Friday, June 30, 2006

GM reverses, will again offer incentives

GM reverses, will again offer incentives
By Tom Krisher
Associated Press

DETROIT — It took General Motors Corp. exactly six months to start cheating on its incentives diet.

GM said in January it was lowering sticker prices on three-quarters of its U.S. vehicles, a move designed to allow the automaker to rely less on costly incentives to sell its vehicles and to take aim at competitors that have been sapping market share.

But on Tuesday, as the automaker predicted slower U.S. sales overall this year, it said it will briefly bring back some incentives to clear inventory as the 2007 model year approaches.

GM will offer zero percent financing for up to six years on most Chevrolet, Buick, Pontiac and GMC models during a sale that begins Thursday and ends July 5.

The automaker also said its June sales likely will be 30 percent lower than the same month last year, when the company was offering an employee-discount promotion.

Those records won't be topped, so sales this year are likely to drop a bit from 2005, said Paul Ballew, GM's executive director of global market and industry analysis. Higher interest rates and fuel prices also will keep sales lower than last year, he said.

GM officials said Tuesday they have no plan to return to employee pricing, even though such a program is under consideration by DaimlerChrysler AG's Chrysler Group. A Chrysler spokesman said no decision has been made on incentives but an announcement would likely be made Friday, when current incentives expire.

GM said it expects to average $2,836 in incentives per vehicle this June, $1,100 less than the same month last year. It also expects sales to increase over May figures when they are released Monday.

Analysts said GM's strategy will bring people into showrooms and boost sales and perhaps market share.

"Just having this 72-zero gimmick means they're having a hard time doing that," said David Healy, an analyst with Burnham Securities Inc.

Ford already has zero percent financing for five years, Healy said, but GM is raising the stakes and cost by going to six years.

UAW officials found guilty

Wednesday, June 28, 2006
UAW officials found guilty
A federal jury convicts two bosses of demanding unqualified men get jobs after a '97 Pontiac strike.
Paul Egan / The Detroit News

DETROIT -- A federal jury convicted two United Auto Workers officials Tuesday of conspiring to break labor laws and to extort favors from automaker General Motors Corp. in the midst of a bitter labor strike in Pontiac nine years ago.

Donny Douglas and Jay Campbell showed no emotion when a U.S. District Court jury returned the unanimous verdicts after a little more than a full day of deliberations.

The incidents that sparked the case date back to 1997, when the UAW went out on strike at GM's truck plant in Pontiac. The work stoppage involved 5,000 workers and lasted 87 days, costing GM hundreds of millions of dollars.

Douglas, an UAW International service representative, and Campbell, who is now retired but was a longtime shop committee chairman at the plant, demanded two unqualified men -- Campbell's son, Gordon Campbell and Todd Fante, the son of another UAW official -- be hired in high-paying skilled trades positions if the strike was to end, the court was told.

The trial that began June 1 continued the case's long legal history. The pair were first indicted in September 2002 after a four-year federal investigation. The charges were dismissed once, in 2003, when a judge found they did not constitute a violation of federal law. But in 2004, the 6th Circuit of the U.S. Court of Appeals reinstated the charges.

Harold Gurewitz, the lawyer who represented the union officials, said the case may now be appealed again.

"I am certainly disappointed with the verdict," said Gurewitz, adding that he respected the work of the jury, but strongly disagreed with the legal instructions the jurors received.

"No matter what the evidence, it doesn't add up to criminal conduct," he said.

Before launching an appeal, "we're going to ask the judge to review what has been done so far."

The two were released on bond and are to be sentenced by Judge Nancy Edmunds on Nov. 2.

A third count of mail fraud against each of the men was dismissed by the judge before the case went to the jury.

Reached by telephone Tuesday night at his home in Holly, Donny Douglas said he was weighing his options, including a possible appeal.

"I think we got a bad call from a jury that didn't look at all the facts," he said.

Douglas is set to retire Friday from his position at UAW's Solidarity House headquarters in Detroit. He is one of about 35,000 union workers to recently accept financial packages from GM to retire.

Douglas said he believes the jury was swayed by UAW members who testified on behalf of the prosecution.

"We had some UAW testimony that was totally inconsistent with what we had heard earlier," he said. "I think that tipped the scales."

Gregory Nash of Metamora, a former wood model maker at the Pontiac plant who sat through the entire trial, said he was pleased by the verdicts.

Nash said he is unhappy he lost his skilled job at the plant while unqualified people were being brought into skilled positions.

"They have obligations to the membership," Nash said of Douglas and Campbell, but instead they were focused on "getting family and friends in."

At one time, a third UAW official, William Coffey, had been charged in the case. Coffey died in 2003.

Spokespeople for GM and the UAW could not be reached for comment late Tuesday.

A separate civil suit filed against GM and the UAW on behalf of 140 plant workers has been tossed out of court, according to Harold Dunne, the plaintiffs Livonia based lawyer.

You can reach Paul Egan at (313) 222-2069 or

Delphi hires 2,000 temporary workers

Wednesday, June 28, 2006
Delphi hires 2,000 temporary workers
They make $14 per hour to replace workers who earned up to $27 and retired, took buyout.
Jeff Bennett / Bloomberg News

Delphi Corp., the biggest U.S. auto-parts maker, hired 2,000 temporary workers to replace thousands of more expensive union members who are taking early retirement or buyouts.

The temporary employees are being trained at U.S. plants before moving into jobs held by United Auto Workers members, Delphi spokesman Lindsey Williams said in an interview Tuesday. Most temporary hires will earn $14 an hour rather than the $27 now paid to union workers.

Delphi, which filed for Chapter 11 protection for its U.S. operations Oct. 8, said that 12,600 workers accepted retirement offers made in March, and it expects more to take buyouts under a June program. The company is trimming employment to reduce costs under its plan to exit bankruptcy by mid-2007.

"There should be some short-term loss of productivity but the lower wages rates should more than compensate," said Morgan Keegan & Co. fixed-income analyst Pete Hastings.

Williams said that "ample time is available to train new or temporary employees prior to many of our employees departing, which will occur throughout the year."

UAW spokesman Paul Krell couldn't be reached to comment.

The company doesn't yet know how many workers it will need as a result of the departures, Williams said.

Delphi is in the process of closing 21 of its 29 U.S. manufacturing sites, and some of the remaining plants may not need as many workers because the company also is exiting product lines.

"The focus may now be on the numbers of people, but the overriding issue for us is obtaining a comprehensive agreement with our unions," Williams said.

Delphi is in talks with the UAW and five other unions over proposed changes including cutting hourly wages to as low as $12.50.

Thursday, June 29, 2006

Wow! 47,600 buyouts

Tuesday, June 27, 2006
Wow! 47,600 buyouts
Deal speeds up GM turnaround by 2 years; Delphi exodus paves way for restructuring.
Bill Vlasic / The Detroit News

DETROIT -- More than 47,000 union workers at General Motors Corp. and bankrupt Delphi Corp. have taken buyouts or early retirements in what amounts to the biggest corporate downsizing in U.S. automotive history.

GM said Monday that 35,000 hourly employees have agreed to leave the struggling automaker for packages ranging from $35,000 to $140,000 -- which will allow the company to reach its target reduction of 30,000 hourly jobs by Jan. 1, two years early.

The final tally of buyouts and early retirements far exceeds early estimates and lays the groundwork for a sweeping restructuring of GM's U.S. manufacturing operations.

"It's fair to say we're coming very rapidly on the road back," said GM Chairman and CEO Rick Wagoner at a news conference at GM's Detroit headquarters.

At Delphi, another 12,600 union members have elected to retire early, paving the way for a radical restructuring of the parts maker's U.S. operations.

Wagoner said the buyouts and retirements at GM will cost about $3.8 billion in payments to departing employees and adjustments in pension liabilities. He said GM will take the charge when it releases second-quarter earnings next month.

In announcing the results of the epic attrition program, Wagoner said GM has increased its target for reducing its North American structural costs from $7 billion annually to $8 billion by the end of this year.

GM market share slides

GM lost $10.6 billion last year, sparking speculation on Wall Street that the company was heading toward bankruptcy.

A decades-long slide in U.S. market share, coupled with rising legacy costs, prompted GM in March to offer buyouts or retirement packages to all of its 113,000 U.S. hourly employees.

Delphi, a former unit of GM and its biggest parts supplier, later extended its own buyout and retirement offers to most of its 33,000 unionized workers.

Wagoner said Monday that the downsizing of the GM work force, coupled with buyouts and retirements at Delphi, could set the stage for a peaceful resolution of Delphi's restructuring process.

"It goes a long way toward addressing the issue of a future at Delphi that works for everybody," Wagoner said.

Delphi said Monday that 12,600 of its 24,000 UAW members have accepted retirement deals, but gave no details on how many other workers took buyouts. The company is also offering packages to 8,000 workers represented by other unions.

UAW support noted

The conclusion of GM's attrition program marks another milestone in the wrenching effort to turn around the automaker.

Last fall, GM struck a deal with the UAW that forced retired workers to pay a portion of their health care and required active workers to forgo a wage increase to help cover medical bills.

Wagoner credited the UAW leadership for its "steady support" of GM's moves to return its North American business to profit.

There was no immediate comment from the UAW on Monday.

Wagoner said the 35,000 departing workers include 33,800 represented by the UAW and another 1,200 represented by the International Union of Electrical Workers and Communication Workers of America.

Of the 35,000 who signed up, Wagoner said that 4,600 accepted cash buyouts that included relinquishing their health benefits.

When GM and the UAW agreed in March to the massive "accelerated attrition" plan, industry observers were unsure how the offers would be received by the rank and file. But questions about GM's future and Delphi's restructuring in bankruptcy court helped convince workers to take the money and run.

Buyouts open up options

"The ball really started rolling toward the end," said Bobby Millsap, who took early retirement after 27 years at GM's assembly plant in Oklahoma City.

GM closed the Oklahoma City plant, which made mid-size SUVs, in February. More than 2,200 hourly workers were transferred into the GM "jobs bank," where they continued to receive paychecks but had little hope of returning to their old jobs.

"With these packages, they can afford to get off the assembly line and do something they really want to do," Millsap said.

The exodus of workers should help GM drastically reduce the size of the jobs bank. At one point this year, the automaker was paying about 9,000 hourly workers to sit idle or do community service.

"The question is whether the buyouts are going to be enough to soak up most of the jobs bank," said David Healy, an analyst with Burnham Securities.

Wagoner declined to provide numbers, but said the number of workers in the jobs bank "will be dramatically reduced."

A bigger issue is whether GM can shrink its manufacturing base fast enough to keep up with its falling market share.

GM announced last year plans to close at least 12 plants and engineering centers by 2008.

Analysts predict the overall U.S. new-vehicle sales to sag in June, and GM to fare worse than other manufacturers. Merrill Lynch analyst John Murphy said Wednesday that GM's market share for the month will drop below 24 percent.

It's now a scramble

GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, transferring workers from other plants and hiring temporary workers.

GM said about 9,000 workers have left the company and the remaining workers who took packages have departure dates scattered through the end of the year.

"We feel highly comfortable we can offer continued focus on great quality," Wagoner said.

Healy estimated the cost of a temporary employee at $19 an hour, compared to about $80-an-hour in wages, benefits and retirement costs for current workers. "That's a huge savings," he said.

GM shares closed at $27.75 Monday, up 78 cents.

You can reach Bill Vlasic at (313) 222-2152 or

Wednesday, June 28, 2006


Monday, June 26, 2006
Mary Kay loves GM for its eye-popping Cadillacs
Brett Clanton / The Detroit News / The Detroit News

Right now, hundreds of thousands of Mary Kay cosmetics sellers are competing for a unique trophy that has distinguished the best among them for nearly 40 years -- the keys to their very own pink Cadillac.

And next month, on a stage in Dallas, a few misty-eyed winners will claim their reward.

The honor of producing the Mary Kay Cadillac has not been lost on General Motors Corp., which through the years has fought to keep the account amid competition from suitors and a slump at its Cadillac brand during the 1980s and 1990s.

But the relationship may be equally important to Mary Kay, whose brand identity has been tied to the luxury car marque from the cosmetic company's earliest days. Rewarding top sellers with, say, a pink Lexus just wouldn't be the same.

While the pink is not so pink anymore and GM is not the same company it was when the program began, the pink Cadillac has endured as the ultimate prize for the Texas makeup purveyor as the company has grown into a global empire.

Along the way, the pink Caddy has also become an American icon, immortalized in songs by Bruce Springsteen and Aretha Franklin, dropped in movies and used as a ride for Barbie. But it is perhaps best known as an unmistakable symbol of the self-made businesswomen.

So, every few months, as it has for years, GM gets the call to build a new batch of big pink sedans. Workers at GM factories in Detroit and Lansing retrieve a special vat of paint marked "OGU," pink Cadillacs roll down the line, sandwiched between white, black and red models, and the tradition continues.

It's the car sellers hope for

The ritual traces its history to 1968, when, as the story goes, a young and ambitious woman named Mary Kay Ash strode into a Cadillac dealership in Dallas with an unusual request.

Pulling a compact out of her purse and pointing to the "Mountain Laurel" pink blush inside, she said she wanted a car in the same color.

The dealer complied, painted the car on-site and Ash had a rolling advertisement for the small cosmetics business she had started five years earlier at the age of 45 with $5,000 -- her life savings.

The following year, with her sales team growing and business taking off, she rewarded her top five sellers with a 1970 model year Cadillac Coupe DeVille -- bathed in bright pink paint.

The rest, of course, is history.

Today, Mary Kay Inc. rakes in more than $2 billion in annual sales and has 1.6 million employees from Uruguay to Ukraine.

But the United States, where 700,000 of Mary Kay's "independent beauty consultants" are based, is still the company's biggest market -- and one of only a few nations where a pink Cadillac is still the top prize.

"It's the car that everyone hopes to receive," said John DeLuna, a Mary Kay marketing and sales analyst who works with the car reward program.

GM has built about 100,000 pink Cadillacs. The attention the automaker shows the Mary Kay account is on full display at GM's large car factory in Hamtramck.

The plant annually builds about 800 pink Cadillac DTS sedans -- the top award for Mary Kay's star sellers. That makes Hamtramck the biggest producer of pink Caddys, dwarfing the output at GM's Lansing Grand River plant, where pink versions of midsize Cadillac CTS sedans are built for Mary Kay.

In Hamtramck, a pink Caddy is pampered in a way that the Buick Lucerne and other DTS models made on the same assembly line are not. A special tri-coat paint job takes more than twice as long as the normal three-minute treatment. And the cars get some exterior components, including rearview mirrors, delivered to the plant in Mary Kay pink by parts suppliers.

"At one point, making these vehicles used to be a big disruption," said Gregory Pratt, paint area manager of GM's Hamtramck plant.

But GM factories are much more flexible today than they once were, so Pratt and his team can respond to a Mary Kay order in seconds, rather than minutes and hours.

Through the years, the appearance of the Mary Kay Cadillac has also changed. No more fins. No more DeVille, which was phased out last year to make way for the DTS. And, most surprisingly, no more pink. Or at least not much of it.

Mary Kay pink has been updated six times in four decades, evolving from bubble-gum pink in the early years to a "pearlescent" shade today that is pink only in the right light. The rest of the time, a Mary Kay special might look like just another white sedan.

And not all of Mary Kay's legions of sellers are happy with the transition.

In the late 1990s, these cosmetics road warriors pushed back when a new shade was introduced that they felt was just too pale. "There were some people out there who wanted it a little pinker," DeLuna said.

So in 2000, the company rolled out a pinker pink to placate the miffed vendors.

Today, Mary Kay is working on a seventh-generation pink for award cars. GM says the new hue will be closely guarded until it is unveiled.

An interesting thing about the Mary Kay pink: Regular customers cannot buy a pink Cadillac from GM, nor have one painted by a GM dealer. It is an exclusive shade owned by the cosmetics company.

In addition, winners of a Mary Kay Caddy must return the cars after a two-year lease expires, at which time the company repaints them and sells them at auction. Those who choose to buy the pink cars must agree not to resell them to anyone other than approved dealers.

Account is valuable to GM

Keeping the Mary Kay people happy may be important to GM now more than ever. After losing $10.6 billion last year, GM is trying to scale back sales to image-killing rental car agencies, and beef up profitable fleet sales to corporate customers like the well-known cosmetics firm.

Along with the pink Cadillacs, Mary Kay buys hundreds of Pontiac Vibe hatchbacks and Pontiac Grand Prix sedans every year -- all painted red -- that are given as rewards to a second tier of top sellers.

Beyond the sales boost, though, GM and the Cadillac brand benefit from being connected to one of the best-known corporate award programs in the world, said Siobhan Olson, head of non-traditional marketing for Frank About Women, a consultancy in Winston-Salem, N.C.

"What brand wouldn't want to be known as a reward?"

To get an idea of how seriously GM views its relationship with the cosmetics company, look no further than GM's Renaissance Center headquarters. There, the automaker has a whole team -- headed by its own vice president -- to oversee the Mary Kay account.

Every week, the group has "Pink Tuesday" strategy meetings where team members -- including the men -- are encouraged to wear pink.

The team will do anything it can to better understand the women who will drive these cars, said Sharon Dudley-Parham, GM's fleet account manager of the Mary Kay business.

"We are sensitive to the fact that this is a long-term account," she said. "We are not interested in losing this business."

Mary Kay's DeLuna said there have been moments through the years when the makeup maker thought about going in a different direction.

"I hesitate to tell you," he said, "but we've considered it."

Mary Kay has always returned to GM because of the care it gives the account and competitive price, DeLuna said.

At this point, it would be hard to swap the Caddys for another model and have it mean the same thing.

Crisette Ellis, a national sales director for Mary Kay who lives in Bloomfield Hills, knows this all too well.

After winning four pink Cadillacs and qualifying for a fifth, she decided to take a cash prize rather than the car, an option that allowed her to buy a sleek Mercedes-Benz convertible.

After a while, though, she missed the recognition she got from wheeling around in a pink Cadillac and the sense of achievement that came with it.

"You can't show people the cash," said Ellis, 42, who now is in her fifth pink Cadillac.

In two weeks, thousands of Mary Kay sellers will gather at the Dallas Convention Center for the company's annual meeting, known as "Seminar," and a new crop of vendors will get their first pink Cadillacs.

As the moment draws near, women in the audience will make oversized steering wheel motions with their arms or hold mini-steering wheels to signal the time is nigh.

The winners will be called to the stage. Music will play. Tears will flow. And the dream that drove them to this point will be fulfilled.

You can reach Brett Clanton at (313) 222-2612 or

Tuesday, June 27, 2006

35,000 Workers Take GM Buyout

35,000 Workers Take GM Buyout
DETROIT, June 26, 2006

(CBS/AP) About 35,000 hourly workers at General Motors Corp. have taken buyout or early retirement offers, surpassing the company's expectations as it tries to cut costs by paring its hourly work force, GM Chairman and chief executive Rick Wagoner said Monday.

The job cuts will help GM's long-term turnaround plan as it cuts production capacity to match its current sales and market share. GM previously announced plans to cut its 113,000-person U.S. hourly work force by 30,000, closing 12 plants by 2008.

GM said it now expects to reach its job reduction target by Jan. 1, 2007, about two years ahead of schedule.

"Over the past several months, we have accomplished a great deal in our strategy to reshape GM into a company that is more nimble, more global and built for long-term success," Wagoner said in a prepared statement.

The deadline for GM workers to file paperwork for the offers was Friday, June 23. Workers have until Friday, June 30 to change their minds, WOOD-TV in Detroit reports.

Friday also was the deadline for workers at Delphi Corp., GM's former parts operation that is now a separate company, to file for early retirement incentives.

Delphi said Monday that about 12,600 UAW-represented employees took one of the buyout or retirement offers at the automotive parts supplier, which filed for bankruptcy protection last October. Some Delphi workers also have an additional buyout offer on the table with deadlines that are more than a month away.

Based on preliminary numbers from GM, about 4,600 employees accepted buyouts and about 30,400 chose to retire. It is expected that most will retire or leave the company by the end of the year, GM said. Delphi did not break out how many workers took each option.

The nation's No. 1 automaker said it expects to save $5 billion in structural costs in 2006.

Bloomberg News reports that the plant closings will cut North American production by about 1 million units, after a previous reduction of the same quantity from 2002 to 2005.

Because so many people are leaving, both GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, bringing in transfers from other plants and hiring new people.

"There will be this challenge to make sure there are enough workers in certain locations. You can't just move people around like chess pieces," said Greg Gardner, spokesman for Harbour Consulting, a Troy, Mich., company that tracks manufacturing productivity.

Turnout was especially heavy at those targeted for closure or sale.

At a GM sport utility vehicle assembly plant in Oklahoma City that's idled and slated to be shut down, the UAW local reported on its Web site that 1,426 workers — almost 60 percent of the 2,400-member local — took the offers. Another 377 will transfer to other plants.

Gerald Meyers, former chairman of American Motors Corp. who now teaches at the University of Michigan, said the cuts initially will cause problems, but eventually will be positive for both companies.

"It's a manufacturing manager's nightmare with all these people moving in and out," said Meyers, who predicted quality problems for Delphi and to a lesser degree, for GM, as the transition is made to a smaller work force. "It'll take weeks before these people learn their jobs and before they find out how tired they're going to get. It'll show up in the quality of the product," he said.

Delphi may lose so many workers that it will have trouble producing its products, said Rob Betts, president of a UAW local at a Delphi plant in Coopersville.

"It could end up being dangerous, a threat to the business," said Betts, who said skilled workers are being replaced by inexperienced people earning far less money.

Analysts say they don't have good estimates on how much all the buyouts and retirements will cost GM.

But the company had about $21 billion in cash back in March, said Robert Schulz, an industry analyst with Standard & Poor's in New York.

The job cuts are an important first step toward GM's long-term stability, but won't turn the company around by themselves, said Erich Merkle, an analyst with IRN Inc., an automotive consulting firm in Grand Rapids.

"The other side of the equation is the revenue side. They've got to do something to stabilize their sales and market share. At the end of the day you still have to build products people will buy," Merkle said.

GM shares closed at $27.75, up 78 cents, on the New York Stock Exchange.

©MMVI, CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

35,000 to head for exits at GM in buyouts


35,000 to head for exits at GM in buyouts
More than 12,000 workers accept Delphi's offer of cash in exchange for leaving early.
By John Nolan
Staff Writer

DAYTON — About 35,000 hourly workers at General Motors Corp. have accepted buyout or early retirement offers to leave the automaker and help it reduce its manufacturing capacity and costs, GM said Monday.

Delphi Corp., GM's biggest parts supplier, separately said that about 12,600 of its employees have accepted retirement incentives to leave Delphi, a former GM unit in bankruptcy reorganization and trying to reduce its hourly labor expenses.

At both GM and Delphi, the workers have until Friday to change their minds about accepting the attrition offers, so the numbers won't become official until after that, company officials said.

Delphi has reached a separate agreement to offer buyouts to workers not yet eligible for retirement; the response to that program won't be known for weeks.

Rick Wagoner, GM's chairman and chief executive officer, said the workers who accepted the voluntary departure offers by last Friday's deadline included 33,800 represented by the United Auto Workers and 1,200 represented by the International Union of Electronic Workers-Communications Workers of America.

Of the 35,000 who accepted, 30,400 chose to retire and 4,600 who haven't worked long enough to qualify for retirement chose buyout options, Wagoner said.

Wagoner said the response exceeded GM's expectations and will help the company achieve its goal — reduce its hourly work force by 30,000 workers — two years earlier than expected, on Jan. 1, 2007.

The company will keep its plants running by relocating workers who accept transfers and absorbing some who return from Delphi, Wagoner said.

Rick Tincher, 50, an official with UAW Local 696 which represents hourly workers at Delphi's Dayton brake plant, said he signed up last week for a pre-retirement departure, but is reviewing his decision before it becomes official Friday.

He and other union members are under pressure to make important decisions that affect their families, he said.

"There's a lot of stress right now on the people in the plant," Tincher said.

Who was eligible

About 113,000 GM workers were eligible for buyouts of $35,000 to $140,000 . About 13,000 Delphi workers were eligible for a $35,000 payment.

What it will cost

GM will take a net, after-tax charge of $3.8 billion to pay for the GM and Delphi attrition programs . GM is to report more specific cost details July 26.

Contact this reporter at (937) 225-2242 or

Copyright ©2006 Cox Ohio Publishing, Dayton, Ohio, USA. All rights reserved.

Delphi's buyouts steer past crisis only for moment

Monday, June 26, 2006
Daniel Howes
Delphi's buyouts steer past crisis only for moment

Delphi Corp. folks mulling buyout offers may be angry and understandably confused, but they're heading for the exits anyway -- right on cue.

The growing willingness of hourly workers to take the dough and run is a clear sign that the bankrupt auto supplier and the unions that control its factory floors -- the United Auto Workers and the International Union of Electrical Workers -- are getting what they need to avert a very ugly train wreck.

The exodus is just beginning. Nearly 10,000 of Delphi's 24,000 UAW members say they're ready to go, and today Delphi is expected to confirm that the clock has begun ticking on offers to its 8,500 IUE members due to expire either Aug. 6 or 9 -- a few days before both sides are due back in a New York bankruptcy court.

"I'd say half -- at least -- will take it," a member of IUE Local 717 in Warren, Ohio, tells me, asking not to be identified until he signs his buyout papers. "They've got 'em buffaloed. The psychological warfare has worked by scaring people to leave instead of staying to fight. There's no unity. It's too dog-eat-dog anymore."

Transformation means 'go'

This is how brutal economic leverage works. A cornerstone of bankrupt Delphi's strategy to transform itself from a high-wage maker of low-priced commodities into a competitive-wage maker of value-added products depends on getting most of its $27-an-hour workers to leave.

It's as simple as it is draconian for the unions, too. To have any hope of getting concessionary contracts ratified, averting a cataclysmic confrontation, the unions need to winnow the ranks of high-wage workers to make room for lower-paid new hires likely to ratify a cheaper contract.

"In the end," says a Delphi official familiar with the strategy, "labor transformation is best done on a voluntary basis."

Especially if a primary goal is using the deep pockets of a former parent called General Motors Corp. to make problems go away without a strike. That could destroy Delphi's plant network and imperil GM itself, endangering the pensions and retiree health care bennies these gyrations are intended to save.

Exodus confirms failure

The scale of the desertion from Delphi and GM, expected to lose some 30,000 workers to buyouts, is stunning. No matter how this corporate triage plays out, the biggest prices will be paid by the hourly workers wooed from their lives on the line, the salaried folks bounced from their offices, the communities built around the tax revenue -- not the guys at the top making the decisions and paying the lawyers.

Even more, this rush toward new lives -- the fact it's so necessary -- testifies to the scale of Detroit's failure, however long in coming it may be. Laid bare is Detroit's inability to adequately anticipate the strength of its competition, to counter it and to prosper in a way that would have made so much of this unnecessary.

There's only one greater indignity possible: That after all the cutting is done, after all the plants are closed that will be closed, after all the product plans have been revised, Americans will buy fewer of Detroit's cars and trucks than they do today -- no matter what Detroit does to heal itself.

Then all bets are off.

Daniel Howes' column appears Mondays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or

Ford rated more likely to default than GM

Ford rated more likely to default than GM
By Richard Beales in New York,Bernard Simon in Toronto andJames Mackintosh in ViennaBy Richard Beales in New York, Bernard Simon in Toronto and James Mackintosh in Vienna

Updated: 11:12 p.m. ET June 22, 2006
Ford is overtaking General Motors as the US car company causing most concern to investors and is seen as the most likely to default on its debts, according to the credit markets.

Judging by the cost of default insurance, Ford is seen for the first time in recent years as the more likely of the two to default on its debts. The companies' shares have also moved in opposite directions in recent months.

The switch centres on concerns about the viability of Ford's Way Forward plan, which aims to return its North American operations to profit by 2008. Analysts and others have doubts about Ford's ability to staunch recent losses in market share and have questioned the quality of management at the family-controlled carmaker.

The annual cost of five-year protection against a Ford default climbed to 9.39 per cent on Wednesday, according to data and valuation group Markit, while the cost of equivalent protection for GM stood at 9.26 per cent. A trader said the costs were about equal yesterday.

Default protection rates for GM in the credit default swap market had jumped to more than 13 per cent in January.

The cost of default insurance for Ford has been more stable at 8 to 10 per cent over the past six months, but the rate has risen markedly in recent weeks.

GM's stock price has risen by 42 per cent since the start of the year as fears have subsided that the world's biggest carmaker was on the verge of filing for bankruptcy protection. On the other hand, Ford stock touched a 52-week low of $6.38 this week.

Rating agencies have cut debt ratings on both companies deep into junk territory in the past year, reflecting concerns about their shrinking market shares and high healthcare and other labour costs.

GM's share of the US market fell to 22.5 per cent in May, its lowest level in decades, while Ford's dropped to 17.5 per cent, compared with about 25 per cent in the 1990s.

Each GM and Ford vehicle has a cost disadvantage of more than $1,000 compared with Japanese models.

At the current cost of default protection, market traders are still implying a greater-than-even chance of bankruptcy for both carmakers within five years.

GM, which is about a third bigger than Ford, has racked up the larger financial losses in recent years. But Stefano Aversa, managing director of Alix Partners, a restructuring consultancy, said: "Ford started [its recovery plan] a little bit later, they have been a little bit slower and a little bit less transparent.''

Both carmakers are in the process of cutting a total of 60,000 jobs as part of drastic cost reduction programmes.

Another automotive consultant questioned Ford's stomach for tough cost-cutting decisions, noting that the company had yet to identify all the plants to close under its recovery plan.

Copyright The Financial Times Ltd. All rights reserved.

Monday, June 26, 2006

Buyouts may top 40,000

Saturday, June 24, 2006
Buyouts may top 40,000
In final day, more GM, Delphi workers come forward to take separation deals.
Brett Clanton / The Detroit News

Massive job-cutting efforts at General Motors Corp. and bankrupt Delphi Corp. got an eleventh-hour boost Friday thanks to a last-minute rush for the exits by workers signing up for cash buyouts or early retirement.

The surge may have pushed the final tally at GM and Delphi higher than 40,000 workers, capping with a bang one of the biggest one-time downsizing events in the history of the U.S. auto industry.

With hours to go before the midnight deadline, workers who had delayed decisions for personal reasons or were holding out for better offers finally came forward to fill out the paperwork, United Auto Workers officials and workers at GM and Delphi plants said Friday.

Neither GM nor Delphi officials would say how many workers had signed up for early retirement or cash buyouts as of Friday evening. GM CEO Rick Wagoner will announce preliminary results on Monday. A final count won't be available until at least next Friday because workers have until then to change their minds.

But sources familiar with the situation said that by Thursday night more than 28,000 GM workers and better than 9,000 at Delphi had accepted offers. The stream of takers continued Friday, the final day workers had to decide whether to accept sweeteners to leave or stay and risk losing their job later if the companies' problems continue.

Mike Hanley, president of UAW Local 699, representing Delphi workers in Saginaw, said the program was playing out just as anticipated.

"I know there was a surge yesterday," he said Friday, "and we're expecting another one today."

By Friday afternoon, 1,900 of the plant's 3,000 workers had committed to offers, and he predicted that number would grow slightly by day's end.

Plant to lose third of workers

There was also a last-minute bump at GM's Corvette plant in Bowling Green, Ky., where about 300 of the factory's 1,000 workers are planning to leave under the program, said David Folk, a union representative at the factory.

"It's probably jumped 50 people today," Folk said.

The strong response to the historic "accelerated attrition" program will allow GM to achieve a key part of its North American turnaround plan -- cutting 30,000 U.S. factory jobs by 2008 -- two years early.

It will also help auto parts maker Delphi lower labor costs en route to its goal of emerging from bankruptcy by next year.

But GM and Delphi could struggle to maintain the same level of quality, productivity and safety in their factories as they wave goodbye to thousands of experienced workers.

"When you lose that many people at one time, there are going to be some challenges," said Kevin Reale, an industry analyst with AMR Research in Clarkston.

GM, which lost $10.6 billion last year, is implementing a sweeping restructuring plan in North America that calls for closing all or part of a dozen of its U.S. plants by 2008, reshaping its eight brands, overhauling its pension system and cutting executive pay.

Central to that effort is the buyout plan, which the United Auto Workers agreed to in March to help GM and Delphi lower labor costs and become more competitive.

At GM, the program chiefly targeted the automaker's 36,000 retirement-eligible workers. But the plan -- offered to all 113,000 of GM's U.S. hourly workers -- also extended cash buyouts of as much as $140,000 to lower-seniority workers if they severed all ties with the automaker.

At Delphi, the program was initially aimed at 13,000 UAW workers with a minimum of 27 years on the job. But this month, it was expanded to include cash buyouts similar to those at GM and workers with 26 years of experience. A separate program, also cleared this month, will extend similar offers to workers at the International Union of Electrical Workers-Communications Workers of America, which represents 8,500 of Delphi's 33,000 U.S. workers.

Based on early returns from the GM program, Merrill Lynch analyst John Murphy on Friday reiterated his "buy" rating on the automaker.

"We believe the company is successfully accelerating its restructuring efforts through its buyout program, which will result in significant cost savings in the near-term."

But the visibility isn't as clear at Delphi, which won't have a good picture for weeks of how many workers will leave under its program. Higher-seniority workers had until Friday to sign up for offers, while those with 26 years or less on the job will have until at least the end of July to decide.

Are young workers leaving?

GM and Delphi officials would not disclose the age breakdown of workers taking the offers. But analysts have suggested that more younger workers than expected have accepted offers.

Take Jeffery Martin, a 27-year-old production worker at GM's Pontiac truck assembly plant. Like many others, he waited until Friday to make a move, figuring GM would extend the deadline or increase the package size. But in the end, after six years with GM, he chose a $70,000 buyout.

"I'm going to use the money to start my own plumbing business," he said, as he left the factory Friday.

On the flip side, Louis Horvath -- a 70-year-old production worker at GM's Willow Run transmission plant in Ypsilanti -- was the perfect candidate to accept a retirement offer. But even after 43 years on the job, Horvath said he wants to keep working.

"I'm in good health," he said, "and I love my job."

Earlier this month, GM wrapped up a separate buyout plan with IUE workers at its Moraine, Ohio, SUV factory. Of 4,100 workers at the plant, about 1,200 workers signed up for buyouts and retirement packages.

GM and Delphi officials said official counts from UAW-represented plants would not be available until Monday morning, and that an announcement likely would not come until Monday afternoon.

You can reach Brett Clanton at (313) 222-2612 or

Saturday, June 24, 2006

37,000 take GM, Delphi buyouts

Friday, June 23, 2006
37,000 take GM, Delphi buyouts
With just one day left, companies prepare for massive loss of workers taking incentives.
Brett Clanton / The Detroit News

With tonight's midnight deadline approaching for workers to sign up for buyouts, General Motors Corp. is taking pains to ensure that what may be the biggest downsizing effort ever undertaken in the U.S. auto industry goes off without a hitch.

By Thursday, more than 28,000 factory workers at GM and better than 9,000 at bankrupt supplier Delphi Corp. had filed paperwork accepting offers to retire early or take a cash payout to leave, according to sources familiar with the program.

The tally will undoubtedly grow by the time the sign-up period closes. The struggling automaker will be close to accomplishing a key piece of its turnaround plan -- the elimination of 30,000 hourly jobs by 2008 -- two years earlier than expected. And Delphi, which plans to close or sell 21 of 29 plants, will take another step toward emerging from bankruptcy in mid-2007.

As workers leave, GM will grapple with how to manage the mass exodus of workers without missing a beat at the factories that churn out its cars and trucks.

The Detroit-based automaker, which lost $10.6 billion last year, cannot afford a rocky transition at a time when it is counting on new vehicles to jumpstart sales and is doing everything it can to convince Wall Street that bankruptcy is not in the cards.

That's why more than two months ago the automaker sent a team to every plant with one task: To anticipate every possible production glitch that could arise because of the buyouts and fix them before they become problems.

While GM has experience managing a huge one-time exodus of workers -- 16,000 people left on a single day in 1993 after a record $23.5 billion loss the year before -- the coming departures could test the company in new ways. But officials say they are well prepared for whatever the so-called "accelerated attrition" program brings.

"The attrition program will undoubtedly drive a lot of transition in our plants in the coming months," said Dan Flores, a GM spokesman. "But we have definitely planned for that transition."

Neither GM nor Delphi officials would say exactly how many workers have signed up for the programs, saying an announcement would come early next week. But those numbers may still be preliminary because workers will have seven days to change their minds.

Some workers have already left under the program; many are expected to leave July 1. But both companies reserve the right to keep workers on until Jan. 1, 2007.

The massive program was designed to help the ailing companies reduce soaring labor costs without layoffs.

But a stronger-than-expected response may find GM scrambling in the coming months to plug holes at its plants, while the automaker is still trying to build vehicles at the same speed and quality level.

"Oftentimes, companies worry and put attention on buyouts and people who are leaving and neglect looking at the people who are remaining," said Linda Burwell, co-owner of Nemeth Burwell PC, a Detroit firm that specializes in workplace issues and corporate restructuring.

GM is determined not to let that happen.

Its plant-based teams have mounted a big board on the wall in the offices of many GM factories. On it are dozens of little boxes, each containing the name of a worker who is about to leave the company, and some idea of how their job will be covered once they're gone.

GM has already begun to fill some spots with employee-referred temporary workers at lower pay and no benefits. It is also shifting workers between plants as the company moves forward with a separate plan to close all or part of a dozen factories across the nation. And in the coming weeks, it will begin to reclaim 5,000 Delphi workers who will be assigned to other vacant jobs within the company.

The company's internal targets initially suggested that 20,000 workers would leave with the program. That figure assumed that a large portion of the 36,000 GM workers eligible to retire -- and some lower-seniority workers -- would jump at the chance to exit with money in their pockets.

Apparently, they have.

Late last week, United Auto Workers President Ron Gettelfinger said 25,000 GM workers had accepted offers, and another 8,500 had signed up at Delphi. The auto supplier, which was spun off from GM in 1999, was included in the program as part of a broader agreement in March with the UAW and GM as part of restructuring efforts at both companies.

Yet even those figures had been exceeded by the time of Gettelfinger's update, said the people familiar with the program. And there may still be a last-minute rush for the exits.

"People are waiting to the last minute to make up their minds," said Chris "Tiny" Sherwood, president of UAW Local 652, which represents workers at GM's Grand River Cadillac plant in Lansing.

Other UAW officials and workers predicted they will see a few last-minute takers, but not the big 11th-hour crowds once anticipated.

Under the program, UAW members at GM and Delphi with 30 years or more on the job can receive $35,000 to leave with full benefits and pension, while lower-seniority workers can receive lump-sum cash buyouts up to $140,000 to sever all ties with the company.

The offers were extended to all 113,000 of GM's U.S. factory workers and initially went only to 13,000 Delphi workers with 27 to 30 years on the job. But the Delphi program has since been expanded to cover nearly all workers at the company.

Some workers have already left under the program, while many are expected to leave July 1. But both companies reserve the right to keep workers on until Jan. 1, 2007.

You can reach Brett Clanton at (313) 222-2612 or

Chevy may junk TrailBlazer, build smaller Hummer

Friday, June 23, 2006
Chevy may junk TrailBlazer, build smaller Hummer
GM will shelve 'Blazer by 2010 and offer an H4 in vehicle fuel efficiency push, analyst says.
Jeff Green / Bloomberg News

DETROIT -- General Motors Corp. may dump the Chevrolet TrailBlazer SUV and build a smaller Hummer as rising fuel prices push buyers to more fuel-efficient models.

The TrailBlazer will cease production in about 2010 when Chevy gets a more car-like SUV as a replacement, said Global Insight Inc. analyst Rebecca Lindland, citing discussions with parts suppliers. The new Hummer will arrive in 2009, she said. GM wouldn't confirm either move.

"GM is appeasing customers' desire for a higher-stature vehicle and mating that with models that get decent gas mileage," Lindland said Wednesday.

GM will offer 14 so-called crossovers by 2009, compared with seven now, Vice Chairman Bob Lutz said in October.

U.S. market share for GM fell to an 80-year low last year as Toyota Motor Corp. and other Asian automakers, which get a higher percentage of sales from car-based SUVs, captured a record portion of sales.

GM spokeswoman, Sherrie Childers Arb, said the automaker is "realigning the TrailBlazer program to adapt to the market." She wouldn't give specifics on what those changes might be or comment on plans for a smaller Hummer. GM said in May it's halting production of the H1, the five-ton model that travels fewer than 10 miles on a gallon of gasoline.

GM shares rose $1.07 to $27.27 at Wednesday in New York Stock Exchange composite trading.

The new Hummer H4, would join the H3 and H2 models and probably be built from a smaller version of the H3 chassis, said Lindland, who's based in Lexington, Mass. It would compete with DaimlerChrysler AG's Jeep Wrangler, she said.

"Consumers are finding strong substitutes with the car-like utilities and are choosing them" over the TrailBlazer and Ford Motor Co.'s Explorer, said Michael Robinet, an analyst for CSM Worldwide in Farmington Hills. He wouldn't predict the timing of an end to TrailBlazer production.

This year, GM will build about 256,000 Trailblazers and other SUVs with which it shares a chassis, Lindland said. That's down from peak production of about 460,000 in 2004.

Friday, June 23, 2006

Big Three rebuffed third time by Bush

Thursday, June 22, 200
Big Three rebuffed third time by Bush
Mich. officials believe Republicans don't care about automakers after meeting delayed again.
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- President Bush's planned meeting with the Big Three has been postponed a third time -- this time until July -- which may add to the perception Detroit's automakers are struggling to get their message heard by the White House.

The automakers have been trying to meet with Bush to discuss soaring health-care costs, energy and trade issues. The Big Three have been waiting to follow the summit with an announcement about their commitment to producing more flexible fuel vehicles.

An initial meeting with Bush was set on May 18. The meeting was rescheduled for June 2 then postponed. The White House told automakers it was committed to a gathering by the end of June.

That deadline will come and go, and no firm date has been set in July.

"This is the most important industry in Michigan and, for that matter, the country, and the CEOs can't get a meeting with the president of the United States. That should speak volumes to voters in Michigan as to how the Republicans feel," said Gov. Jennifer Granholm's campaign spokesman Chris DeWitt.

White House spokesman Alex Conant said the administration has never confirmed any date for the meeting.

The automakers Wednesday declined to comment on the postponement.

Michigan Republican gubernatorial candidate Dick DeVos "has talked to all the automakers and offered to make a call to get the meeting set up," said his spokesman John Truscott. He said DeVos is sympathetic to the automakers positions on trade, currency and alternative fuels, but added: "No single state governor can solve the legacy cost issues of global companies."

Specifically, Detroit's CEOs want to discuss a proposal to reform pensions that could cost General Motors Corp. and Ford Motor Co. billions of dollars, improving access to alternative fuels at the pump, and what the automakers call currency "manipulation" by the Chinese and Japanese central banks -- a claim the Asian automakers deny.

The domestic automakers also are smarting from a comment Bush made recently in the Wall Street Journal. The president said the Big Three need to build "relevant" vehicles.

That comment prompted GM Vice Chairman Bob Lutz, a lifelong Republican, to say he planned to cast a protest vote for possible Democratic presidential candidate, U.S. Sen. Hillary Rodham Clinton.

Her husband, former President Bill Clinton, is expected to attend a Detroit fundraiser for Granholm and Sen. Debbie Stabenow, D-Lansing, in August.

Despite the meeting delays, the auto industry continues its Washington offensive.

GM's chairman and CEO Rick Wagoner will testify before the U.S. Senate special committee on aging on July 13 about the company's staggering health care burden, which costs $1,500 per vehicle -- more than is spent on steel.

Wagoner plans to "highlight what GM is doing to improve health care and reduce costs for our employees and retirees," GM spokesman Greg Martin said.

GM is the largest single private purchaser of health care in the United States. The company spent $5.4 billion last year in providing health care for 1 in 271 Americans. It's also the largest purchaser of prescription drugs, spending $1.5 billion in 2005. GM expects its health care bill to reach $7.4 billion in 2009.

Ford Motor Co. Americas President Mark Fields spoke last week to the U.S. Chamber of Commerce about health care, trade, currency and other issues.

You can reach David Shepardson at (202) 662-8735 or

Thursday, June 22, 2006

GM hides fuel-efficient small cars and trucks -- in Brazil

Sunday, June 18, 2006
GM hides fuel-efficient small cars and trucks -- in Brazil
Warren Brown / The Washington Post

INDAIATUBA, Brazil -- Some of the best little vehicles made by General Motors Corp. are not sold in its home market, and therein lies one of the biggest misconceptions about the world's biggest car company.

On most North American lists of small cars and trucks, GM products are at the bottom, if they are included at all.

Through its South Korean subsidiary, GM Daewoo Auto and Technology, GM makes the tiny Chevrolet Aveo car available to American consumers. But that hardly makes an impression in a fuel-challenged market where small suddenly is big business and where two of GM's toughest foreign rivals, Toyota Motor Corp. and Honda Motor Co., are winning hearts and minds with little runners such as the Honda Fit, Toyota Yaris, Honda Civic, Toyota Corolla, and small wagons and sport-utility vehicles such as the Toyota RAV4 and Honda CR-V.

Other Japanese manufacturers, including Nissan Motor Co. Ltd., Suzuki Motor Corp. and Mazda Motor Corp. (controlled by Ford Motor Co.), are cranking up their small-car engines in response to U.S. consumer worry about rising gasoline prices. South Korean car companies, Hyundai Motor Co. and Kia Motors, are increasing their offerings of small vehicles. And Chinese car companies are planning to join their Asian counterparts in America's small-car wars.

In those developments, GM seems invisible, apparently content with its current, albeit endangered, good luck in selling a slew of completely revised, but still gargantuan sport-utility vehicles and pickups. The public impression, at least in North America, is that GM does not care about small vehicles and that the company lacks both the will and the competence to produce them.

That is erroneous. But it's GM's fault.

Specifically, it is the fault of GM's North American marketing department and unions, which, for a variety of reasons and through myriad machinations, have kept highly desirable small GM vehicles out of the U.S. market at a time they are very much needed.

The truth, as evidenced by a sampling of GM of Brazil cars and trucks at the company's Cruz Alta Proving Ground here, is that GM can make small vehicles as well as anyone else. But the company is hampered by a North American marketing belief that American consumers won't buy those models, and by labor politics that prevents the U.S. entry of those little cars and trucks because they are not assembled by the United Auto Workers union.

For the record, that's my take. GM officials are loath to be so blunt. They proffer seemingly palatable excuses, such as the high cost of retrofitting their Brazilian models to comply with U.S. safety and emissions rules.

I reject that argument. I refuse to believe that a GM that could make a huge Chevrolet Tahoe sport-utility vehicle meet stringent U.S. safety and air-quality standards can't do the same thing for the car-based, subcompact Chevrolet Montana pickup truck sold here. It just doesn't wash.

That being the case, I humbly suggest to GM's marketing and union people that they rise above their biases, work out their differences, do whatever has to be done and move quickly to strengthen the company's flimsy North American small-ride lineup by allowing the U.S. import of the following GM of Brazil vehicles:

--The Chevrolet Montana Sport pickup truck, preferably equipped with the company's splendid 1.8-liter, four-cylinder FlexPower engine, which means it can run on a mixture of 20 percent ethanol and 80 percent gasoline, 100 percent ethanol or gasoline alone.

The FlexPower engine effectively allows consumers to play the fuel market in Brazil, where nearly all of the country's 29,000 filling stations offer an alcohol fuel option. When gasoline prices are high, they can switch to ethanol. When ethanol prices are high, they can switch to gasoline or a combination of gasoline and ethanol.

The Montana is based on GM's subcompact Corsa car. Its 1.8-liter FlexPower engine generates 112 horsepower at 5,600 revolutions per minute and 174 foot-pounds of torque at 2,800 revolutions per minute. But it's a spunky, stable little thing at high speeds. Its five-speed manual shifter works smoothly. With its barely five-foot-long cargo box, it offers urban utility while minimizing urban parking hassles. The interior is one of the best looking I've seen in any small truck. It averages the U.S. equivalent of 35 miles per gallon on the highway.

--The Chevrolet Celta, a FlexPower one-liter, four-cylinder subcompact car that is too much of a lightweight for long U.S. highway runs. But it would be perfect for daily suburban-urban commuting. It gets the U.S. equivalent of 40 mpg. You can park it on a dime. It's the perfect car for academic and corporate campuses. The engine generates 70 horsepower at 6,400 revolutions per minute and 86 foot-pounds of torque at 3,200 revolutions per minute. Cute.

--The Chevrolet Corsa hatchback and Chevrolet Meriva city wagon, both of which are excellent substitutes for American-style minivans that are anything except "mini" and small-to-mid-size "crossover vehicles" that are minivans pretending to be sport-utility models.

The Meriva and Corsa are straightforward family mobiles, elegant in their overall simplicity, efficient and economical in operation, and beyond sensible in meeting the daily transportation needs of most American motorists and their families.

The Meriva city wagon and Corsa hatchback also come with GM's 1.8-liter, four-cylinder FlexPower engine. They are maneuverable as heck, and they both get a bit more than 30 miles per gallon.

I drove those vehicles and walked away from the GM of Brazil test track wondering aloud how a global car company filled with so many demonstrably talented and intelligent people could do something so dumb as to keep some of the best small vehicles made anywhere out of a market that's clamoring for those models.

It makes no sense. And to anyone offering the counter-argument that bringing in cars from Brazil will undermine GM's U.S. employment and labor-union relationships, I offer the following response:

Those jobs and relationships are being wrecked, anyway. They're being wrecked every time an American buys a small car from Honda, Toyota, Suzuki, Nissan, Hyundai or Kia. They're being hurt because of the UAW's failure to win the hearts, minds and dues of workers at those GM rival companies.

The bottom line is that if GM does not give the U.S. market the small vehicles America wants and needs, someone else will. That means a financially struggling GM will lose sales and market share. No company suffering those kinds of losses can offer anyone job security.

UAW optimism belies obstacles

Saturday, June 17, 2006
UAW optimism belies obstacles
Solutions remain vague as leaders try to assure anxious workers of weakened union's future.
Brett Clanton / The Detroit News

LAS VEGAS -- Like gamblers confident they can beat the house, the United Auto Workers came to Las Vegas this week for the union's 34th constitutional convention with an optimism that belied the long odds it faces.

In speech after speech, UAW leaders shouted that the union has plenty of fight left in it.Speakers and politicians railed against Bush administration policies they claim are destroying the middle class. And the rank-and-file -- some wearing T-shirts proclaiming "American jobs are worth fighting for" -- waited for their turn at the mike to make the same points.

A turnaround won't be easy for the 71-year-old union. With U.S. automakers shedding jobs as fast as they're building cars, the union's membership is in sharp decline and its influence is weakening. UAW leaders acknowledged the unprecedented challenges in unusually frank terms.

But their game plan for rebuilding the UAW -- and the labor movement itself -- was often vague, and wholly ignored many of the toughest questions.

What happens when more than 30,000 UAW-represented auto workers exit with buyouts from General Motors Corp. and bankrupt supplier Delphi Corp.? Can the union afford a strike at Delphi over proposed wage cuts and factory closings? What concessions will be on the table next year during difficult talks with Detroit's struggling automakers?

UAW President Ron Gettelfinger, re-elected Wednesday to a second term, has the unenviable task of steering the union through it all, his legacy tied to how he navigates this tumultuous period.

Future means changes

Whatever happens, the UAW that convenes in 2010 for the next constitutional convention likely will be very different from the union of today.

That's why it is tempting to view this year's event, which wrapped up Thursday, as something of a last hoorah for a proud union.

But UAW leaders and their allies made exactly the opposite point in lectern-pounding speeches spread over four days at the MGM Grand Casino.

Gettelfinger set the tone early with an hour-long address Monday morning.

"The skeptics who say this is the 'twilight of the UAW' -- that we're 'toast' -- that our epitaph has already been written -- don't know who we are and where we came from," he shouted as applause drowned out his words.

"We're going to keep fighting for what we believe in … at the collective bargaining table … in the courts … in statehouses and the halls of Congress … in our communities … and where push comes to shove, on the picket lines."

On the walls around him, in a giant conference room inside the MGM Grand, were signs in UAW blue and gold that cheered him on: "Stop the race to the bottom," "Don't Agonize. Organize" and "Good jobs are worth fighting for." At every program break, upbeat music blared over any suggestion that these are anxious times.

But outside the great hall, in the conference center lobby and on a stoop where smokers huddled, it wasn't hard to find doubters.

Finding direction

The most vocal were a small group of the 1,300 convention delegates, who called a meeting Monday night to express concern over the union's direction.

"For all the talk of the union being at a crossroads, there wasn't enough talk about a way forward," said Bill Parker, president of UAW Local 1700, which represents workers at Chrysler's Sterling Heights Assembly Plant.

About a dozen delegates joined Parker in a small out-of-the-way conference room in the bowels of the casino, as hundreds of other delegates met several floors above.

"They look at us as if we're radicals," said Mike Yanoulakis, also from Local 1700 who joined the dissident group. "But we're not. We're just good union people who care."

The idea that the union would hold its constitutional convention in a locale as decadent Las Vegas at a time when so many workers are losing jobs did not sit well with some union members back home. But the UAW said it chose Las Vegas for its heavily-unionized work force, ability to accommodate large groups and affordable rates.

During and after convention sessions, some UAW delegates indulged in their surroundings.

Easily identifiable in UAW golf shirts stitched with their name and home plant, they strolled the Vegas strip, parked themselves at slot machines and lounged by the pool.

But most delegates stayed in the big hall, listening attentively as the marathon convention rolled on.

Optimism, despite losses

UAW leaders repeatedly referred to the union's success in signing 66,000 new members outside the auto industry during the past four years. But there was no mention of a decades-long membership slide that continues to eclipse gains, reducing the union's ranks to just under 600,000 today, from 1.5 million in 1979.

Many delegates insisted the UAW, no matter its size, will always be a force to be reckoned with.

"We may be smaller," said Bob Roth, retiring director of the UAW's Region 1C, which represents workers in Flint, Lansing and other Michigan cities. "But we will be just as strong."

Nobody made the point more forcefully than UAW Vice President Bob King, the long-time head of organizing for the union who this week was tapped to lead its Ford division.

Irked by a newspaper headline that characterized the convention's tone as "somber," King vowed that the UAW will triumph despite historic challenges.

"We're not going to give up," he shouted. "We're not depressed."

Applause erupted. King urged delegates to get on their feet and "with the highest amount of energy you have," just start moving.

What followed was a spontaneous rally, accompanied by Shania Twain's "We are Going to Rock This Country," with delegates dancing and circling the hall for nearly an hour.

As song after song played, delegates hugged. They high-fived their leaders. They sang where they stood. And for a moment, the troubles facing the union seemed to melt into the background.

You can reach Brett Clanton at (313) 222-2612 or bclanton@

Wednesday, June 21, 2006

Judge extends Delphi's deadline

Tuesday, June 20, 2006
Judge extends Delphi's deadline
Bankruptcy court gives supplier, in talks to address union labor issues, until Feb. 1 to file reorganization plan.
Detroit News staff and wire reports

NEW YORK -- A bankruptcy judge on Monday approved a motion by Delphi Corp. to extend the auto supplier's deadline to exclusively file its reorganization plan, before creditors can weigh in with alternate proposals.

The new deadline is Feb. 1, 2007, and the deadline for responses to the plan is April 2. Judge Robert Drain approved the extension, which is the company's second and moves the filing deadline from Aug. 5. The company reserved the right to file other extensions if needed.

Delphi asked for both extensions because the company says it cannot finalize a reorganization plan until its future labor costs are determined in ongoing negotiations with its unions.

While Delphi has hammered out deals to offer thousands of workers buyouts or early retirement, it still needs an over-arching wage and benefit deal with its six unions and General Motors Corp. to cover workers who will remain with the company.

Delphi plans to make "every effort" to reach such a deal before Aug. 11, when a hearing resumes on its controversial motion to reject labor contracts covering 33,000 U.S. hourly workers.

"We're working under the assumption that we can make a lot of progress" between now and then, Delphi spokesman Lindsey Williams said Monday.

Such a deal could avert a crippling strike by the United Auto Workers that could ruin the supplier and tip GM, its former parent and top customer, into bankruptcy.

GM Chairman Rick Wagoner has said he hopes to have a deal completed by Labor Day.

Delphi planned to file a motion Monday to seek the court's approval of a new concessions deal with its second-largest union, the International Union of Electronic Workers-Communications Workers of America, said Delphi attorney John W. Butler.

The supplier announced over the weekend that it had reached an agreement with the IUE-CWA and GM to offer buyouts to hourly workers. The deal was similar to one reached earlier with the UAW, the largest union representing Delphi employees.

The judge said the matter would be considered in a June 29 meeting.

Under the plan, about 8,000 hourly workers represented by the IUE-CWA are eligible to participate. Some may be offered a lump sum payment of $35,000 to retire, Delphi said, while eligible employees may decide to accept buyout packages ranging from $40,000 to $140,000.

The plan also permits the transition of up to 3,200 Delphi workers represented by the IUE-CWA to GM for retirement purposes.

Also on Monday, the court set at $5 million the maximum value of creditors' claims Delphi can settle without court approval. Delphi's motion had asked the judge to set that at $20 million.

Representatives of the ad hoc creditors committee and the equity committee objected, saying the process needed greater transparency.

GM delays earnings release

Wednesday, June 21, 2006
GM delays earnings release
Carmaker will report results a week late to count buyouts; Delphi to restate '04 earnings.
Christine Tierney / The Detroit News

General Motors Corp. has alerted investors that it will delay the release of its second-quarter results by a week to tally the responses to buyout offers that the automaker extended to all of its 113,000 U.S. workers.

"We want to allow enough time to finalize the numbers for the quarter, including the special attrition program," GM spokeswoman Gina Proia said. GM is now scheduled to report its second-quarter earnings on July 26.

Separately, the automaker said it planned to revise the terms of a $5.6 billion credit line due to expire in 2008 by extending it and offering assets as collateral.

Debt-rating agencies responded by driving GM's ratings further down into junk territory Tuesday, but analysts said the new terms would make it easier for the automaker to complete the sale of its GMAC finance arm.

GM's results are complicated this year by CEO Rick Wagoner's restructuring efforts entailing asset sales, cost-saving agreements with workers and pensioners, and support for GM's former subsidiary Delphi Corp., now in bankruptcy.

Also on Tuesday, Delphi said it would restate its 2004 earnings.

Investors tend to worry when companies need more time to crunch the numbers, but GM's latest announcement was less unsettling than its previous reporting delays and earnings restatements.

GM restated its full-year 2005 results in March, widening the annual loss by $2 billion to $10.6 billion after increasing charges to restructure its ailing North American operations and help Delphi.

GM also restated earnings for the five prior years after finding accounting errors. The automaker, the object of U.S. Securities and Exchange Commission and Justice Department investigations into its accounts, says it has tightened its accounting procedures.

Last month, GM revised its first-quarter results from a preliminary loss of $323 million to a $445 million profit after coming to an agreement with the SEC about how to record its obligations as part of a health care deal struck last year with its workers.

GM's main problem has been an unrelenting slide in its U.S. market share. It plans to close 12 facilities by 2008 and eliminate up to 30,000 blue-collar jobs to bring its production facilities in line with its smaller market share.

In March, GM offered early retirements or buyouts to all of its 113,000 U.S. union workers to cut its work force. Employees have until June 23 to accept, and then seven days to back out.

GM also is subsidizing similar offers for workers at Delphi.

United Auto Workers President Ron Gettelfinger said last week that 25,000 U.S. union workers at GM had agreed to buyouts ranging from $35,000 to $140,000, and another 8,500 employees had accepted at Delphi.

On the financial front, GM was trying to secure a new source of capital after losing its investment-grade rating last year. In addition, it said in March that the earnings restatements might compromise its ability to draw on the loan.

On Tuesday, GM said most of its bank lenders had agreed to its proposal to revise the facility.

"The amended facility will further strengthen GM's strong liquidity profile and will reposition this source of capital from a standby facility to one that will be drawn on from time to time to fund working capital and other needs," GM treasurer Walter Borst said in a statement.

Rating agencies Moody's Investors Service and Standard & Poor's cut GM's rating again. They said its decision to use collateral to secure the loan means bondholders risk recovering a smaller share of their investment if GM should file for bankruptcy.

But analyst David Healy at Burnham Securities said the new facility would give GM easier access to credit and help close the GMAC deal. "Getting a proper line of credit for GM was one of the conditions of a GMAC sale."

GM hopes to conclude the sale of 51 percent of GMAC to a group of investors in the fourth quarter.

According to Bloomberg News, Delphi said in an SEC filing that it would restate its 2004 results, widening the loss by $65 million to $4.82 billion to correct tax accounting.

The Troy-based supplier is restating earnings for the second time since June 2005, when it revised results for 2000 through 2003 as a result of an internal investigation that led to the ouster of five executives.

Delphi said the restatement will be made when it files its 2005 annual results on July 19 after receiving a filing extension from its creditors.

Bloomberg News contributed to this report. You can reach Christine Tierney at (313) 222-1463 or

Tuesday, June 20, 2006

Smithsonian removes electric-car exhibit

Friday, June 16, 2006 · Last updated 11:14 a.m. PT
Smithsonian removes electric-car exhibit

WASHINGTON -- Just weeks before the release of a movie about the death of the electric car from the 1990s, the Smithsonian Institution has removed its EV1 electric sedan from display.

The National Museum of American History removed the rare exhibit yesterday, just as interest in electric and hybrid vehicles is on the rise.

The upcoming film "Who Killed the Electric Car?" questions why General Motors created the battery-powered vehicles and then crushed the program a few years later. The film opens June 30th.

GM happens to be one of the Smithsonian's biggest contributors. But museum and GM officials say that had nothing to do with the removal of the EV1 from display.

A museum spokeswoman says the museum simply needed the space to display another vehicle, a high-tech SUV.

The Smithsonian has no plans to bring the electric car back on view. It will remain in a Suitland storage facility.


Information from: The Washington Post,

Monday, June 19, 2006

Delphi offers buyouts to 8,000 workers

Monday, June 19, 2006
Delphi offers buyouts to 8,000 workers
Supplier will extend deals worth $35,000 to $140,000 to members of its second-biggest union.
Brett Clanton / The Detroit News

Under a new deal that will hasten the retirement of thousands more U.S. auto workers, Delphi Corp. agreed to provide retirement incentives and buyouts to 8,000 hourly workers represented by its second-largest union.

The pact announced over the weekend with the International Union of Electrical Workers-Communications Workers of America expands a Delphi buyout program that had been available only to members of the United Auto Workers, the company's biggest union.

The buyouts will shield workers from the impact of Delphi's brutal downsizing in Chapter 11 and lower the troubled parts maker's long-term labor costs.

The IUE-CWA deal is another sign Delphi is making progress in talks with its six unions on a broader wage-cutting agreement the company says it needs to emerge from bankruptcy by next year.

But those talks could still explode into an industry-crippling strike if Delphi wins court approval to reject its labor contracts. Delphi is scheduled to return to bankruptcy court on Aug. 11 to push for authority to ax the contracts unless it has a deal by then.

The IUE-CWA and the parts maker reached the buyout deal after months of negotiations. But union officials were cautious not to claim victory.

"We have made great progress in resolving the first part of a very complex puzzle," said the IUE's Automotive Conference Board Chairman Willie Thorpe, who announced the deal the day following his election to succeed Henry Reichard, who died last week.

"Our members now have options that can provide them with some financial security. Next, our focus turns to crafting an agreement for those who remain in the plants that gives them a job worth having."

Delphi, which filed for bankruptcy in October, says it needs to lower wages by up to 60 percent and close or sell 21 of 29 U.S. factories to be competitive with other domestic parts makers.

Under a deal reached in March, Delphi said it would offer up to $35,000 to 13,000 UAW workers who are near or eligible to retire. That program was expanded this month to include cash buyout offers, ranging from $40,000 to $140,000, to 10,000 more UAW workers with fewer than 26 years on the job.

Last week, UAW President Ron Gettelfinger said more than 8,500 UAW workers at Delphi have signed up for the offers, and another 25,000 workers have signed up for a similar program at GM.

The new buyout offers are good news to Gene Collins, 58, an IUE member at a Delphi plant in Dayton, Ohio.

"I'm definitely leaving," said Collins, who has 16 years seniority and is eligible for a $140,000 payment.

Asked what he will do with four years before his pension begins, Collins said he'll find something.

"If you're a worker, there will still be work out there," he said. "But the money won't be the same."

About 8,000 hourly workers represented by the IUE-CWA are eligible to participate. Some will be offered a lump-sum payment of $35,000 to retire, Delphi said, while lower-seniority employees can take buyout packages ranging from $40,000 to $140,000.

Workers who are 50 years old with 10 years on the job can exit with a "mutually satisfactory retirement," while workers with between 26 years and 30 years can leave and grow into retirement.

Workers with at least 10 years of seniority can take a $140,000 buyout payment to leave with only their accrued pension benefits. Workers with between 3 and 10 years of seniority are eligible for a $70,000 payment, while those with between 1 year and 3 years of seniority can receive $40,000.

The plan also permits the transition of up to 3,200 Delphi workers represented by the IUE-CWA to GM for retirement purposes.

GM will pick up half the tab for the IUE buyouts and cover post-retirement benefits for those retiring. The automaker is a party to the deal because it spun off Delphi in 1999 and still has obligations to former employees there.

The IUE retirement program must be approved by the bankruptcy court. The rollout will begin prior to that, but no payments will be made until the court has approved the program.

You can reach Brett Clanton at (313) 222-2612 or

Delphi announces deal with IUE-CWA, GM on buyouts


Delphi announces deal with IUE-CWA, GM on buyouts
By the Associated Press

DETROIT Delphi Corp. has reached an agreement with its second-largest union and General Motors Corp. to offer buyouts to hourly workers that is similar to an earlier deal with the United Auto Workers union.

The auto parts supplier announced the agreement with the International Union of Electronic Workers-Communications Workers of America and GM, Delphi's former parent and its largest customer, late Friday.

Delphi employs about 5,700 workers in five plants in the Dayton area and 13,000 workers in Ohio overall. The IUE-CWA Conference Board represents eight Delphi plants nationwide, including those in Moraine and Kettering

Delphi filed for Chapter 11 bankruptcy protection in October. The buyouts are part of an effort to provide early retirement incentives as the company seeks to cut its work force.

"We continue to be focused on the transformation of Delphi and this attrition plan provides a stronger framework to position our successful emergence from Chapter 11," Delphi President and Chief Operating Officer Rodney O'Neal said.

GM has agreed to provide financial support under the proposed plan, which is subject to bankruptcy court approval, Delphi said. GM spokeswoman Toni Simonetti said Saturday that the automaker will split the cost with Delphi.

Representatives of Delphi and the IUE-CWA did not immediately return calls seeking additional comment Saturday.

About 8,000 hourly workers represented by the IUE-CWA are eligible to participate. Some may be offered a lump sum payment of $35,000 to retire, Delphi said, while eligible employees may decide to accept buyout packages ranging from $40,000 to $140,000.

The plan also permits the transition of up to 3,200 Delphi workers represented by the IUE-CWA to GM for retirement purposes, Delphi said.

Earlier this month, Delphi announced a deal with the UAW and GM to offer buyouts to all hourly employees. Those buyouts greatly expand early retirement incentives announced in March and meant that all UAW-represented employees will be offered something if they want to leave the company.

The UAW — the largest of Delphi's six unions — represents about 22,000 of Delphi's 31,000 workers. At the time, Delphi said it was negotiating with other unions to offer similar packages for their members.

Staff writer Stephanie Irwin contributed to this report.

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Sunday, June 18, 2006

Who Says GM Is Dead?

Who Says GM Is Dead?

May 22, 2006

When General Motors asked Bob Lutz to revive its product line in 2001, the thinking was that if anyone could do it, he was the man. The charismatic, brash ex-Marine fighter pilot had led the development at Chrysler of such hot cars as the Dodge Viper and PT Cruiser, and he wasn't shy about criticizing GM for cranking out the dullest metal in Detroit.

Many Americans have come to share that view, thinking of GM as a rusted, doomed giant that will never recover from decades of bad cars and better foreign competition. President George W. Bush said as much in JanuaryDetroit needs to build "relevant" cars. (Message to GM: Forget about a bailout.) But now that Lutz is looking at things from inside GM, he's telling a different story--and has some evidence to back it up. He likes to reel off the names of new GM models earning solid reviews, notably the Chevy HHR, Buick Lucerne and Saturn Sky. GM has made enormous leaps in quality too, so Lutz bridles at the notion that its vehicles don't stack up. "I can't find words that can be printed in a family publication to express my opinion of that view," he says in his office in downtown Detroit. "Our No. 1 problem is the perception gap."

If perception is reality, here's one Lutz might like: Wall Street is warming to the idea that GM isn't dead yet. After losing $10.6 billion last year, the company reported a first-quarter profit of $445 million, its first quarterly gain since 2004. Much of that was due to accounting opticsand GM still lost $503 million in its North American auto operations. But in recent weeks the stock has rallied 42% from its 52-week low of $18.33. "There's more optimism than there was a month ago," says analyst Brian Johnson of Bernstein Research, noting "glimmers of hope" in strong sales of GM's new full-size SUVs despite high gas prices. Merrill Lynch and Deutsche Bank have raised their ratings on the stock, citing evidence that GM's cost-cutting plan is on track. "This is a salvageable situation," says David Cole, chairman of the Center for Automotive Research. "It's a crisis, but that's the good and bad news. Absent a crisis, I don't think they'd survive."

Decades of downsizing have turned GM into a retirement home with a car factory in back. Every active U.S. employee supports 3.2 retirees and surviving spouses, amounting to "legacy costs" of about $1,500 per vehicle and wiping out profits on all but the priciest models. Yet that dismal state also makes CEO Rick Wagoner's plan fairly straightforward: shrink GM to a defensible market share. Then wait for the retiree costs to go down, around 2010, as GM vets increasingly qualify for Social Security and Medicare. To bridge itself to 2010, GM is shedding factories and workers, offering buyout packages to its entire North American hourly workforce. It is also raising cash by unloading assets like a 51% stake in its GMAC finance arm, scheduled to be sold to a private equity firm, Cerberus Capital, for $14.1 billion. "We've made big moves in every area," Wagoner told TIME, adding that GM has "no plan, strategy or vision to utilize bankruptcy" to restructure.

GM is only now truly embracing the globalization strategy that Toyota has used for decades: sharing parts and platforms around the world and harmonizing production. Global product development is being centralized under Lutz. Result: expect to see more Asian- and European-designed cars in the U.S., including the next Saturn Ion, widely expected to be a rebadged Opel Astra from GM's European subsidiary. "We won't trim brands," Lutz says, referring to Wall Street calls to euthanize the Pontiac and Buick nameplates, which even Lutz has described as "damaged." Instead GM will pare some of its more than 70 models, many that trail the competition in quality scores and critics' reviews. "We're doing radical surgery," he says.

That includes the workforce, as GM eliminates 30,000 of 125,000 hourly jobs and shuts 12 plants in North America. Wagoner acknowledges the terrible toll on morale. "I'm not saying people haven't sacrificed," he says. He's not saying it's over either, which is why many plant workers are getting out. "The pressure they're putting on people is ungodly," says John Weizman, 45, who is taking a package. Weizman has been shuffled among plants in West Virginia, Ohio and Michigan and figures that, even with his seniority, he will be asked to move again. "It's not worth it for me to stay," he says.

In Saginaw, Mich., where 11 Delphi parts plants spun off by GM in 1999 are for sale, the mood is just as grim. "I worked for GM and Delphi for 34 years, and now they tell me my time is up," says Tom Basner, 52, chairman of United Auto Workers (U.A.W.) Local 699. Delphi filed for bankruptcy last fall, and the way Basner sees it, the company is using Chapter 11 to hire younger, cheaper workers. Delphi plants are hiring, even as they shed veteran employees. Basner has referred one of his sons to Delphi for a job, which is still better than working at the bagel shop. But he knows that such jobs are no longer a ticket to middle-class prosperity. "I'm an optimist," he says of his own chances of finding work. "But I feel betrayed."

Wagoner's job is on the line too. In February GM added a board member, Jerry York, who represents a large and restive shareholder: the Las Vegas real estate mogul Kirk Kerkorian. Since then, Detroit has buzzed that Wagoner demanded a statement of support from the board as rumors swirled that York had asked for his scalp. In a January speech, York complained that GM was not in "crisis mode" and prodded Wagoner to raise cash by selling assets such as Saab and Hummer. Ultimately, the board declared its "great confidence" in Wagoner, and Lutz says the sale of Saab and Hummer is off the table. Wagoner and other top execs nevertheless had to eat pay cuts, and the taste lingers. "I'm not going to characterize the impact of any single board member," he says tersely when asked about York's influence.

For Wagoner, the next 18 months will define his stewardship, if not GM's future. GM, Delphi and the U.A.W. are locked in a complex feud over how to restructure the partsmaker, whose fate is tied to the automaker's. GM has agreed to take back as many as 5,000 Delphi workers, and thousands more are being offered buyouts. But Delphi chief Robert (Steve) Miller has asked the bankruptcy court for permission to void labor contracts, which would allow him to slash wages if the unions won't concede--a move that could spark a strike. He also wants more financial support from GM. Delphi workers, for their part, are furious that the firm wants to cut their wages 40% while company lawyers ask the bankruptcy judge to approve $60 million in bonuses for salaried staff--on top of $36 million already approved for top execs.

"It's not easy stuff to see your way through," Wagoner says. The situation is complicated by the fact that Miller wants better terms for supply contracts with GM, while GM claims it pays too much already. The judge heard arguments over the labor contracts last week and is expected to rule this summer. GM CFO Fritz Henderson said, however, he expects to reach a settlement with Delphi and the U.A.W. within 60 days. GM, meanwhile, is stockpiling parts in case of a strike. "The consequences of our not addressing this effectively are big," says Wagoner. "Nobody wins with a long strike."

Keeping the labor peace is critical for Wagoner since he will soon have bigger issues to face: reaching a deal with the U.A.W. for a master contract to replace the one expiring in September 2007. Under the current contract, GM can close factories but can't lay off workers; they go into a "jobs bank" and collect wages and benefits even if they sit around and play cards. Wall Street estimates the program costs $600 million a year. "Clearly, it's an area of uncompetitiveness," Wagoner says. It's sure to be on the agenda. So too will GM's unhealthy U.S. health-care bill: $5.3 billion last year. Wagoner and the U.A.W. have agreed on $15 billion in long-term savings on retiree health care, but Wagoner needs rank-and-file concessions, and union officials are talking tough. "It was probably the most difficult backward step for us to take in the history of our union," says U.A.W. chief Ron Gettelfinger, referring to the $15 billion "giveback."

Could it be that Wall Street is in overdrive about GM's brightening prospects? Certainly, the case for survival looks a bit stronger. Analysts were encouraged by GM's first-quarter sales of full-size SUVs. Even if gas prices continue killing the segment, the thinking goes, GM could pick up market share. They like York's presence on GM's historically wimpy board. Analysts also figure GM will pay whatever it takes to avoid a Delphi strike. With roughly 6,000 blue-collar workers expected to be left at Delphi, GM "could easily afford to compensate those employees to avoid a labor disruption," notes Prudential Financial analyst Michael Bruynesteyn. And labor bosses know a strike would be mutually assured destruction. Says industry analyst Cole: "Everyone is scared to death."

Lutz's product revival, meanwhile, is yielding some decent cars with interiors that don't feel like Cracker Jack toys. The Saturn Sky won't save the brand but provides much needed zing. calls it "Maria Sharapova at a tennis match full of middle-aged and badly dressed men." Lutz vows that design will no longer take a backseat to sales and marketing. A forthcoming Cadillac will be a model dreamed up by a design team and pitched to senior execs instead of the other way around. A 2007 Saturn sedan, the Aura, with an exterior designed in Germany, has already won acclaim for stylish looks.

Of course, any number of developments could puncture Wagoner's tires: oil hitting $100 a barrel or a recession in which auto sales tumble. Moody's recently warned of further downgrades of GM's bond ratings, already below investment grade, after GM said it may have to renegotiate terms for $5.6 billion in credit. Should GM's unsecured debt fall below a CCC rating, the GMAC sale would be in jeopardy. "We have to get the GMAC deal closed," Wagoner says when asked what could derail a turnaround.

Skeptics also question GM's books. The Securities and Exchange Commission is investigating the way GM accounts for retirement benefits and transactions between GM and Delphi. GM took a charge of $800 million last year to pay for factory closures, but that may not reflect the final cost of workers' opting for the jobs bank instead of retiring; analyst Bruynesteyn figures GM will have to book another charge for that in 2007. GM's various cost-cutting moves should boost the bottom line, resulting in net income of $1.6 billion next year, Bruynesteyn estimates. Yet the healthier GM's finances appear, the more difficult it will be to persuade workers to accept big wage and benefits cuts in the next contract.

Lutz is right about the perception problem: GM needs Wall Street and the media to stop mentioning the B word. Analysts say GM has lost one percentage point of U.S. market share in the past yearabout 170,000 vehicle salesas buyers shun its models, fearing a meltdown. Company execs stress that GM has ample cash. But bankruptcy is a psychological event as much as a financial one; Delphi sought Chapter 11 protection not because it ran out of money but because it ran out of credibility, sparking a run on the bank. "Someday, someone will be brave enough to say these guys aren't gonna die, that this place is on the cusp of a major turnaround," says Lutz. Someday. Maybe.

—With reporting by With reporting by Joseph R. Szczesny/ Detroit

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