be used through December 2007. Consumers wouldn't get any credits if gas prices fall below $1.99.
GM said a California resident who buys a 2007 Chevrolet Tahoe and drives 1,000 miles per month would get an estimated $103.75 monthly credit, based on the current average premium fuel price of $3.65 per gallon, GM said. A Florida resident who drives a 2006 Buick LaCrosse about 1,000 miles per month would get an estimated monthly credit of $60 based on the current premium fuel price of $3.19.
GM spokeswoman Deborah Silverman said GM picked California and Florida in part because the company wants to increase sales in those states. Silverman said GM will see how successful the program is before deciding whether to expand it to other states.
GM's newly redesigned full-size SUVs like the Tahoe have been big sellers this spring despite rising gas prices. In the first four months of this year, Tahoe sales were up 36 percent. The rebate could help older, slower-selling SUVs like the Hummer H2, which saw sales fall 19 percent in the same period.
GM's car sales were down 12 percent through April. While some cars have bucked that trend - Pontiac Grand Prix sales were up 24 percent - the rebate could help stragglers like the Buick LaCrosse, which saw sales fall 21 percent.
After years of watching customers focus on their deals instead of their vehicles, GM has been cutting back on incentive spending in favor of lower overall pricing. In April, the company lowered per-vehicle incentives by 26 percent to $2,836, the biggest drop of any U.S. automaker.
Silverman said the new program isn't straying from GM's strategy. The automaker has always said it would continue to use targeted incentives to focus on particular vehicles or regions, she said.
GM shares rose 4 cents to close at $24.48 on the New York Stock Exchange.
^---
On the Net:
http://fuelprotection.com
GM puts autos to the test
Tuesday, May 23, 2006
GM puts autos to the test
Simulating snow, heat and slick, hairpin curves New Milford test lab puts vehicles through climate, terrain extremes, without shipping them at an expense.
Josee Valcourt / The Detroit News
MILFORD -- It may be months before Metro Detroiters experience subzero temperatures again, but inside a new $50 million lab at General Motors Corp.'s Milford proving grounds, engineers can now switch from sweat to chills in mere hours.
The automaker on Monday dedicated a new state-of-the-art vehicle testing facility that can create the severest of weather conditions -- from arctic blasts with temperatures at 40 degrees below zero, to stifling desert heat with temperatures as high as 130 degrees.
It is one of the most sophisticated development facilities for testing engines and transmissions for cars and trucks in the world, GM says.
With the 40,000-square-foot facility, the automaker hopes to take some much-needed giant steps and bring new engines and transmissions to market sooner, while spending considerably less on product development.
For example, engineers can now see how driving conditions such as icy roads or extreme humidity affect engine performance, and view the results immediately, without having to ship vehicles to testing destinations such as Canada or Arizona.
"It reduces cost," said Dan Hancock, vice president of engineering operations for GM Powertrain.
GM lost $10.6 billion last year and is in the midst of a major restructuring of its struggling North American operations.
One major focus is to develop lighter, more fuel-efficient powertrains across a smaller family of engines and transmissions. For one, GM has been slower than some rivals in introducing six-speed automatic transmissions that can boost fuel efficiency, as well as more powerful four-cylinder and V-6 engines that don't sacrifice fuel economy.
For the 2007 model year, GM is introducing 19 new or significantly redesigned engines and transmissions, including a new hybrid system and a fuel-saving V-6 engine.
Using computers and customized software at the new test site, GM has created one of the most advanced dynamic road simulators used in the auto industry. GM engineers have mapped nearly two dozen mountain and desert roads where customer vehicles are test driven. Climate conditions along with road grades and other conditions have been programmed into computers.
The computer-simulated roads can be "played back" as test vehicles are driven on them. And any of the road conditions can be digitally modified to simulate each of the four seasons, on a single day, if needed.
"As a consumer, you want to hear the transmission shift smoothly whether its 20 degrees or 105 degrees temperature," said Karla Berger, a technical assistant at GM.
The facility will help GM engineers develop and validate future powertrain products by allowing testing currently completed on the road to be executed in a controlled, repeatable and climatically robust laboratory environment.
Behind the sliding steel door of dynamic chamber room 35S, 48-inch rollers in the floor can move back and forth and simulate a highway drive, for example.
Adjustable floor tracks can fit different size vehicles, from tiny compacts to hulking Hummer SUVs. A wind tunnel can blast air up to 100 mph. And special ceiling lights can intensely beam to simulate the hottest desert sun.
In addition, engineers will be able to test any type of emissions levels in gasoline, ethanol or diesel fuel, allowing the automaker to better respond to government regulations that vary by country and state, such as environmentally conscious California.
"We have the ability to provide year-round climatic and altitude testing, which greatly improves our vehicle development time," said Hancock, adding the new lab could help cut development time by 4 to 5 months.
You can reach Josee Valcourt at (313) 222-2575 or jmvalcourt@detnews.com.
Delphi Too Broke to Pay Workers—But Execs Get $98 Million in Bonuses
Delphi Too Broke to Pay Workers—But Execs Get $98 Million in Bonuses Top bosses at Delphi Corp. claim the company is so broke it can’t afford to pay a fair wage to union workers who make the company successful—but it does have enough money to give management $98 million in bonuses this year.
Kevin Butler, Delphi’s vice president for human relations, told a federal bankruptcy judge May 10 the bonuses likely will go to managers and salaried workers because the company is exceeding its financial projections.
Under a long-standing Delphi bonus plan, 450 Delphi executives are expected to split $38 million, which works out to an average $84,444 each. Some 14,000 salaried employees would share $60 million, or an average of $4,286 per worker. Delphi’s last offer to its 33,000 hourly employees would cut their wages from $28 an hour to $16.50 an hour by September 2007.
“It’s grossly unfair to be increasing the compensation of salaried and management while making this drastic attempt to cut the pay of hourly workers,” says Thomas Kennedy, an attorney for IUE-CWA. IUE-CWA and the UAW represent some 33,000 Delphi workers.
The news of the bonuses reinforces the fact that the nation’s largest auto parts supplier is using the bankruptcy process to impose deep wage and benefit cuts the workers had already rejected during contract talks, union leaders say. Like many other companies in recent months, Delphi declared bankruptcy to renege on its collective bargaining contracts and to cut costs by squeezing pay and pensions.
The Detroit News “Autos Insider” columnist Daniel Howes puts it this way:
Even if many of Delphi’s salaried workers and most of its executives are underpaid compared with competitors (they are) and even if they have performed well through trying times (they have), the bad optics of cutting hourly jobs and granting salaried bonuses are devastating and practically impossible to defend.
Although Delphi executives claim the cuts are necessary to remain competitive, they refuse to give union leaders the financial records that would prove their argument. Fifty-five members of the House and 25 senators recently wrote to Delphi CEO Robert “Steve” Miller, asking him to provide complete and current financial information to workers, retirees and communities and to explain why the company’s proposed wage and benefit cuts are necessary.
Delphi filed for bankruptcy in October and immediately began calling for concessions but failed to reach an agreement with the unions. The company’s last offer in late March also included a $50,000 bonus for accepting the concessions—if Delphi’s former owner, General Motors Corp. (GM), agrees to put up the money for the bonuses. As of yet, GM had not agreed to do that, union lawyers say.
The IUE-CWA members have given their leaders authorization to call a strike if necessary, and UAW members are voting on authorization. A strike could shut down Delphi and impact production at GM, Delphi’s largest customer.
Meanwhile, Delphi continues to show its anti-union stripes. The company is advertising for replacement workers across the country to work for $10-$14 per hour, half of what union workers make, in the event of a strike.
by James Parks
Financial errors spur GM shake-up
Thursday, May 18, 2006
Financial errors spur GM shake-up 2 execs out, carmaker hires outside overseer in wake of SEC probe into accounting errors.
Bill Vlasic / The Detroit News
DETROIT -- General Motors Corp. shook up its financial staff Wednesday in the wake of a series of accounting errors that have drawn the scrutiny of the U.S. Securities and Exchange Commission and a federal grand jury in New York.
GM said two of its top finance officers will be leaving the company, and their jobs will be combined in an effort to improve the automaker's internal financial controls.
Paul Schmidt, GM's corporate controller, will retire later this year, and Peter Bible, the company's chief accounting officer, will resign on June 1, GM said in a statement.
Their two positions will be combined and filled by an outside candidate before the end of the year, GM spokeswoman Toni Simonetti said.
GM also said it had retained high-profile turnaround experts AlixPartners of Southfield to help assess its internal accounting systems and financial controls.
GM has been under investigation by the SEC since last fall, when the company disclosed that it had been subpoenaed in a broad inquiry into payments made by suppliers to retain GM contracts. The formal investigation stemmed from an SEC subpoena issued in April 2005 in connection with the probes into GM's former parts unit Delphi Corp.
The formal SEC probe has since widened to include a federal grand jury in Manhattan, which subpoenaed GM records in early March relating to supplier credits.
The probe is led by the U.S. Attorney's Office for the southern district of New York, because the company has Treasury operations there.
GM has hired attorneys to represent some current employees in the investigation. Some employees have been questioned in the wide-ranging accounting probe.
Last year, GM hired prominent Washington attorney Thomas Newkirk, the former associate director of enforcement at the SEC, to assist it.
In March, the automaker delayed the filing of its 2005 annual report because of a mistake in accounting at its mortgage unit. When it was filed, the report said GM would restate five years of earnings because of accounting errors.
The staff changes are part of an overhaul of GM's internal accounting led by Fritz Henderson, who took over as GM's vice chairman and chief financial officer in January.
"We have had some accounting missteps that we have identified and corrected," said Simonetti. "Combining the control position and the chief accounting officer helps to improve the internal infrastructure of the department."
AlixPartners has been involved in numerous prominent bankruptcy cases in recent years. Clients included Troy-based Kmart Corp., auto-parts maker Dana Corp., trading firm Refco Inc., energy giant Enron Corp. and telecommunications company WorldCom Inc.
GM has said it has no plans to file for bankruptcy and has plenty of money to operate its business.
Schmidt's retirement after 37 years with GM was expected, the company said. Bible, 48, is leaving the company to "pursue other career options" and was not considered a candidate for the combined job of controller and chief accountant.
The cloud of SEC investigations over the company appeared to be a prime factor in the shake-up, according to one auto analyst.
"It looks like these are the scapegoats," said David Healy of Burnham Securities. "The public's confidence has been shaken in GM, and this is part of the response."
Healy said that GM's earnings restatements were "insignificant in terms of dollars," but had created a climate of suspicion about its financial controls.
"The accounting problems are really a mouse when the public thinks it's an elephant," Healy said.
GM is also the target of a class-action suit that alleges the company and several of its top officers made false and misleading statements to investors that inflated the value of its stock. The company has denied the charges.
GM Chairman and CEO Rick Wagoner, in a letter to shareholders last month, apologized for the series of accounting errors and promised the automaker was "working diligently to get things moving in the right direction -- quickly" following a huge loss of $10.6 billion last year.
In the letter, Wagoner vowed that GM had "a renewed commitment to excellence and transparency in our financial reporting."
Detroit News Staff Writer David Shepardson contributed to this report. You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
GM retools engine lineup
Friday, May 19, 2006
GM retools engine lineup The automaker plans 19 new or revamped engines, transmissions; hybrid system in works.
Dee-Ann Durbin / Associated Press
DETROIT -- General Motors Corp. said Thursday it is introducing 19 new or significantly redesigned engines and transmissions in its 2007 model year vehicles, including a new hybrid system and a fuel-saving V-6.
The world's biggest automaker also said it will offer 14 models -- or about 400,000 total vehicles -- that can run on E85 ethanol in the 2007 model year, compared with nine models in 2006.
New ethanol-capable vehicles are the Chevrolet Express and GMC Savana vans, the Chevrolet Uplander minivan and two more models that haven't yet been announced, spokeswoman Susan Garavaglia said. GM already has nearly 2 million ethanol-capable vehicles on the road.
GM's 2007 Saturn Vue Green Line, due out this summer, will have a new gas-electric hybrid system that GM says will use up to 20 percent less fuel than a traditional Saturn Vue.
Like other gas-electric hybrids, the Green Line saves on gas consumption by shutting off the engine while idling, giving the vehicle a boost of electric power during acceleration and capturing electrical energy when the vehicle is braking. GM brought down the price by making a simpler system that doesn't run on electric power for as long as other hybrids. The Green Line will get an estimated 27 mpg in the city and 32 mpg on the highway, compared with 33 mpg in the city and 28 mpg on the highway for the Highlander.
GM is developing a more advanced hybrid system in a partnership with DaimlerChrysler AG and BMW AG.
GM Chairman and CEO Rick Wagoner said in an interview last week that he thinks GM's strategy of having several hybrid options is a good one and will make up for the fact that GM has trailed Toyota and other rivals in bringing hybrids to market.
"It's fun to be first in an early-stage technology. It's more important to be right, and I think we have a well-thought out approach," he said. "I think (the Vue and the Tahoe) will show people that we can play with anybody on technology. "
GM also is expanding the number of vehicles with six-speed automatic transmissions.
GM says the six-speeds offer better fuel economy and performance and smoother shifting than traditional four-speeds. They also cut down on wear by reducing engine revolutions per minute.
Cadillac Escalade tanks up on power
May 17, 2006
2007 Cadillac Escalade
He Drove, She Drove By Paul & Anita Lienert / Special to The Detroit News
It may be risky to recommend a big, gas-guzzling SUV in an era of rising gas prices.
But it's impossible to not get gushy about the redesigned 2007 Cadillac Escalade -- a mighty Motor City creation that's big on chrome from its luggage rack to its 22-inch wheels.
We're in agreement that the new Escalade, which gets a 58-horsepower bump for the new model year, is a winner. But one of us thinks that General Motors Corp. still needs to do a bit more work to bring it up to world-class quality standards.
We tested an amply equipped Escalade with five options, including a $2,495 "information package" that bundles such items as a DVD navigation system and a rearview camera, as well as a $625 climate package with heated-and-cooled front seats and a heated steering wheel. Bottom line: $64,815, including an $875 shipping charge.
SHE: One of my favorite things to do in the early morning is to pour myself a cup of coffee and check out what GM Vice Chairman Bob Lutz has to say on his blog. Recently, he told readers, "You'll be surprised at how much GM is at war -- and not with itself anymore." I think the new Escalade is an excellent example of that. It is a five-star vehicle in my book that more than competes with such newcomers as the all-new 2007 Mercedes-Benz GL-Class. If gas prices aren't really an issue for you, I can't think of another big SUV I'd recommend more than this one.
HE: One of my favorite things to do in the early morning is to go back to bed. Without Lutz. Actually, I suppose I could just curl up in the back seat of the Escalade. It seems that big. So big, in fact, that GM felt compelled to slide an even bigger V-8 under the hood of the '07 model, which now comes with a whopping 6.2-liter V-8. How's that for conservation consciousness?
SHE: Funny you mentioned that because that's one of my biggest gripes -- no variable-displacement system on the Cadillac V-8 to help conserve fuel. The EPA ratings are pretty appalling -- 19 mpg on the highway and only 13 in the city. That being said, if a person can afford a loaded Escalade with a $65,000 sticker, the price of fuel is probably not going to be an issue, not even at $3 a gallon. That's why I'm not afraid to recommend this.
HE: Well, there's that and, of course, the 403 horses that big V-8 churns out. I'm glad GM decided to team the engine with its new six-speed automatic, which is a very smooth, modern transmission. The 6.2 V-8 and six-speed are one of the nicest powertrain teams in the SUV universe, in terms of performance. Cadillac also did a fine job of tuning the chassis for a remarkably smooth ride for such a behemoth truck.
SHE: Chassis, nothing. The Escalade is all about status. When you climb behind the wheel into that command seating position and see those gorgeous gauges with the blue needles and the retro analog clock spread out in front of you, you can't help but feel like a master of the universe. And the Escalade has all of the safety and security features I expect in a luxury vehicle, from stability control and standard head curtain air bags that protect all three rows, to the OnStar communications system.
HE: I agree with you in some respects. But I have some serious reservations. Why do the seating positions looking progressively cheaper the farther back you go? Why don't the big plastic trim pieces fit together very well, especially in the third row? Why isn't there a power folding third-row seat, like you get in the Lincoln Navigator? Why do the second-row windows only roll down halfway? And why in the world doesn't a $65,000 luxury SUV come with a standard rear-seat entertainment system? Just asking.
SHE: Ooh, I can hardly wait to read Lutz's response on his blog.
Anita and Paul Lienert are partners in Lienert & Lienert, an automotive information services company.
2007 Cadillac Escalade AWD
Type: Front-engine, all-wheel drive, seven-passenger sport-utility vehicle
Price: $57,280 (incl. $875 destination charge); as tested, $64,815
Engine: 6.2-liter V-8; 403-hp; 417 lb-ft torque
EPA fuel economy: 13 mpg city/19 mpg highway
Where built: Arlington, Texas
Estimated 12-month insurance cost, according to AAA Michigan : $1,923
Paul
Likes: Striking exterior design. Very comfortable ride. More expensive-looking cockpit -- at least the first row. Powerful 6.2-liter V-8. Huge front armrest. Smooth 6-speed automatic transmission.
Dislikes: Not enough legroom for adults in second and third rows. Sloppy trim fit in third row. Cabin wood looks fake
22-inch tires don't fill up wheel wells. Steering column doesn't telescope and only has manual tilt. Rear windows only roll down halfway.
Anita
Likes: Chrome, chrome everywhere. Bigger, better brakes. Terrific second-row amenities, including heated seats, audio controls. Excellent standard safety features. Retro-looking analog clock. Clever power release for second-row bucket seats. Power adjustable pedals. Bold 22-inch chrome wheels.
Dislikes: Dismal fuel economy. No power folding third row seat. No variable displacement system to save gas. Massive center pillars block vision.
Anita and Paul Lienert are partners in Lienert & Lienert, an automotive information services company.
UAW OKs strike at Delphi
Wednesday, May 17, 2006UAW OKs strike at Delphi Union says workers will walk if supplier imposes cuts
Brett Clanton and Bill Vlasic / The Detroit News
The United Auto Workers said Tuesday that its 24,000 members at Delphi Corp. voted overwhelmingly to authorize UAW leaders to call a strike if the bankrupt auto supplier tries to impose wage cuts.
More than 95 percent of the UAW members at 21 Delphi plants voted to back the measure, the union said in a short statement.
"A 95-percent majority really speaks for itself," said UAW spokesman Paul Krell.
The vote highlights the support UAW President Ron Gettelfinger has of members as the union heads toward a potential showdown with Delphi in U.S. Bankruptcy Court.
"The union wants to show that it is united and determined," said Harley Shaiken, labor professor at the University of California-Berkeley. "A strike vote underscores how high the stakes are."
Delphi has asked Judge Robert Drain to void existing labor contracts with the UAW and other unions in order to slash payroll costs and close factories as part of a sweeping reorganization of its U.S. operations.
But if that happens, the UAW now has the option to strike Delphi and shut off the supply of parts to its biggest customer and former corporate parent, General Motors Corp. Still, any walkout would be weeks away, pending the outcome of the deliberations in bankruptcy court.
A strike at Delphi would cripple GM's assembly plants within days, and siphon billions of dollars from the automaker's cash reserves. Merrill Lynch analyst John Murphy has said the automaker would "bleed" $7 billion to $8 billion in cash through the first 60 days of a strike.
Some analysts say a lengthy walkout would force GM into bankruptcy. While GM has said it has stockpiled some parts, a widespread Delphi strike would close GM auto-assembly plants within 48 hours, according to Sean McAlinden, an analyst with the Center for Automotive Research in Ann Arbor, Michigan.0
GM and Delphi executives say they hope to work out a consensual deal with the UAW to provide what Delphi Chairman Robert S. "Steve" Miller called a "soft landing" for workers whose jobs or wages are affected by the reorganization.
But the UAW has not held any formal talks with Delphi in recent weeks, though high-level discussions have occurred between the two sides, according to sources familiar with the situation. Talks are ongoing, however, between GM and Delphi.
GM's chief financial officer, Fritz Henderson, told analysts last week he expected a settlement with Delphi within 30-60 days.
One analyst, however, said a quick settlement of pension and wage issues at Delphi could be very expensive for GM.
"We are concerned that this aggressive timeline may result in GM accepting more adverse settlement terms," said Rob Hinchliffe of UBS Investment Research. "We estimate the deal could cost more than $7 billion."
GM's shares closed down 67 cents, or 2.5 percent, at $25.53 on the New York Stock Exchange after word of the strike vote. Delphi's shares no longer trade on the New York Stock Exchange.
In court hearings last week, Drain instructed the UAW and Delphi to continue negotiating before the case resumes May 24.
The strike-authorization vote was seen as a formality by some Delphi workers in the long-running struggle to preserve jobs and wages.
"It's not a really big subject right now," said Don Yull, a 50-year-old production worker at a Delphi plant in Rochester, N.Y.
Yull said workers are more focused on early-retirement and buyout offers made GM made to its 113,000 U.S. hourly employees and 13,000 workers at Delphi.
He expects employment at his plant to drop substantially because of the program. "For the people being left behind, there's a lot of uncertainty around here," he said.
Despite the heated rhetoric in court from Delphi and UAW representatives, Yull is unconvinced that the union is headed for a strike.
"There's a lot of opportunity for an agreement," he said.
The UAW is by far the largest of Delphi's six unions, representing 24,000 of the company's 33,000 U.S. hourly workers. The International Union of Electronic Workers-Communications Workers of America, which represents 8,000 workers, also has voted to authorize a strike.
The United Steelworkers, International Association of Machinists and Aerospace Workers and the International Brotherhood of Electrical Workers, which represent more than 1,100 Delphi workers, haven't scheduled strike votes. Messages seeking comment were left with Delphi's other union, the International Union of Operating Engineers, which represents about 20 workers.
Detroit News wire services contributed to this report. You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Who gets your car dollar? Depends on your point of view
Monday, May 15, 2006
Daniel HowesWho gets your car dollar? Depends on your point of view In the "who's more American" sweepstakes, this much is indisputable:
Detroit's automakers and suppliers employ vastly more Americans than their foreign rivals do.
Detroit's No. 3, the Chrysler Group, may employ Americans, produce American brands and sell them mostly in North America, but it's German-owned.
Detroit's hottest new midsize sedan, the Ford Fusion, is built in Mexico, the Chrysler Crossfire comes from Germany and General Motors Corp.'s Chevrolet Aveo hails from South Korea. But they're American models.
Toyota, Honda and Nissan, the leading creators of automotive jobs in the United States and Canada over the past five years or so, are not American companies -- and never will be. Their headquarters are not here. Their CEOs don't live here. Most of their shareholders aren't here.
Catching the Detroit pitch
Why is any of that debatable?
The Level Field Institute, a creation of retirees from Detroit's traditional automakers that is modestly supported by Ford, wants Americans to understand the importance of Detroit's automakers and their suppliers to the American economy and how some foreign-owned rivals are bigger American job creators than others.
"It is, in the end, a buy Big Three pitch," concedes Jim Doyle, president of Level Field. "But it's also a buy Honda over a Hyundai message." Among foreign automakers, "Honda has got the highest number of American employees per car. If you can convince someone who's going to buy a Hyundai to buy a Honda, jobs are served."
OK. But extend the logic.
Does buying a Honda built in Ohio by non-union labor trump buying a Ford Fusion from Mexico? Solidarity House wouldn't think so, even if American jobs are created.
Economic self-interest rules
Is a BMW SUV from South Carolina more politically correct than a Land Rover from the U.K.? Land Rover parent Ford gets the profit, but America gets the BMW jobs.
Would a Texas-built Toyota Tundra, coming soon, be more preferable to Detroit diehards than a Canadian-built Chevy pickup? Don't answer that.
As the global auto industry's tentacles reach deeper into the lives of every American and muddle a commercial landscape that few outside the industry pay much heed, two things are clear:
First, economic choices have consequences. Just as buying cheaper steaks at Costco helps drive your neighborhood butcher out of business, what you drive from the showroom impacts your local economy. The only question: Do you care?
Second, economic choices are selfish. If you buy Detroit because you live in the Midwest (and get a discount), that's self-interest. If getting the best minivan (the Honda Odyssey) trumps Detroit's automakers, that's self-interest, too.
Waving the flag or hoisting the union banner to sell cars and trucks is a lame argument when the products can -- and often do -- stand on their own. For the Detroit companies, it says desperation. For the foreign-owned, it smacks of political positioning and good ol' deception.
Daniel Howes' column runs Mondays, Wednesdays and Fridays. Reach him at (313) 222-2106 or dchowes@detnews.com.
Delphi drops charges
Delphi drops charges The union official led from a plant in cuffs will not be charged, but is not allowed back in the plant.
By John Nolan
Staff Writer
DAYTON — Delphi Corp. said Friday that it has dropped a trespassing allegation it made against Joe Buckley, president of United Auto Workers Local 696, even though Delphi had police arrest him last week and removed him from its Dayton brake plant.
But company spokesman Brad Jackson said that Buckley still isn't being allowed into the plant, pending discussions that management is having with representatives of the Detroit-based UAW's national headquarters.
"It's going to put a strain on the relationship, there's no doubt about that," Buckley said.
Jackson declined comment on why the auto parts company banished Buckley. The union president maintains an office in the plant, where the UAW represents 1,400 hourly workers. There is no timetable for Buckley's return.
"We dropped the charges," Jackson said Friday. "Our primary objective was achieved ... for him to leave the plant."
Deirdra Logan, Dayton's chief city prosecutor, said Delphi had declined to pursue a criminal charge against Buckley.
Buckley said Delphi initially had Dayton police handcuff him and take him to jail on a criminal-trespassing charge May 5 after he refused a company demand to leave the plant.
Earlier that day, Delphi placed Local 696 shop chairman Tony Keen on indefinite suspension for what management said was his involvement in an unauthorized work stoppage, Buckley said.
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
Delphi to Delay Filing 1Q Results
Delphi to Delay Filing 1Q Results
DETROIT — Auto parts supplier Delphi Corp. said it won't be able to file its first-quarter financial report on time because it needs more information on the potential outcome of wage talks with its unions and General Motors Corp.
Delphi also failed to file a 2005 annual report with the U.S. Securities and Exchange Commission because of the ongoing talks. In a report to the SEC filed late Thursday, Delphi said it will file its quarterly report once it completes the annual report.
Delphi, which filed for bankruptcy protection in October, is required to file monthly financial statements with the U.S. Bankruptcy Court. In its most recent filing, the company said it lost $1.6 billion on $9.1 billion in sales for the period from Oct. 8 to March 31.
Delphi was in bankruptcy court this week asking the judge for permission to cancel its labor contracts. It is in talks with GM, its former parent and largest customer, and its unions and hopes to reach an agreement to lower U.S. hourly workers' wages.
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On the Net:
Delphi Corp., http://www.delphi.com
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May 12, 2006 - 12:07 p.m. EST
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Delphi asks judge for right to cancel contracts
Delphi asks judge for right to cancel contracts
By Adam Geller , Associated Press
NEW YORK — Auto parts supplier Delphi Corp. argued Tuesday that it must be given the right to cancel its labor contracts, telling a bankruptcy judge that is critical to the cost cutting required for its survival.
Delphi's argument
"Without transforming Delphi's North American operation to be competitive in North America, let alone globally, these debtors cannot reorganize and the corporation will fail," Delphi attorney Jack Butler told Judge Robert Drain and a packed courtroom. "Simply stated, Delphi must become competitive to survive," Butler said.
UAW's argument
Lawyers for the United Auto Workers union contended that letting the company cancel its contracts would give Delphi an overwhelming and unfair advantage, allowing it to force through deep wage cuts and rob its workers of long-promised benefits.
What Delphi wants
Delphi has proposed cutting its workers wages from $27 an hour to $16.50 an hour. That proposal, however, would require a large contribution from General Motors, Delphi's former parent and largest customer. Without such a contribution, Delphi is prepared to pay its workers $12.50 an hour.
What might happen
The union has pledged to strike if Delphi cancels the contracts. Such a strike could have a devastating effect on Delphi, its 33,000 hourly workers and on GM, which relies heavily on Delphi parts for its own production.
What's next
The trial in U.S. Bankruptcy Court for the Southern District of New York is expected to last for several days and Drain is not expected to rule for weeks.
(05.09.2006)
Delphi disciplines officials from union
Delphi disciplines officials from union
By John Nolan
Staff Writer
DAYTON — Delphi Corp. on Monday disciplined three more officials of United Auto Workers Local 696 at the company's Dayton brake plant in response to a work stoppage in part of the factory last week, the union said.
Joe Buckley, president of UAW Local 696, said the company placed a union shop steward on indefinite suspension and was planning to take similar action against two other stewards.
Last week, the company put Local 696 shop chairman Tony Keen on indefinite suspension, then had Buckley arrested on a trespassing charge when he declined management's order to leave the plant, Buckley said. The company has the option of converting an indefinite suspension into a firing, he said.
"I think it sends a pretty clear message that the corporation has chosen a path of confrontation, rather than sitting down and resolving the issues we've got," Buckley said Monday.
Delphi spokesman Brad Jackson declined to discuss any of the details, saying the company does not discuss employee matters publicly. On Sunday, the union members voted to authorize the national UAW to call a strike if the union is unable to negotiate a new, lower-cost wage agreement that Delphi wants.
Union officials said last week's dispute began because Delphi hasn't replaced janitors who retired May 1 and floors have become dirty and slippery near brake machining equipment. Keen brought the problem to management's attention, then directed union members to stop working in the area last Thursday because of the safety hazard that he believed the company had not corrected, Buckley said. Keen was suspended the next day.
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
(05.08.2006)
Delphi has UAW leader arrested, he says
Delphi has UAW leader arrested, he saysThe union president said the action followed a complaint about safety and shutdown of a line.
By John Nolan
Staff Writer
DAYTON — The president of United Auto Workers Local 696 said Delphi Corp. had him arrested on a trespassing charge and suspended the union's shop chairman, a day after the union complained of an unsafe workplace and shut down an operation in Delphi's Needmore Road brake plant.
Tuesday in New York, a federal bankruptcy judge will hear Delphi's request to cancel the contracts with its labor unions unless they agree to lower-cost contracts the auto parts company says it needs to get out of bankruptcy reorganization. Members of UAW Local 696 are to vote today on whether to authorize the national union to call a strike if it cannot reach a contract with Delphi.
Joe Buckley, president of Local 696 which represents the brake plant's hourly workers, said Delphi placed union shop chairman Tony Keen on indefinite suspension Friday and could later fire Keen.
Delphi has not replaced janitors who retired May 1, and union members complained the floor had become dirty and slippery around brake cylinder machining equipment, Buckley said Saturday. After Keen asked management on Thursday to have the floor cleaned and received what he thought was an inadequate response, Keen directed union workers to stop work in that area, Buckley said.
"The shop chairman was doing his job, and that was defending the people who elected him," Buckley said of Keen.
Delphi spokesman Brad Jackson said Saturday that the company does not discuss employee matters. Discipline follows Delphi's union contracts, Jackson said.
Buckley, who maintains an office inside the plant, said Delphi's management told him on Friday to leave the premises. Buckley said that after he refused, management called Dayton police and had him arrested, handcuffed and removed on a criminal trespassing charge. Buckley said he was taken to jail, then posted a $124 bond and directed to appear Tuesday in Dayton Municipal Court.
(05.06.2006)
Delphi, GM fail to reach accord on prices
Delphi, GM fail to reach accord on prices The automaker does not want to continue to give up discounts on parts from its troubled supplier.
By John Nolan
Staff Writer
DAYTON Delphi Corp. said Monday it was unable to work out a deal with General Motors Corp. for the automaker to continue giving up price reductions it was otherwise due for Delphi parts.
GM is contractually entitled to price reductions over time on a broad array of Delphi auto parts, but had been temporarily forgoing them since November to help Delphi through the early stages of its bankruptcy reorganization.
Delphi said on Monday that its net sales figures will reflect the previously agreed-to contract price reductions retroactive to April 1.
GM, which owned Delphi before spinning it off as an independent company in 1999, remains the biggest customer for Delphi parts.
Separately, Delphi has asked a federal bankruptcy judge for permission to reject various contracts with GM that Delphi says it can no longer afford as it tries to emerge from court-supervised reorganization in 2007.
Delphi and GM are also in continuing negotiations with Delphi's hourly labor unions for new, lower-cost contracts the company says it needs to become competitive with rival U.S. parts suppliers.
GM is involved in those talks because it guaranteed the retirement benefits of former GM workers who transferred to Delphi and because GM would be hurt if Delphi's unions failed to reach new contracts and were to go on strike.
U.S. Bankruptcy Judge Robert Drain of New York is scheduled on May 9 to hear Delphi's request to reject its contracts with its hourly unions, even while talks for new pacts continue.
The judge may not rule for several weeks afterward, and the talks can continue during that time.
Contact this reporter at (937) 225-2242
or jnolan@daytondailynews.com.
(05.01.2006)
Watch 'Survivor' on us, GM tells cable viewers
Saturday, May 13, 2006Watch 'Survivor' on us, GM tells cable viewersAutomaker to sponsor 'On Demand' programs on Comcast in Detroit and in three other cities.
Bill Vlasic / The Detroit News
If fans of the "Survivor" reality series miss this Sunday's episodes, they can catch them "on demand" for free a day later -- courtesy of General Motors Corp.
GM said Friday that it will sponsor free, On Demand viewing of "Survivor Finale" and "Survivor Reunion" starting Monday and running through Aug. 31 on Comcast cable systems in Detroit, Baltimore, Chicago and Philadelphia.
Video on demand lets digital subscribers watch archived shows and movies at any time. But the concept of offering prime-time network shows for free is new.
Such shows usually cost 99 cents to view on Comcast's On Demand, but the GM sponsorship allows cable customers to access the CBS "Survivor" shows at no additional cost.
The deal between Comcast, CBS and GM marks the first time that an advertiser will sponsor on-demand programming, according to the three companies.
"We at GM are excited about this opportunity to help bring CBS programming to its loyal fans through Comcast on demand for free," said Betsy Lazar, GM's executive director of media and advertising operations.
The "Survivor" On Demand programs will have three GM commercials that run before, in the middle and at the end of the shows.
The commercials will encourage viewers to access the "GM Showroom" through the On Demand system. The GM Showroom features videos of various GM cars, trucks and SUVs.
By linking up with Comcast and CBS, the automaker will be able to target audiences of specific programs that have favorable demographics for car buying.
"We're offering advertisers new ways to reach very targeted and engaged audiences," said Charlie Thurston, president of Comcast Spotlight.
It also gives GM an avenue to reach potential customers who are in the habit of digitally recording TV programs and skipping commercials.
"For GM, it's another base to cover and they want to see what they get out of it," said Jim Sanfilippo of AMCI Inc. in Detroit, who does marketing consulting for several automakers. "They can control the space and they don't have to be intrusive."
He said the Comcast deal is likely one of a number of initiatives that GM is launching to cut through the advertising clutter.
"In media, the worst thing you can do is stand still," he said. "The game is changing all the time."
The announcement is the latest step in the link-up of CBS and Comcast. Earlier this year, the broadcast network agreed to offer some of its prime time programming for on-demand viewing on the cable system.
You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
