Daniel Howes: Gettelfinger can't tell it like it really is

Wednesday, March 28, 2007
Daniel Howes
Daniel Howes: Gettelfinger can't tell it like it really is





Tuesday being Day One of the UAW's bargaining convention, you'd expect President Ron Gettelfinger to talk tough to 1,500 delegates facing the biggest threat matrix since the union's rocky inception 70 years ago.

You'd expect him to say "collective bargaining is not collective begging and where we have demonstrated cooperation it would be a grave mistake to equate our actions to capitulation."

You'd expect him to say the union doesn't want to strike, but is prepared to do just that if General Motors, Ford Motor and the Chrysler Group -- which he didn't name in this context, but didn't have to -- treat collective bargaining as "a one-way street."

You'd expect mild-mannered Gettelfinger to again come unhinged over Delphi Corp.'s allegedly "mechanical bankruptcy" and Chairman Robert S. "Steve" Miller's "intention" to file before bankruptcy law changed and "disturbed" a $388 million executive bonus plan.

That Miller, alone among Detroit auto CEOs who have cut tens of thousands of union jobs, warrants so much attention in a union speech is either evidence that a) Delphi's bankruptcy is the watershed fundamentally changing the industry or b) this has become personal for the UAW chief or c) both.

I'll take "c," and add that Gettelfinger's veiled disgust for private-equity vultures "circling overhead" is union recognition that economic forces have fundamentally shifted for the UAW -- and that ain't good for the health of an institution those same sharpies have zero interest in perpetuating.

Belligerence begets demise?

Truth is, it wouldn't have come to this sorry pass, where Detroit's automakers and their largest union are in varying stages of fighting for their lives, if all sides had heeded clear signals from Wall Street and Main Street.

They didn't. The UAW is going into national bargaining talking tough and rallying the troops, as it must. But its leaders and, I'd guess, a big chunk if its members know that belligerence, entitlement and strikes would only hasten their demise in these very uncertain times.

How could they not know it? The refusal of UAW leaders to deliver retiree health care concessions to Chrysler that were delivered to GM and Ford accelerated the move by Chrysler's German parent to dump the Auburn Hills automaker.

Ford CEO Alan Mulally, his back to an operational wall, compiled a record during his years at Boeing Co. of facing down union members, even if doing so promised a strike -- as it did in 2005. And GM has made too much progress to be sand-bagged into preserving the past.

Go big or go home

Union politics being what they are, Gettelfinger couldn't stand before his delegates at Cobo Center and tell them where things really stand. If he could, it might go something like this:

"Brothers and sisters, this international union -- you, me, our predecessors who delivered the gains we enjoy today -- faces a fundamental test forged from the choices of those before us and the expectations of those who would follow us.

"We can either take this opportunity to be bold, to ensure that our pay, benefits and work rules make our employers as competitive as they can be. Or we can cling to the creeping incrementalism and denial that brought us to this point, that hastened bankruptcies, plant closings and record buyouts.

"This is our time to help save a Detroit industry that made us, our parents and grandparents the bedrock of the American middle class and, for a time, the envy of all industrial workers. When this time passes, as it will, we must be able to tell our children and ourselves that we did everything to save the companies that made us what we are.

"That's real solidarity."

Daniel Howes' column runs Mondays, Wednesdays and Fridays. Reach him at (313) 222-2106, dchowes@detnews.com or http://info.detnews.com/danielhowesblog.















© Copyright 2007 The Detroit News. All rights reserved.

GM pumps up sedans, SUVs

Wednesday, March 28, 2007
New York International Auto Show
GM pumps up sedans, SUVs
LaCrosse front redone; H2 upgraded; new H3 in works
Sharon Terlep and Scott Burgess / The Detroit News








DETROIT -- General Motors Corp., on a mission to pump some life into the often-dreary world of sedans, will highlight its latest efforts next week at the New York auto show.

GM will show a made-over Buick LaCrosse, as well as performance versions of the LaCrosse and Buick Lucerne and a refreshed Cadillac STS.

The new LaCrosse will feature a redesigned front end and a beefed-up package of premium equipment. All versions of the car will come standard with a chrome exterior appearance package, remote start, XM Satellite Radio and dual-zone climate control, among other features.

It'll be the latest addition to GM's sedan lineup, for years in the shadow of more popular trucks and SUVs. But as jitters over volatile gas prices send more consumers back to cars, GM is giving family cars more attention.

"We're putting a much stronger face on the vehicle," GM engineer Ed Zellner said, showing off the made-over LaCrosse.

The midsize sedan market grew 2 percent last year, with about 3.6 million sales.

Also on display in New York will be the new Super high-performance versions of the LaCrosse and Lucerne. The LaCrosse Super will include a 5.3-liter small block V-8 that will push 300 horsepower. The Lucerne Super will come with a 4.6-liter Northstar V-6 and produce 292 horsepower. Both will come with special badging, which Buick first used on cars more than 60 years ago.

Zellner says much work went into making sure the larger, more powerful engine didn't compromise the ride and handling of the vehicles. Larger brakes, advanced steering gear and 18-inch wheels are part of the Super packages.

"In the old days, when you started making engines big, it would make it hard for the cars to drive," Zellner said of the Super models. "This isn't the case."

Buick's models have been strong, but are hurt by the brand's less-than-stellar reputation, said Tom Libby, senior director of industry analysis at J.D. Power and Associates.

To be successful, Libby said, Buick needs to have a clearly identifiable lineup and make sure vehicles stand apart from Cadillac.

"They need to create a clear and distinct brand entity," he said.

GM also will use the New York show to display the latest offerings from its Hummer brand.

Upgrading the H2 and offering a new model in the H3 lineup are in the works at Hummer.

The larger H2 gets a completely refashioned interior and new powertrain, Hummer's executive director, Ross Hendrix, said Tuesday. "I'd call this a major midcycle enhancement."

The 2008 H2's new engine, a 6.2-liter V-8, will boost the H2's horsepower to 393, 28 horsepower more than the 2007 model H2. It will add 90 pound-feet of torque, from 325 to 415.

While the new engine will provide more power, Ross said other changes, such as adding a six-speed transmission and cutting several hundred pounds from the vehicle's weight, will make the engine 10 percent more fuel-efficient than the current one.

While nothing changes on the H2's exterior, its interior will be overhauled. The H2 will feature a new instrument panel, a two-person third row, which is removable, and a lot more brushed aluminum accents, Ross said.

"We're making the interior closer to the Cadillac Escalade," he said. "When people get into the new H2, they're going to say, 'Wow, this is a really high-end truck.' "

The all-new 2008 H3 Alpha may also impress Hummer drivers looking for enhanced performance on the smallest Hummer to hit trails.

It will come with a 5.7-liter V-8, much more powerful than the H3's standard 3.7-liter inline five-cylinder engine. It also features a much more luxurious interior, as well as the Alpha badging throughout the vehicle.

The H3 is the second Hummer to receive the Alpha designation.

"This is a rocket," Ross said. "People have been asking for this model and now it's coming."

Other GM vehicles that will debut in New York include:


2008 Cadillac STS equipped with a more powerful direct injection V-6 and retouched styling.


Saab BioPower 100 concept car: Powered by 100 percent ethanol, the BioPower makes its North American debut. It features a 300-horsepower turbo-charged engine.

You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.












© Copyright 2007 The Detroit News. All rights reserved.

UAW workers feel givebacks unavoidable

Tuesday, March 20, 2007
UAW workers feel givebacks unavoidable
Louis Aguilar / The Detroit News




The day he got home from the Army 37 years ago was the day Angelo Bruno got a job as a painter at Ford Motor Co.'s Michigan Truck Plant. He's been proud of his career -- until now. The automaker's woes have forced changes at the plant that have left him as angry with his union as he is at Ford.

Bruno is not alone. More than two dozen United Auto Workers members told The Detroit News they fault union leaders for being too willing to agree to concessions Detroit automakers say they need to help restore profits.

Yet with critical contract talks coming this summer, Bruno and others say they will try to swallow their ire and accept a deal that likely will bring more cuts.

"It was a great ride," Bruno said. "But now globalization is killing us. We've got no choice."

Many workers are trying to balance their growing mistrust of the union with the stark realization that the companies they work for are losing billions of dollars as they struggle to compete against more efficient foreign rivals with lower-paid, largely nonunion, work forces.

Bruno, for instance, believes a recent vote held by his local UAW that authorized Ford to make major work rule changes at the plant, such as shifting to a 10-hour-a-day, four-day work week, was "rigged."

He and other Michigan Truck workers said turnout was deliberately kept low because they had to scramble through a snowstorm to vote at the local union hall. Traditionally, votes have been held inside the plant, Bruno said.

So for the first time in his career, Bruno is listening intently to dissident rank-and-file workers such as the Soldiers of Solidarity and is considering filing formal grievances against the UAW.

'It's a betrayal'

Despite his "growing despair," however, Bruno says he's willing to approve a national contract this fall that analysts predict could cut his pay, make him dig deeper to pay for his health care, and possibly thin his pension.

"It's a betrayal," Bruno said. "I don't think anyone's being honest with us. I just hope I can stomach it." But he admits times have changed for him and even a lower-paying Ford job is probably better than anything else he could get.

"I'm 55 years old," he said. "The economy would eat me up."

Top UAW officials declined to discuss the coming contract talks, but auto companies have clearly signaled they intend to pursue terms that will lower their labor and so-called "legacy costs" -- health care, pension and retiree benefits.

Al Benchich, president of UAW Local 909, says many local union officials are trying to "balance on a tight rope." He represents workers at General Motors Corp.'s powertrain plant in Warren.

"Everyone knows the situation the auto industry finds itself in," he said. "We are trying to determine a strategy based in reality."

Disillusionment among the rank-and-file runs deep partly because the union has been so effective at protecting its workers, said Harley Shaiken, labor professor at the University of California, Berkeley. He has close ties to the UAW and automakers.

"They've dodged a lot of bullets, but the bullets are whizzing by a lot closer now," Shaiken said. "Despite the decades-long retrenching of the Big Three, there has never been this scale of layoffs. The UAW has always achieved some hard-fought gains" during labor negotiations.

When the current national contract was negotiated four years ago, GM, Ford and DaimlerChrysler AG's Chrysler Group faced serious challenges. They were steadily losing market share even as they spent heavily on sales incentives. They needed to reduce their labor cost disadvantage, especially health care.

The UAW ultimately agreed to close some plants and introduce more money-saving flexibility into factories, but also won pay gains and retained medical benefits and job protections, such as continuing to pay workers who had been laid off.

Economy is different

Industry conditions are even tougher for Detroit going into this year's talks. Together, GM, Ford and Chrysler are losing money, cutting tens of thousands of jobs and closing factories. Chrysler is on the selling block. Meanwhile, foreign-owned auto plants thrive in the nonunion South, and automakers increasingly are shifting production to Mexico, China and other low-wage countries. Such changes are generating a huge outcry among autoworkers.

Bill Hanline, a veteran worker at Delphi Corp's Athens, Ala., plant, is trying to recruit workers and retirees to join a class-action lawsuit against the UAW, GM and Delphi to force GM to take over Delphi's pension responsibilities.

And many workers like Al Figlan, a skilled tradesman at Ford's Van Dyke Transmission plant, are battling their union even as they are bracing for givebacks at contract time. Figlan's overtime income has been eliminated -- a loss of about $60,000 gross annually.

Figlan says he and the other remaining skilled trades workers are not allowed to build an assembly system that takes up one-third of the plant, the kind of job that once defined his career. The line is being installed by outside contractors.

Figlan has filed 57 grievances against the UAW because of work rule changes and has hired an attorney. Still, he doesn't intend to file a lawsuit; he just wants his complaints heard.

"I know we got to give something back in the contract," Figlan said. "But unless it's fair, I don't know how they expect us to swallow it."

Labor expert Shaiken disputes the idea that UAW leaders have sold out the rank-and-file. "They are not going to sacrifice the gains it took 60 years for them to build," he said. "They are very realistic about how tough times are right now. You've got constructive discussions between both sides. Both sides want to see healthier companies."

You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.












© Copyright 2007 The Detroit News. All rights reserved.

Toyota trucks have Big 3 defending turf

Saturday, March 17, 2007
Toyota trucks have Big 3 defending turf
As automaker intensifies war to become No. 1, GM, Ford and Chrysler slam Tundra in company e-mails, ads.
Sharon Terlep / The Detroit News




If there were any doubt that Toyota Motor Co. is emerging as a legitimate threat on a truck scene long dominated by Detroit steel, consider some of the latest maneuvers by the folks peddling American-made pickups.

A General Motors Corp. sales manager recently sent an e-mail to dealers picking apart some of the more lofty claims in a Toyota TV commercial touting its new Texas-built Tundra pickup.

Workers at Ford Motor Co., including Mark Fields, president of the Americas division, are spreading the word that Ford trucks were spotted helping out in the construction of the San Antonio Toyota plant.

And, in Atlanta, a major Chevrolet dealer is airing a radio ad stating, "Toyota contributes more to our staggering national trade deficit than any manufacturer."

That Toyota's brazen entry to the full-size pickup market is stirring strong feelings is natural given the stakes involved.

"As they continue to do well in the marketplace and there's been more and more talk about them eclipsing us to become No. 1, it puts them into a different limelight," GM spokesman Terry Rhadigan said. "It puts them into a more adversarial position."

Even as Toyota has steadily gained market share on the domestic automakers home turf, trucks remained an area where GM and Ford could reliably dominate.

But within the last year, the Japanese automaker has opened a new plant in the heart of truck country, launched an Americana-themed ad campaign and taken the unusual move of offering incentives on a brand new product.

And Toyota has invested heavily in the new truck, a bigger and stronger version of the current Tundra, to boost its share of the lucrative big pickup market. GM, meanwhile, has come out with new versions of its full-size pickups.

The Japanese automaker sold 124,508 Tundras last year, while Ford and GM each sold more than 800,000 full-size pickups.

Now, Detroit's carmakers are fighting to protect their turf.

"They've made it a war," with the Tundra, said Jim Ziegler, an automotive retail consultant based in Duluth, Ga. "And GM cannot afford to let them win this war."

The e-mail sent to GM dealers says Toyota makes misleading claims in the Tundra ad, which features the truck hauling a mammoth trailer and then speeding to the edge of a cliff then halting. "Bottom line: Our truck is better! Spread the word," the e-mail says.

GM's communication officials have heard the radio ad, but the company wasn't involved in its creation, Rhadigan said.

At Ford, folks are circulating a Louisville Courier-Journal article about Ford truck spottings in behind-the-scenes footage of the Tundra ad. Ford's Fields, the article says, had a video posted to the company's Web site highlighting the blue oval sightings.

Toyota is taking the heat in stride. Spokesman Chad Harp pointed out that the company's boasts in the commercial, including the Tundra pulling a 10,000-pound trailer, are backed by scientific testing. The GM e-mail said the trailer was only 5,000 pounds.

"We know we are in territory that is not our home turf," Harp said. "You aren't going to see us stepping to a level where we're trying to defend ourselves."

Steve Cook, a GM dealer in Vasser, said all the competitive rhetoric is taking the focus off his vehicles.

"It seems we're always talking about Toyota," he said. "We've got good products. We need be a little bit more like Toyota and just do it."

You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.










© Copyright 2007 The Detroit News. All rights reserved.

GM pits hybrid Aura vs. Toyota

Tuesday, March 20, 2007
GM pits hybrid Aura vs. Toyota
Automaker confronts rival by selling cheapest gas-electric vehicle in U.S. with Saturn sedan.
Sharon Terlep / The Detroit News




Looking to challenge Toyota Motor Co. for fuel-conscious consumers, General Motors Corp. plans to sell the cheapest hybrid -- the Saturn Aura -- on the U.S. market, the automaker announced Monday.

A hybrid version of the Saturn Aura sedan will hit showrooms this month, with a starting price of $22,695 -- $100 less than Toyota's trend-setting Prius hybrid. The Aura will be the first hybrid sedan sold in the United States by an American automaker.

Aura buyers also will get a $1,300 tax break as part of the federal government's push to get more drivers to purchase fuel-sipping hybrids.

"It makes true hybrid fuel savings available to more people than ever before," Saturn General Manager Jill Lajdziak said.

Realizing the massive image boost Toyota received from being seen as an environmentally friendly, technologically advanced carmaker, GM has set out to steal some of that positive buzz.

GM's announcements came on the eve of President Bush's visit today to its Fairfax Assembly Plant in Kansas City, Kan., where both versions of the Aura are made; Bush also is expected to discuss his plan to reduce U.S. fossil fuel consumption.

Volt, other hybrids in works

The automaker has set a 2010 goal to start production on an all-electric car called the Chevrolet Volt and is coming out with other hybrids that use different types of technology.

The Aura will go up against the Prius, by far the most popular hybrid in the United States with 107,000 sold last year.

However, beginning in April, Prius buyers will be eligible for only a $787 federal tax credit. That's because the federal program gradually reduces -- and eventually eliminates -- that credit as more and more of a particular model is sold.

GM lists the Aura Green Line's EPA fuel economy rating as 28 miles per gallon in the city and 35 mpg on the highway.

Even though gas-electric hybrid vehicles cost several thousand dollars more than conventional models, they have resonated with buyers as fuel prices fluctuate wildly. Hybrids have conventional internal combustion engines as well as electric motors, which can assist the gas engine. Ford Motor Co. and Honda Motor Co. each have hybrid offerings.

Aura leads Saturn's rebirth

GM has pinned much of Saturn's revitalization on the Aura, which has generated glowing reviews. The automaker, which doesn't disclose sales targets, has sold 7,898 Auras in the first two months of 2007.

"Given the fact that the Aura is an absolutely first-rate, terrific vehicle," said Joseph Phillippi of AutoTrends Consulting in Short Hills, N.J., "it should do reasonably well."

You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.











© Copyright 2007 The Detroit News. All rights reserved.

UAW workers feel givebacks unavoidable

Tuesday, March 20, 2007
UAW workers feel givebacks unavoidable
Louis Aguilar / The Detroit News




The day he got home from the Army 37 years ago was the day Angelo Bruno got a job as a painter at Ford Motor Co.'s Michigan Truck Plant. He's been proud of his career -- until now. The automaker's woes have forced changes at the plant that have left him as angry with his union as he is at Ford.

Bruno is not alone. More than two dozen United Auto Workers members told The Detroit News they fault union leaders for being too willing to agree to concessions Detroit automakers say they need to help restore profits.

Yet with critical contract talks coming this summer, Bruno and others say they will try to swallow their ire and accept a deal that likely will bring more cuts.

"It was a great ride," Bruno said. "But now globalization is killing us. We've got no choice."

Many workers are trying to balance their growing mistrust of the union with the stark realization that the companies they work for are losing billions of dollars as they struggle to compete against more efficient foreign rivals with lower-paid, largely nonunion, work forces.

Bruno, for instance, believes a recent vote held by his local UAW that authorized Ford to make major work rule changes at the plant, such as shifting to a 10-hour-a-day, four-day work week, was "rigged."

He and other Michigan Truck workers said turnout was deliberately kept low because they had to scramble through a snowstorm to vote at the local union hall. Traditionally, votes have been held inside the plant, Bruno said.

So for the first time in his career, Bruno is listening intently to dissident rank-and-file workers such as the Soldiers of Solidarity and is considering filing formal grievances against the UAW.

'It's a betrayal'

Despite his "growing despair," however, Bruno says he's willing to approve a national contract this fall that analysts predict could cut his pay, make him dig deeper to pay for his health care, and possibly thin his pension.

"It's a betrayal," Bruno said. "I don't think anyone's being honest with us. I just hope I can stomach it." But he admits times have changed for him and even a lower-paying Ford job is probably better than anything else he could get.

"I'm 55 years old," he said. "The economy would eat me up."

Top UAW officials declined to discuss the coming contract talks, but auto companies have clearly signaled they intend to pursue terms that will lower their labor and so-called "legacy costs" -- health care, pension and retiree benefits.

Al Benchich, president of UAW Local 909, says many local union officials are trying to "balance on a tight rope." He represents workers at General Motors Corp.'s powertrain plant in Warren.

"Everyone knows the situation the auto industry finds itself in," he said. "We are trying to determine a strategy based in reality."

Disillusionment among the rank-and-file runs deep partly because the union has been so effective at protecting its workers, said Harley Shaiken, labor professor at the University of California, Berkeley. He has close ties to the UAW and automakers.

"They've dodged a lot of bullets, but the bullets are whizzing by a lot closer now," Shaiken said. "Despite the decades-long retrenching of the Big Three, there has never been this scale of layoffs. The UAW has always achieved some hard-fought gains" during labor negotiations.

When the current national contract was negotiated four years ago, GM, Ford and DaimlerChrysler AG's Chrysler Group faced serious challenges. They were steadily losing market share even as they spent heavily on sales incentives. They needed to reduce their labor cost disadvantage, especially health care.

The UAW ultimately agreed to close some plants and introduce more money-saving flexibility into factories, but also won pay gains and retained medical benefits and job protections, such as continuing to pay workers who had been laid off.

Economy is different

Industry conditions are even tougher for Detroit going into this year's talks. Together, GM, Ford and Chrysler are losing money, cutting tens of thousands of jobs and closing factories. Chrysler is on the selling block. Meanwhile, foreign-owned auto plants thrive in the nonunion South, and automakers increasingly are shifting production to Mexico, China and other low-wage countries. Such changes are generating a huge outcry among autoworkers.

Bill Hanline, a veteran worker at Delphi Corp's Athens, Ala., plant, is trying to recruit workers and retirees to join a class-action lawsuit against the UAW, GM and Delphi to force GM to take over Delphi's pension responsibilities.

And many workers like Al Figlan, a skilled tradesman at Ford's Van Dyke Transmission plant, are battling their union even as they are bracing for givebacks at contract time. Figlan's overtime income has been eliminated -- a loss of about $60,000 gross annually.

Figlan says he and the other remaining skilled trades workers are not allowed to build an assembly system that takes up one-third of the plant, the kind of job that once defined his career. The line is being installed by outside contractors.

Figlan has filed 57 grievances against the UAW because of work rule changes and has hired an attorney. Still, he doesn't intend to file a lawsuit; he just wants his complaints heard.

"I know we got to give something back in the contract," Figlan said. "But unless it's fair, I don't know how they expect us to swallow it."

Labor expert Shaiken disputes the idea that UAW leaders have sold out the rank-and-file. "They are not going to sacrifice the gains it took 60 years for them to build," he said. "They are very realistic about how tough times are right now. You've got constructive discussions between both sides. Both sides want to see healthier companies."

You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.










© Copyright 2007 The Detroit News. All rights reserved.

GM gains, faces pains

Thursday, March 15, 2007
GM gains, faces pains
Despite strong quarter, firm's restructuring has ways to go
Sharon Terlep / The Detroit News





DETROIT -- General Motors Corp. drastically narrowed its losses in 2006 thanks to a host of cost-saving moves, but now the pressure is on the struggling automaker to start turning a profit.

Even as GM reported its best quarter in more than two years Wednesday, swinging to a $950 million profit in the fourth quarter of 2006 from a loss of $6.6 billion a year earlier, the automaker ended the year with $2 billion in losses and its critical North American operations still in the red.

And with tens of thousands of fewer employees on its payroll and popular and profitable new pickups on the market, GM may be running out of plausible explanations should it turn in another money-losing performance in 2007.

"For the first time in a long time, I am questioning their strategy," said analyst Brad Rubin at investment firm BNP Paribas, after reviewing GM's year-end and fourth-quarter results. "The results aren't that great considering everything. It still isn't enough."

GM's recovery leads Big 3

Among Detroit's automakers, all struggling against intense competition from Asian rivals in their home market, GM is furthest along in its recovery and investors are watching its progress closely.

Analysts had been expecting strong results from GM for 2006, a year in which the automaker pared its work force, cut production costs and scaled back less profitable businesses, such as sales to rental-car companies.

Some had even expected GM to post a small profit in North America and were disappointed by Wednesday's results, partly because the automaker had taken a number of actions last year as part of its plan to restore profits following a staggering $10.4 billion loss in 2005.

GM executed a costly buyout program that ushered out more than 34,300 U.S. union workers. Its new full-size pickups, a bastion of profits, arrived on the market. And it was realizing savings from a landmark deal struck in 2005 with the United Auto Workers to cut health care costs.

During a conference call Wednesday to discuss the company's 2006 financial results, investors and reporters grilled GM Chief Financial Officer Fritz Henderson about how GM will make money going forward if it has not been able to despite its moves to reduce costs and increase revenues.

"While improved, we still have some massive strategic issues in front of us," Henderson said. "The results for North America are clearly not an acceptable level."

Henderson said GM expects 2007 earnings to be better than last year, though he would not detail the automaker's predictions.

The company will be bolstered by the debut of new heavy-duty pickups and a full year of sales for the new Chevrolet Silverado and GMC Sierra pickup lineup, Henderson said. The revamped Chevrolet Malibu sedan is also expected to help GM in the increasingly important midsize car market.

GM also will continue its drive to cut costly incentives and less-profitable sales to rental fleets, steps that will help GM make more money on its cars and trucks.

And the cost-cutting will continue on top of the $6.8 billion GM slashed in 2006, Henderson said. The goal is to achieve $9 billion in cost savings in 2007.

GM took a hit from losses incurred by its former finance arm, GMAC, because of problems with defaults on subprime loans through its residential mortgage division. That risk should lessen in 2007, Henderson said.

While its North American operations improved from last year, GM lost $14 million in the fourth quarter here, compared to $1.4 billion in red ink a year ago. The unit finished the year with a loss of $779 million.

The company sold 9.1 million vehicles worldwide in 2006 for record revenue of $207 billion, up from $195 billion in 2005.

Included in the year-end results were 11 months of earnings from GMAC. GM sold a majority stake in the company in a transaction that was completed Nov. 30.

GMAC, which announced its year-end and fourth quarter results Tuesday, made $2.1 billion in 2006. The company said it expects to receive $1 billion in cash this quarter from GM in relation to a change in the lending arm's balance sheet.

Analyst questions some gains

Despite GM's overall loss and the red ink in North America, analysts agreed the 2006 results signal GM's turnaround is gaining ground.

"GM's fourth-quarter profit of $950 million is further evidence that the turnaround plan is working," David Kudla, chief investment strategist for Mainstay Capital Management, said in a research note. "We look for further positive earnings momentum as a result of cost cutting and improved SUV and truck sales."

Still, BNP's Rubin said GM's gains in some areas are questionable. Results for operations in Europe, while profitable, were disappointing, he said, and Wall Street was expecting a profit around $100 million in North America.

In addition, $236 million of GM's fourth-quarter profit came in the category of "automotive other," which is largely one-time gains that can't be counted on year after year, Rubin said.

"When you proclaim that you're going to have good results, after you restate your earnings, and you come out with this -- it questions your credibility," he said.

Such pressure from Wall Street can work against a company trying to stage a major comeback, said corporate restructuring expert Gregory Charleston, managing director of Conway, MacKenzie & Dunleavy in Detroit. GM must be careful to make decisions for the long term and not obsess over quarterly results, he said.

Turnarounds will only be successful if a company can solve the root problem, which, at GM, is its sliding market share, he said. And that will take years to reverse.

"When you're trying to turn around a company and you're focused on pleasing analysts for the particular quarter, you can make the wrong decisions," Charleston said. "Analysts and people who follow the industry have short-term expectations. But the best turnarounds are the ones you look back at over a five-year period."

Detroit News Staff Writer Bill Vlasic contributed to this report. You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.













© Copyright 2007 The Detroit News. All rights reserved.

GM's split from GMAC not painless

Wednesday, March 14, 2007
GM's split from GMAC not painless
Settlement charges of $1 billion tied to sale of profitable finance arm.
Sharon Terlep / The Detroit News





GMAC results
GMAC reported earnings Tuesday for the first time since GM sold a majority stake in the finance company. How GMAC did in 2006:
Net income: $2.1 billion
Automotive finance unit
Operating profit: $791 million
Real estate finance
Operating profit: $182 million
Other
Operating loss: $71 million
Source: GMAC




DETROIT -- The cool $2.1 billion earned by GMAC Financial Services in 2006 must be somewhat bittersweet for General Motors Corp.

Because GM owned all of its longtime captive finance unit until Nov. 30, 2006, the vast majority of those profits went straight to GM's shaky bottom line.

Going forward, though, GM will reap only 49 percent of GMAC's earnings because it sold a 51 percent stake in the finance arm for $14.4 billion to a group led by private equity firm Cerberus Capital Management.

"They will only get 49 percent of the (profit) cushion that GMAC gave them," said auto analyst David Healy at Burnham Securities. "They had to sell half of the crown jewel to fund the turnaround. In ordinary times they would never do that. But when you look at the results they had in 2005, it was an entirely natural reaction."

In addition, GM has agreed to pay approximately $1 billion in settlement charges to GMAC by the end of the first quarter in relation to a change in the lending arm's balance sheet.

The cash settlement, announced Tuesday in GMAC's fourth-quarter financial report, is related to the impact that problems in the subprime mortgage segment, which focuses on borrowers with low credit scores, have had on GMAC's book value.

Overall, GMAC reported net income of $2.1 billion for 2006, down from $2.3 billion a year ago. GMAC made $1 billion in the fourth quarter alone, up from $112 million a year earlier. Results were bolstered by $791 million in tax benefits that came from the split from GM.

Compare that to the financial picture at GM. The automaker lost $91 million in the third quarter of 2006. While GM expects to report a profitable fourth quarter for the year -- the first in two years -- the margin is expected to be slim.

GM was expected to announce its 2006 year-end and fourth-quarter financial statement this morning. The results have been delayed twice, in part because of the GMAC deal.

GM, which lost $10.6 billion in 2005, needed the cash from the GMAC deal to fuel its massive turnaround plan. GMAC needed to separate to improve its debt ratings, which were downgraded along with GM to junk status in 2005. A rating below investment grade makes it more expensive to borrow money.

Only time will determine whether GM made the right move. GMAC spokeswoman Toni Simonetti said the finance company's borrowing costs have already improved and the company is poised for growth.

"To own a smaller percentage of a thriving business is better than owning 100 percent of a constrained business," she said. "We feel like we have a solid foundation for growth. Borrowing costs have already improved and we expect them to get better over time. GM is going to share in this."

The deal marked the end of GM's 87-year ownership of the finance company, which provides auto financing, mortgage lending and real estate services.

While GM reaped billions from GMAC over the years, the finance company is moving fast to distance itself from the automaker.

"We are primarily a GM shop, and that is one of the things we need to change," said GMAC Chief Financial Officer Sanjiv Khattri, responding Tuesday to investor worries that GMAC could suffer if it depends too much on business from GM.

Despite the contrast, not everything is rosy at GMAC.

Losses in the residential mortgage business weighed on the company heavily last year, offsetting gains made in the insurance and automotive lending businesses.

GMAC's home-lending unit, Residential Capital LLC, or ResCap, lost $651 million in the fourth quarter, compared with a $118 million profit in 2005.

The hit was largely because of defaulted mortgage loans made to high-risk borrowers, a trend that's shaking the entire lending industry.

GMAC also confirmed what many analysts were expecting: that GM will turn over $1 billion to the finance company to cover losses that came as a result of the downturn in the residential mortgage business.

GM needed to make the payment because its sales agreement with Cerberus required that the book value of GMAC be more than $14.4 billion at the time of closing.

"Obviously, leaning away from the nonprime market was not sufficient," ResCap Chief Financial Officer Jim Giertz said. "Deterioration in the nonprime market drove the loss in 2006."

Detroit News staff writer Bill Vlasic and Detroit News wire services contributed to this report. You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.












© Copyright 2007 The Detroit News. All rights reserved.

Big 3, Toyota to Congress: Emissions not just car issue

Wednesday, March 14, 2007
Big 3, Toyota to Congress: Emissions not just car issue
David Shepardson / Detroit News Washington Bureau





WASHINGTON -- In a high-stakes appearance on Capitol Hill today, U.S. auto industry leaders aim to make two crucial points -- higher fuel economy mandates can't solve America's dependence on foreign oil and a broad array of approaches across all industries is needed to fight global warming.

A subcommittee of the House Energy and Commerce Committee will hear testimony from General Motors Corp. Chairman Rick Wagoner, Ford Motor Co. CEO Alan Mulally, Chrysler Group CEO Tom LaSorda, Toyota Motor North America President Jim Press and United Auto Workers President Ron Gettelfinger.

The rare joint appearance comes amid growing pressure on automakers to increase the fuel efficiency of vehicles.

Automakers have long detested the Corporate Average Fuel Economy system -- first adopted in 1975 in the wake of the Arab Oil Embargo -- because they say it perverts the market by forcing them to make smaller, lighter vehicles people don't want to buy.

In recent days, the automakers' top lobbyists have exchanged drafts of their respective CEOs testimony in an effort to make sure they are in lockstep on key issues. They also are preparing for a meeting with President Bush on alternative fuels expected March 26, The Detroit News has learned.

"As an industry, we have an obligation to be part of the solution, not the problem," Press will tell lawmakers, according to a copy of his testimony.

Progress to be highlighted

The CEOs are expected to highlight their companies' progress toward developing flexible fuel vehicles, hybrids and other fuel-saving technologies. They, along with Gettelfinger, also are expected to warn that steep fuel economy mandates will increase costs and job losses.

Automakers have been successful in beating back fuel economy legislation for decades.

But some allies have been dropping recently as worries about climate change and foreign oil dependency have increased.

U.S. Rep. Mike Castle, R-Del., said Tuesday he believes "the science has caught up with the politics" and automakers are capable of finally improving fuel economy.

U.S. Sen. Ted Stevens, R-Ala., also dropped his longstanding opposition to stricter fuel economy rules and filed a bill that would require automakers to average 40 miles per gallon by 2017.

In 1975, Congress ordered carmakers to boost fuel economy for passenger cars, which was at 13 miles per gallon, to 27.5 miles in 10 years. Since 1985, new engine technology that saves fuel has been offset by the fact that vehicles have become larger and more powerful. SUVs now account for about half of all vehicles.

At the same time, the number of vehicles on the roads has increased to 230 million and is expected to reach 300 million in seven years.

Since President Bush proposed raising corporate average fuel economy (CAFE) mandates by an average of 4 percent starting in September 2009 for passenger cars and September 2011 for light trucks, automakers have been girding for a fight.

The big issue is the cost of fuel economy mandates. A Dec. 13 Bush administration analysis pegs the cost of increasing fuel economy by 4 percent a year at $114 billion from 2010 to 2017, with the Detroit automakers' share at $85 billion. The pressure isn't letting up. A group of CEOs led by FedEx, Southwest Airlines and Dow Chemical along with retired generals will be on hand earlier today to push for stricter fuel economy regulations.

GM doesn't back changes

While the testimony of the CEOs is expected to be fairly similar, GM is the only automaker not to specifically support higher fuel economy mandates. Toyota seeks to play up the company's green credentials -- and even endorses "increased reliance on mass transit" as one solution.

GM spokesman Greg Martin said Wagoner hopes "we would have a frank discussion on how CAFE has failed to meet its intended goals. Any rush to increase CAFE without regard to what is technically feasible could have a devastating effect on the industry."

Said Ziad Ojakli, Ford's vice president for governmental affairs: "We want to be part of the solution, but we don't want to be the entire solution."

DaimlerChrysler CEO Dieter Zetsche said in January at the Washington Auto Show that fuel economy rules have outlived their purpose. "Trying to sell people what they don't want is not a winnable business proposition. And it is that 'anti-free market element' of CAFE that makes life difficult for us," he said. Automakers should "look to innovation, and to increasingly substituting petroleum products with biofuels," he said.

Honda, whose auto fleet is the leader in U.S. fuel economy, wasn't invited to the hearing.

The hearing comes as Europe is poised to aggressively regulate tailpipe carbon dioxide emissions, rather than miles per gallon. California has proposed reducing the carbon content of fuels by 10 percent by 2020, which would put part of the burden on highly profitable oil companies.

U.S. Rep. Ed Markey, D-Mass., introduced a bill that would achieve Bush's goal of increasing fuel economy by 4 percent into law, and then would tack on annual increases of 4 percent starting in 2018. "It is a national security imperative," Markey said.

In a recent interview, U.S. Rep. John Dingell, D-Mich., noted that some lawmakers see the automakers as devils "wearing horns and carrying pitchforks."

"We are not going to concentrate on one industry or on one part of the problem," he said. "Everyone will have to make appropriate contribution into the collection pots."

Detroit's automakers have built millions of vehicles that run on E85, a fuel made of 85 percent ethanol, but just 1,100 of nation's 170,000 pumps offer it. The automakers also get credits toward meeting fuel economy mandates, even if the E85-ready vehicles never use the fuels.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.











© Copyright 2007 The Detroit News. All rights reserved.

GM to Approach Unions for Concessions

GM to Approach Unions for Concessions
By TOM KRISHER
AP Business Writer




DETROIT — General Motors will seek relief from its whopping $68 billion post-retirement employee health care obligation in contract talks with the United Auto Workers union, according to an annual report filed with federal regulators.

In the filing Thursday with the U.S. Securities and Exchange Commission, General Motors Corp. said health care is its largest competitive disadvantage, and the burden could grow on a global basis.

The world's largest automaker also said it has determined its internal financial controls are ineffective and that it is working to fix them. It has said previously that federal authorities are investigating its financial reporting.

The comments came only a day after GM's delayed release of financial results for the fourth quarter and full year 2006. The earnings report was delayed as it sorted through accounting issues dating to 2002.

GM told the SEC that it spent $4.8 billion on health care in the U.S. last year, and that is expected to drop only slightly to $4.7 billion this year.

"We must continue to make structural changes to reduce our U.S. health-care cost burden," the company's report said.

GM said it needs to continue to reduce structural and material costs, and its production must become more efficient in order to return to profitability. But it said restrictions in labor agreements could limit cost savings.

"Our current collective bargaining agreement with the UAW will expire in September 2007, and we intend to pursue our cost-reduction goals vigorously in negotiating the new agreement," the company said, adding that a UAW strike or threat of a strike could hamper efforts to cut costs.

GM said it provides extensive pension and retiree health care benefits to more than 400,000 retirees and surviving spouses in the U.S.

In the filing, the company pointed out that the UAW agreed to retiree health-care cost sharing in 2005 that reduced its post-retirement health care obligations by $17 billion, and it capped salaried retiree health care spending levels effective in January.

But Lehman Brothers analyst Brian Johnson said in a note to investors that the 2005 agreement eliminates GM's ability to change retiree health care benefits because it remains in effect until 2011.

A challenge to the agreement remains in a federal appeals court, and Johnson said any new agreement would need court approval, which he said is unlikely.

A UAW spokesman declined to comment on the filing. GM spokesman Dan Flores said health care costs remain under discussion with the union.

"We are looking at a variety of alternatives to address the health care burden. We aren't going to speculate on those options we are exploring, and we are working with our unions to develop solutions together," he said.

On Wednesday, Detroit-based GM reported a 2006 fourth-quarter net profit of $950 million, but the company still lost $2 billion for the year. It also lost $10.4 billion in 2005, and is in the midst of shedding thousands of jobs and closing plants to shrink its factory capacity so that it can compete with Asian automakers, mainly Toyota Motor Corp.

Also in Thursday's filing, GM said it has received subpoenas from the SEC and a federal grand jury investigating its financial reporting.

The investigations include GM's financial reporting for its pension and other post-retirement employee benefits and its transactions with Delphi Corp., GM's former parts operation that was spun off as a separate company.

GM said it is cooperating with the government in the investigations.

"A negative outcome of one or more of these investigations could require us to restate prior financial results and could result in fines, penalties or other remedies being imposed on GM," the filing said.

The company detailed federal investigations into its transactions with Delphi and other suppliers in its 2005 annual report filed last year.

The filing said GM has continued to improve its internal controls, but if it can't fix them permanently, "It may adversely impact our ability to report our financial condition and results of operations in the future accurately and in a timely manner."

Earlier this year, GM said it had hired outside financial advisers to help restructure its corporate controller's office.

Peter Henning, a former SEC attorney who teaches at Wayne State University Law School in Detroit, said the GM filing has standard accounting language that is a result of the Sarbanes-Oxley law, enacted in 2002 in response to the wave of corporate scandals.

The required language, which deals mostly with complicated tax accounting, sounds more ominous than it really is, Henning said.

"It shouldn't be a significant concern for investors because it's more on the reporting side and not on the recording of transactions," he said.

But he said GM's problems have persisted and need to be fixed.

"If it continues for a significant period of time, then it becomes a real concern that they are not able to handle these transactions and they shouldn't be engaged in them," he said.

GM shares were traded down 87 cents, or 2.88 percent, Thursday on the New York Stock Exchange to close at $29.38

___

On the Net:

General Motors Corp., http://www.gm.com




Copyright 2007, The Associated Press. The information contained in the AP Online news report may not be published, broadcast or redistributed without the prior written authority of The Associated Press.










Copyright ©2007 Cox Ohio Publishing, Dayton, Ohio, USA. All rights reserved.

Success may trip up GM in talks

Tuesday, March 13, 2007
Success may trip up GM in talks
As turnaround gains traction, automaker may find it harder to demand givebacks from UAW.
Sharon Terlep / The Detroit News





General Motors Corp.'s improving outlook could be a handicap during labor negotiations this summer, when the automaker will be in the delicate position of trying to sell its comeback on Wall Street while also attempting to wrest concessions from the United Auto Workers.

For now, GM seems to have pulled out of the tailspin it was in a year ago, when multibillion-dollar losses and skidding market share dominated headlines.

Sales are up -- 3.7 percent in February. Operating costs are down. And the company is on track to report a profitable quarter for the first time in two years Wednesday when it releases fourth-quarter and full 2006 financial results.

Such positive signs may make it tougher to sell an already wary UAW on the idea that major givebacks are still needed to safeguard the company's future.

Top UAW officials have publicly acknowledged that GM needs the union's help, but some local UAW leaders and rank-and-file members say the automaker isn't as bad off as it seemed even a year ago.

"They understand that if they show profit, it's going to be something we look at," Chris Sherwood, president of Local 652 in Lansing, said of GM. Local 652 represents workers at a Cadillac plant.

"Hopefully, they won't get carried away. They've got to take into account that a lot of our folks are saying, 'Enough is enough.'"

Contract talks should wrap up in September when the UAW's four-year agreement expires.

GM is working to craft a finely tuned message grounded in the idea that any recent gains could be lost if GM still can't compete against lower-cost foreign rivals.

"The union understands that better than anybody," GM North America President Troy Clarke said in a recent interview.

"If they show very good earnings, it's going to be a tougher job for GM," said Harley Shaiken, a labor expert at the University of California, Berkeley. "Both management and labor are going to be walking a very fine line."

GM is not expected this week to report a profit in North America and has made it clear that getting the unit in the black and keeping it there depends on reducing health costs for active and retired workers.

"We cannot, as an American auto industry in the long-term, survive with the legacy cost burden that we've gotten," Bob Lutz, GM vice chairman of global product development, said last week at the Geneva auto show. "We need to work with our UAW partners to find some sort of solution."

Downsizing by Detroit automakers has cut tens of thousands of workers from the union's ranks, but the UAW remains an influential force within GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, Shaiken said. Even in tough times, he said, "union leaders do not want to give up things won with great sacrifice."

The UAW already has taken the unusual step of agreeing to health care cuts in a landmark 2005 deal with GM that was ratified by 61 percent of workers -- a margin slim enough to make GM nervous.

At the same time, analysts say the UAW is realistic about the challenges facing GM, Ford and Chrysler. While GM is faring better than its crosstown rivals, the picture is far from rosy. As GM execs are quick to point out, even a few billion dollars in profit is hardly stellar given GM's size.

Then there's the issue of health care. By 2008, GM is expected to spend more than $1,900 on health care for every vehicle it builds in the United States, according to the credit rating firm Fitch Inc.

"They're both struggling so badly that neither side can afford to let things go downhill," labor expert Jim Hendricks of the Chicago-based law firm Fisher & Phillips said of GM and the UAW. "That hasn't changed just because they've had some good news."

Whatever deal UAW negotiators strike with GM will have to be approved by workers, who have never voted down a national contract, although the margins are narrowing.

"We're not going to let GM dupe us at the bargaining table -- we've got people at international just as smart at their guys," said George McGregor, president of UAW Local 22, which represents workers at GM's Hamtramck factory. "But we know we've got to make some sacrifices. We're going to do what we need to do to keep our members working as long as we can."

You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.











© Copyright 2007 The Detroit News. All rights reserved.

Toyota-wary GM ups Chevy output abroad

Friday, March 09, 2007
Toyota-wary GM ups Chevy output abroad
Jeff Green / Bloomberg News




GENEVA -- General Motors Corp. is increasing production of Chevrolet cars in markets such as India and Russia as it tries to retain a lead over Toyota Motor Corp., which may pass it as the world's largest automaker this year.

Chevrolet cars based on Korean designs helped the automaker pass 2 million units for the first time in Europe and 1 million in Latin America last year, GM Vice Chairman Bob Lutz told reporters this week in Geneva. Since 2001, Chevy sales have increased 158 percent outside North America, making it one of the fastest-growing brands in the world, he said.

Growth in Russia, India and China is part of GM Chief Executive Officer Rick Wagoner's plan to focus on boosting sales in 11 emerging-market countries. Since Wagoner took over GM in 2000, GM has risen to first from second in those countries, which also include Brazil, Indonesia, Mexico, Poland and Turkey.

"While Chevrolet might not be as recognized globally as Ford or Volkswagen, it is probably the strongest brand in GM's portfolio," said John Casesa, managing partner of Casesa Strategic Advisors LLC. "Right now GM has a first-mover advantage in emerging markets and I'm not so pessimistic that I think it's inevitable that they lose to Toyota."

GM's share in emerging markets rose 0.4 percent to 10.9 percent last year, according to John Middlebrook, head of global marketing. Volkswagen AG was second at 9.3 percent, he said, followed by Toyota at 7.7 percent and Hyundai Motor Co. and its Kia Motors Corp. subsidiary at a combined 5.2 percent.

Wagoner said this week that he isn't ready to concede that Toyota will overtake GM this year.











© Copyright 2007 The Detroit News. All rights reserved.

General Motors to boost Chevy production abroad

Thursday, March 08, 2007
Report: General Motors to boost Chevy production abroad
The Detroit News



General Motors Corp. is increasing production of Chevrolet cars in markets such as India and Russia as it tries to retain a lead over Toyota Motor Corp., which may pass it as the world's largest automaker this year, Bloomberg News reported today.

Chevrolet cars based on Korean designs helped the automaker pass 2 million units for the first time in Europe and 1 million in Latin America last year, GM Vice Chairman Bob Lutz told reporters in Geneva. Since 2001, Chevy sales have increased 158 percent outside North America, making it one of the fastest growing brands in the world, he said.

Growth in Russia, India and China are part of GM Chief Executive Officer Rick Wagoner's plan to focus on growth in 11 emerging market countries. Since Wagoner took over GM in 2000, GM has risen to first from second in those countries, which also include Brazil, India, Indonesia, Mexico, Poland and Turkey.

"While Chevrolet might not be as recognized globally as Ford or Volkswagen, it is probably the strongest brand in GM's portfolio," said John Casesa, managing partner of Casesa Strategic Advisors LLC. "Right now GM has a first mover advantage in emerging markets and I'm not so pessimistic that I think it's inevitable that they lose to Toyota."












© Copyright 2007 The Detroit News. All rights reserved.

GM may owe $1B on mortgage loans

Wednesday, March 07, 2007
GM may owe $1B on mortgage loans
Automaker might have to cover defaulted home loans made by unit of ex-finance arm, GMAC.
Sharon Terlep / The Detroit News





First, General Motors Corp. delayed releasing its much-anticipated financial results for 2006.

Then, the automaker missed the March 1 filing deadline with the Securities and Exchange Commission, requesting an extension to next week.

Now, risky mortgage loans doled out last year by GM's former finance arm are giving Wall Street another reason to be anxious.

GM may be on the hook for as much as $1 billion to cover defaulted mortgage loans made to high-risk borrowers by Residential Capital LLC, the former home-lending unit of General Motors Acceptance Corp., several analysts said this week. The automaker sold a 51 percent stake in GMAC last year for $14.4 billion to a group led by Cerberus Capital Management LP.

A GM spokeswoman declined to comment Tuesday, saying that GM hasn't yet seen GMAC's 2006 financial report.

"People are definitely getting frustrated," said analyst Brad Rubin at investment firm BNP Paribas.

Rubin said GM, which has about $46 billion in liquidity, can safely handle a $1 billion payout. But the company's financial issues are stressing investors. Yet, he said, "I don't think that's going to impact the restructuring or whether GM survives or not."

The automaker, which has restated its results seven times in the past two years, last month requested an extension of the March 1 SEC deadline for 2006 financial results. GM initially planned to announce results on Jan. 30.

GMAC was a factor in the delay.

GM's exposure to the risky loans was one key concern of analyst New York-based Bear Stearns analyst Peter Nesvold. "Our biggest concern on the equity side is whether GM stock sufficiently discounts ResCap's subprime exposure," he wrote in a recent research note.

Subprime mortgages, with their higher interest rates, typically go to homeowners with troubled credit histories. Falling home prices are causing overextended homeowners to default on loans because it's more difficult for them to take out second mortgages or home equity loans for extra cash.











© Copyright 2007 The Detroit News. All rights reserved.

GMC Sierra 1500 is made with rural America in mind

March 3, 2007
2007 GMC Sierra 1500
General Motors
Weekend Drive
GMC Sierra 1500 is made with rural America in mind
By Warren Brown / The Washington Post







LURAY, Va. -- The thermometer showed 24 degrees Fahrenheit. It felt like zero. Cold winds swept down from Hawksbill Mountain, the tallest peak in Shenandoah Valley National Park. With the winds came snow flurries, which seemed to last longer than flurries should.



It was beautiful in the way that nature is beautiful when you accept its power, when you realize that the idea of conquering it is man's folly. We climbed back into the 2007 GMC Sierra 1500 extended-cab pickup. We proceeded cautiously. It mattered not that the Sierra is among the most robust of pickups available, a body-on-frame leviathan equipped with a big V-8 engine and four-wheel drive.

All along Interstate 81 and adjoining roads was plenty of evidence of what happens when drivers of four-wheel-drive and all-wheel-drive vehicles assume that man's technological savvy is capable of trumping ice. The ice wins, canceling traction and throwing vehicles off the road, or tragically tumbling them and their occupants onto their heads and into oblivion.

I have a theory about big pickup trucks and why there are so many of them in places such as Luray and the swamp and bayou towns of my home state, Louisiana. Trucks are practical. They carry and pull lots of stuff, much of it heavy and unglamorous. Terrain and weather in those regions often are challenging. Two-wheel-drive wimpmobiles don't measure up to conditions. And most of the people in those areas are workers, people who turn wrenches, plant fields, lift bales and use hammers and saws as part of their daily regimen. They need vehicles that work as hard as they do.

But, in a way, those rural truck drivers and owners are as much victims of automotive illusion as their paper-pushing, word-processing cousins in the city, where sports cars, luxury sedans, and super-bling sport-utility vehicles reign.

Cars and trucks are more than the sums of their parts. They have a meaning far beyond themselves. The city slicker in the high-end sedan is telling the world that he or she has arrived, if only at an elevated place in his or her own mind. The owner of a pickup truck in small-town America is declaring his or her just-folks status -- a sort of down-to-earth ruggedness, an awareness that getting close to nature also means getting dirty, dented and scratched, a belief that only trucks are worthy of that bruising communion.

That is why there are so many pickup trucks in rural and small-town America.

Luray and similar towns constitute the America that General Motors is wooing with its big-muscled Sierra 1500. It is the America that Ford is going after with its F-Series pickups, and that Nissan is trying to claim with its Titan pickups, and that Toyota is pursuing with its broad-shouldered, giant-braked Tundra CrewMax.

That America is not going away anytime soon. As long as it remains, the War of the Pickups will rage. With its GMC Sierra 1500 and several other models, GM is hoping to win with a combination of power and common sense, finesse and brutality.

The GMC Sierra 1500, for example, uses a GM technology called "active fuel management.' It is a computer-assisted system that shuts off four of the engine's eight cylinders at moderate speeds, or when the truck is carrying nothing except the driver and a passenger or two. At higher speeds and with heavier loads, when more power is needed, all eight cylinders go to work. The upshot is a full-size, four-wheel-drive truck that can complete a 400-mile round-trip journey, including several side-road diversions, with 120 miles worth of regular unleaded gasoline left in its 26-gallon tank.

In the past, GM seemed to care little about the wide seams between panels in its pickup trucks, or about mundane materials and interior layouts of those vehicles. The seams in the new GMC Sierra 1500 are tight. Interior materials are high quality. And although the passenger cabin still bespeaks "work truck,' it is much more attractive and comfortable than the cabins of any of its predecessors.

It is a likable truck, which is why, I suppose, there are so many of them running around rural Virginia. It fits well with the landscape of the Shenandoah Valley.



Luray, Va., and similar towns constitute the America that General Motors is wooing with its big-muscled Sierra 1500.



2007 GMC Sierra 1500

Complaints: This is a high-rider, which is no problem for people long of leg. But ingress and egress can be challenging for short-legged types. Also, the four-speed automatic transmission should be replaced by a more fuel-efficient five-speed or six-speed model.

Ride, acceleration and handling: It is a full-size pickup truck that rides and handles like a pickup truck. People desiring something gentle and sedan-like should shop elsewhere. Acceleration is good, meaning that the GMC Sierra 1500 has no problems entering freeways or changing lanes.


Head-turning quotient: It's a pickup truck. Sexy doesn't get it in this league. Power does. It looks powerful.

Body style/layout: The GMC Sierra 1500 extended cab is a front-engine, body-on-box-frame pickup with two full side doors and two smaller rear access doors. It is available in rear-wheel drive or four-wheel drive, either with a short, intermediate or long cargo bed.

Engine/transmission: The tested model had a 5.3-liter V-8 that develops 315 horsepower at 5,200 revolutions per minute and 338 foot-pounds of torque at 4,400 rpm. The engine employs a computerized cylinder deactivation system to save fuel when running at moderate speeds and pulling light loads. The engine is linked to a four-speed automatic transmission.

Capacities: There is seating for six. Maximum payload is 1,564 pounds. It can be equipped to tow up to 8,600 pounds. Fuel capacity is 26 gallons of recommended regular unleaded gasoline.

Mileage: With driver and one passenger, and carrying no cargo, or pulling no trailer, we averaged 21 miles per gallon traveling at posted speed limits.
Safety: Head air bags are optional. Side air bags, electronic stability control and traction control were not available at this writing.

Price: Base price on the 2007 GMC Sierra 1500 extended cab pickup truck with four-wheel-drive and short bed is $31,795. Dealer's invoice price on that model is $29,092. Price as tested is $34,300, including $1,605 in options (remote vehicle starter system, heated power-adjustable mirrors, heated windshield-wiper fluid system, high-performance suspension) and a $900 destination charge. Dealer's price as tested is $31,324. Prices sourced from General Motors and www.edmunds.com.

Purse-strings note: Compare with Ford F-150, Dodge Ram 1500, Nissan Titan and Toyota Tundra.








© Copyright 2007 The Detroit News. All rights reserved.

Big 3 face heat in D.C. over global warming

Wednesday, February 28, 2007
Big 3 face heat in D.C. over global warming
David Shepardson / Detroit News Washington Bureau






U.S. Rep John Dingell, D-Dearborn, and three other congressional officials on energy policy met with President Bush for 45 minutes Tuesday. Bush asked the group to meet with him in the weeks to come and continue talking about the issue.

Dingell, chairman of the Energy and Commerce Committee, plans at least 8 more hearings on fuel economy mandates and climate change over the next six weeks.

Auto executives will testify on March 14. Former Vice President Al Gore will testify in both the House and Senate on March 21.

Supreme Court is expected to soon rule on whether the EPA can regulate automobile tailpipe emissions in Massachusetts vs. EPA.
Source: Detroit News research
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WASHINGTON -- Top executives of the world's four biggest automakers and the head of the United Auto Workers union will testify before Congress next month during a high-profile hearing on climate change amid growing calls for automakers to do more to limit global warming.

General Motors Corp. Chairman and CEO Rick Wagoner and Jim Press, president of Toyota Motor Corp.'s North American division, have agreed to testify March 14 before the House Energy and Commerce Committee, which is chaired by U.S. Rep. John Dingell, D-Dearborn.

Ford Motor Co. and DaimlerChrysler AG's Chrysler Group have also agreed to participate and are expected to send Ford Executive Chairman Bill Ford Jr. and Chrysler CEO Tom LaSorda. UAW President Ron Gettelfinger will appear at a separate session of the same hearing.

Dingell is calling the automotive heavyweights to Washington as he is working to fashion a compromise to President Bush's call to increase fuel economy by 4 percent annually, which would reduce vehicle emissions that have been linked to global warming. Dingell's goal is a bill to cut greenhouse gas emissions that automakers can support.

The hearing will mark the first time in recent years that automakers' top executives have been called to Congress as a group to testify about climate change and their opposition to dramatic increases in fuel economy rules.

Auto industry critics say the prospect brings to mind the appearance of tobacco company CEOs in 1994, who declared nicotine wasn't addictive.

"Do they blame the victim or do they say, 'OK, we'll do our fair share' or do they resist and become the pariah the tobacco industry became?" said Dan Becker, director of the Sierra Club's global warming program. "The auto companies have gotten more rope to allow them to continue to make gas-guzzling, polluting vehicles that aren't very good for society."

Auto industry officials say it isn't fair to compare them to tobacco executives, noting that the industry has spent billions to improve the fuel efficiency of vehicles and doesn't oppose achievable increases.

Automakers say the current corporate average fuel economy requirements, known as CAFE, distort the market by forcing them to heavily discount smaller, more fuel-efficient cars to meet fleet-wide mandates.

"There is change in the air," said Dave McCurdy, head of the Alliance of Automotive Manufacturers, which represents GM, Ford, DaimlerChrysler and Toyota among other companies. "We are going to be at the table. I often use the Oklahoma saying, 'If you're not at the table, you're on the menu.' "

In just a few short months, the auto industry has faced growing pressure from Congress, the Bush administration and in the courts to dramatically increase the fuel efficiency of their products -- a prospect that will likely cost the industry billions and force it to stop making heavier vehicles while developing hybrid versions of more models.

There is no dispute that U.S. cars and trucks generate a large amount of carbon dioxide -- an estimated 300 million tons yearly, or about 6 percent of worldwide greenhouse gas emissions.

The best way to reduce emissions is to improve fuel economy and there are about 40 separate bills in Congress that offer competing ways to force automakers to raise fuel economy.

The Bush administration's call for a 4 percent annual increase gets its first real test at a hearing today of Dingell's Energy and Commerce Committee.

Dingell, one of four lawmakers who met with President Bush on Tuesday on energy policy, has told automakers in blunt terms about the need to be part of a broad-based reduction in carbon dioxide output from many industries as his committee attempts to meet a July 4 target for a draft bill .

At today's hearing, Dingell, who wrote the original fuel economy law in 1975, will "acknowledge that it is an imperfect system" but also praise the gains that were achieved by the regulations, according to excerpts of his statement obtained by The News.

"It has contributed to motor vehicles which are twice as efficient and at the same time are cleaner and safer than ever before," Dingell says in the statement. "I am proud of what this committee accomplished thirty years ago, however, we are now confronted with new and pressing questions."

Some have suggested Congress should focus on regulating carbon dioxide emissions. California Gov. Arnold Schwarzenegger wants to reduce the content of carbon dioxide in fuels by 10 percent by 2020, which could force fuel companies to take a larger role.

"Faced with evidence that the globe is warming, is the current method of regulating the fuel economy of vehicles the most effective way to reduce emissions of greenhouse gases, such as carbon dioxide, from cars and trucks?" Dingell said in his statement.

National Highway Traffic Safety Administrator Nicole Nason and White House council of economic advisors chair Edward Lazear will testify at today's hearing.

The pair will be questioned about President Bush's call to reduce oil consumption 20 percent by 2017 -- in part by reducing gasoline usage by 8.5 million gallons annually through higher fuel economy mandates for both light trucks and passenger cars.

In 1975, Congress forced automakers to hike fuel economy to 27.5 miles per gallon from the industry average of 13 mpg over 10 years. Last March, NHTSA issued a small increase in light-truck fuel economy raising it from 21.6 to 24 mpg by 2011.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.












© Copyright 2007 The Detroit News. All rights reserved.

Suits filed over GM speedometers

Suits filed over GM speedometers
By David Bowermaster
Seattle Times staff reporter





Kevin Zwicker knew something was wrong when the speedometer on his 2004 Chevy Suburban indicated he was going 10 mph, even though he was driving at or near the speed limit on Interstate 5.

Zwicker's speedometer failed completely in April 2006. But General Motors did not replace it for free because the truck was outside the standard three-year, 36,000-mile warranty period.

Zwicker had purchased an extended warranty, so he paid $100 for a new speedometer rather than the usual $400 to $500.

But now Zwicker, who lives in Snohomish, is the lead plaintiff in a federal lawsuit seeking damages on behalf of potentially thousands of people. The lawsuit, filed last week in U.S. District Court in Seattle, could potentially cover all Washington residents who purchased GM trucks and sport-utility vehicles from 2003 to 2007, and who have had to replace defective speedometers.

Zwicker, 48, considers himself a "savvy driver," but said it was uncomfortable driving without knowing how fast he was going.

"I don't think it's fair that a major manufacturer such as GM can let something like this go by and not give it some serious thought," Zwicker said.

A nearly identical suit was filed this week in U.S. District Court in Oregon on behalf of John Hall, who paid $427.50 in January to fix a defective speedometer on his 2003 GMC Envoy LE.

The lawsuits in Washington and Oregon are seeking class-action status, according to Beth Terrell, an attorney with the Seattle law firm of Tousley Brain Stephens who is representing Hall and Zwicker. The suits cover five Chevrolet models: Avalanche, Silverado, Suburban, Tahoe and Trailblazer; four GMC models: Denali, Envoy, Sierra and Trailblazer; and the Cadillac Escalade.

Additional suits could follow in other states, but there are currently no plans to consolidate the cases into a single national suit against the world's largest automaker.

"We think it makes sense to prosecute GM in each state on behalf of that state's residents," Terrell said.




A spokeswoman for GM said the company had no comment because it had not yet seen the lawsuits.

The suit filed on behalf of Zwicker is seeking three types of compensation from GM: replacement of all speedometers on the affected models; reimbursement for anyone who has already paid to have a defective speedometer replaced; and reimbursement for anyone who has had to pay speeding tickets, and whose auto insurance rates have risen as a result of a speeding ticket, due to a defective speedometer.

The legal filing includes quotes from 19 complaints posted on the Web site of the National Highway Traffic Safety Administration, and other Internet sites, alleging problems with GM speedometers.

"My '04 Chevy Tahoe's speedometer with only 40,000 [miles] just quit working and is stuck on 55 mph even when it sits in the garage," said one of the anonymous complaints.

Vehicle owners whose speedometers have failed while the truck is under warranty are not covered by the lawsuit. But Terrell said the defects most often show up after the warranty has lapsed.

Terrell doesn't know how many trucks could be covered by the lawsuit. GM sold roughly 827,000 trucks covered by the lawsuit in 2006, according to its most recent financial results. It is not clear how many of the trucks were sold in Washington state.

The lawsuit alleges that GM failed to perform a product recall, and continued to sell trucks with defective speedometers, even though it was aware of the problems. "[GM] has known of the defects in the trucks and their speedometers since at least 2003, if not earlier," the lawsuit alleges.

The case has been assigned to U.S. District Judge John Coughenour, who will decide whether to certify the lawsuit as a class-action.

David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com

Copyright ©2007 The Seattle Times Company

GM sales buck Big 3 trend

Friday, March 02, 2007
GM sales buck Big 3 trend
Hot trucks, 0% loans fuel gains in February
Josee Valcourt / The Detroit News





For a month, at least, General Motors Corp. gained market share, its big trucks rebounded and new vehicles like the GMC Acadia crossover took off out of the gate.

While U.S. auto sales in February were far from a panacea for GM, they were a welcome shaft of light in what has been an otherwise bleak start to 2007 for Detroit's automakers.

GM's sales rose a surprising 3.7 percent, fueled by an 11 percent surge in retail purchases, even as Ford Motor Co. saw a 13.4 percent sales decline and demand for Chrysler Group products slid 8.3 percent, while parent DaimlerChrysler AG slipped 7.7 percent.

GM also picked up a point of market share, coming in at 24.6 percent, compared to 23.6 percent in February 2006.

A bright spot for the No. 1 automaker was its redesigned Chevrolet Silverado pickup, which saw a 26.5 percent increase and outsold Ford's F-Series pickups to claim the title of best-selling vehicle in America last month.

"Everyone expected their sales to be down," said Alex Rosten, an analyst with Edmunds.com, a research Web site for car buyers. "Nobody expected their retail to be so strong."

Toyota, Honda, Nissan gain

Japanese automakers, meanwhile, kept their momentum going in February, with Toyota Motor Corp. sales soaring 12.2 percent, Honda Motor Co. gaining 3.2 percent and Nissan Motor Co. sales increasing 1.2 percent.

Even with GM's gain, however, sales will continue to be under pressure for Detroit automakers as economic forces including the slumping housing market and uncertainty on Wall Street add to the intense financial and competitive pressures already weighing on Detroit's Big Three.

"We're in for a very uncertain year because there are so many factors that can impact sales," Rosten said.

Still, Paul Ballew, GM's chief market analyst said the overall U.S. auto market is on track for a 17-million vehicle year in 2007. "It's fair to describe the industry as operating a bit below trend," Ballew said. "But I wouldn't say we're experiencing any further deterioration." A combination of new vehicles such as the Silverado, GMC Acadia and Saturn Aura sedan, along with free financing incentives rolled out in mid-February helped lift GM's sales, analysts say.

"You're seeing a company that has been paying attention to what their critics have been saying," said Rebecca Lindland, of Lexington, Mass.-based Global Insight Inc.

GM to trim production

GM ended the month with about 1 million vehicles in inventory -- two thirds of them truck models. Ballew said GM expects to trim its second-quarter production schedule by 62,000 vehicles as it continues to pull back on daily-rental sales.

Despite Toyota's growth and its own tumble, Ford was able to hold onto its spot as the No. 2 automaker. In recent months, Ford has slipped to as low as No. 4, behind Toyota and Chrysler.

Ford's February sales dropped largely because of declining sales to daily rental fleets and weaker demand for its bread-and-butter F-Series pickups.

To better match production with demand, Ford said Thursday it would cut factory output 14 percent in the second quarter, to 770,000 cars and trucks from 897,000 a year earlier. The company said more than 60 percent of the reduction is tied to Ford's ongoing effort to cut sales to daily rental fleets, which don't generate strong profits and can erode brand image. All three Detroit automakers are trying to cut rental fleet sales and bolster more profitable retail sales, which are vehicles sold to consumers at dealerships.

Ford has fewer F-150s

Ford sales analyst George Pipas acknowledged that some dealers feel the production cuts have gone too far. There were 100,000 fewer F-series pickups in inventory at the end of January than there were a year ago.

Ford, which finished February with a 16.7 percent U.S. market share, is also seeing its sales fall partly because of the discontinued Ford Taurus, which was sold to fleets and accounted for about 6 percent of the automaker's total sales, said Rebecca Lindland of Global Insight.

One of the few bright spots in Ford's sales results were its new crossovers: the Ford Edge and Lincoln MKX. In the vehicles' second full month on the market, Edge sales climbed to 13,563 and the MKX rose to 4,009.

Cisco Codina, head of sales, marketing and service for Ford North America, said both exceeded the company's projections.

Zetsche comments hurt sales

Chrysler Group's sales slide, which include the Chrysler, Dodge and Jeep brands, dragged down parent DaimlerChrysler, which also includes Mercedes-Benz. Chrysler sales were hurt by all the speculation swirling about its future since DaimlerChrysler CEO Dieter Zetsche said all options were open for money-losing Chrysler, including a possible sale.

"Chrysler Group faced some headwinds due to the speculation," said Steven Landry, vice president of sales and field operations.

In Metro Detroit, 70 percent of Chrysler Group sales are to employees and that demand fell off 30 percent as employees workers worried about their future. Chrysler hopes to see sales improvements in the next two to three months, Landry said.

Toyota was helped by strong demand for its cars, led by the Camry and Corolla.

The Prius hybrid also did well, nearly doubling sales to a record 12,227 cars from 6,547 last February. The rise in Prius sales reflects both an increase in output of the gasoline-electric cars and modest incentives Toyota now offers. Toyota says the Prius is becoming a mainstream vehicle.

"That trend-setter or early adopter? We've moved beyond that phase," said Jim Lentz, executive vice president of Toyota Motor Sales, the Japanese automaker's Torrance, Calif.-based U.S. sales arm. "A more mainstream buyer, three years into a model's life, is expecting some kind of incentive support."

Tundra pickup sales were down 8.5 percent at 9,669 units as outgoing 2006-model-year Tundras sold out faster than anticipated and Toyota has not yet shipped all versions of the new model.

Toyota expects to sell 200,000 Tundras in 2007 and expects to reach that annualized sales rate in the spring.

Lentz estimated 7 to 8 percent of sales were conquests from other brands. Deliveries of the biggest version of the new Tundra, the CrewMax, will begin later this month.

Despite stock market jitters, Toyota still feels bullish about the economy. Executives said the economic fundamentals -- inflation, interest rates, housing market -- would support an auto market of around 16.5 million vehicles. Because some automakers are reducing less profitable sales to fleet buyers, "the retail piece of that market may be stronger than it was last year."

Detroit News Staff Writers Bill Vlasic, Christine Tierney and Bryce Hoffman contributed to this report. You can reach Josee Valcourt at (313) 222-2575 or jmvalcourt@detnews.com.














© Copyright 2007 The Detroit News. All rights reserved.

GM's annual report will be late

Friday, March 02, 2007
GM's annual report will be late
Automaker says accounting problems will delay its financial statement's release.
Tom Krisher / Associated Press





DETROIT -- Pesky accounting problems have forced General Motors Corp. to delay filing its annual report with federal regulators until after the Thursday deadline.

The world's largest automaker, in a filing with the U.S. Securities and Exchange Commission, said Thursday it would need until March 16 to file.

"We're continuing to finalize the items we previously reported, and it became necessary to file an extension," said GM spokeswoman Renee Rashid-Merem.

The filing said GM could not meet the deadline "without unreasonable effort or expense." GM will seek an extension with the SEC today, the company said.

GM said last month that it had "substantially completed" its review of financial statements from 2002 until late September 2006. It estimated a deferred tax liability overstatement to be about $1 billion and said accounting changes involving interest rate hedging would increase its retained earnings by about $200 million.

The accounting problems, which include General Motors Acceptance Corp., have delayed the automaker's release of fourth-quarter and 2006 earnings. The Detroit company has said it would post a fourth-quarter profit.

GM officials won't divulge the size of the expected profit, but it would be the auto giant's first quarter in the black since the fourth quarter of 2004, when it made $630 million.

Problem isn't a big concern

Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. Inc. in Memphis, Tenn., said while the accounting troubles may be persistent, they are not a big concern compared to other issues facing GM, like softening auto sales and upcoming contract talks with the United Auto Workers.

"For a multinational corporation with fairly complex issues in front of them, I'm not altogether surprised" at the delay, he said.

GM, which reported losing $3 billion through the first nine months of last year and $10.6 billion in 2005, is looking into other accounting problems involving hedging activities.

GM also attributed the delays to its financial arm, GMAC, which needed more time to close its books on 2006. GM sold a 51 percent stake in GMAC to a group of investors for $14 billion last year.















© Copyright 2007 The Detroit News. All rights reserved.

Report: Chrysler could be swapped for a General Motors ownership stake

Monday, February 26, 2007
Report: Chrysler could be swapped for a General Motors ownership stake
Associated Press





FRANKFURT, Germany -- DaimlerChrysler shares edged higher Monday on a news report that the automaker was considering taking a stake in General Motors Corp. in exchange for its struggling Chrysler unit.

Meanwhile, Russia's second-biggest automotive company denied that it was interested in the Chrysler business.

Earlier this month, DaimlerChrysler Chairman Dieter Zetsche said all options are on the table for the money-losing Chrysler business and he would not rule out a possible sale.

The Financial Times reported Monday that DaimlerChrysler was considering a move that would see it take a stake in GM in the form of a payment were a deal to sell it Chrysler were to go forward.

GM is the world's biggest automaker, but has been losing market share at home and is undergoing a massive restructuring that includes closing plants and shedding jobs.

The newspaper, citing people familiar with the situation, said DaimlerChrysler was weighing the possibility of trading Chrysler for the GM stake, but added it was also considering a cash sale to private equity firms, including Apollo Management LP, Blackstone Group, Cerberus Capital Management LP and Carlyle Group, among others.

DaimlerChrysler AG did not comment on the report, reiterating its previous stance that all options for Chrysler are being considered.

On Friday, a senior Chrysler official told The Associated Press that the company is giving detailed financial information to selected potential suitors and is working with its investment bank, JPMorgan Chase & Co., to avoid divulging sensitive information.

Meanwhile, Russia's second-biggest automotive company, OAO Gaz Group, shot down a report in German weekly magazine Focus that it was interested in acquiring Chrysler.

The magazine, citing no sources, said that Gaz, which receives four-cylinder engines from Chrysler for the Russian company's cars and minivans, was interested in Chrysler.

On Monday, Gaz said it had no interest in a deal for Chrysler. Volkswagen AG, the Renault-Nissan auto alliance and Hyundai Motor Co. have previously said they had no interest in the division.

Analysts said an equity deal would benefit GM given that a domestic tie-up would be easier for Chrysler instead of a foreign buyout.

"Since GM is short of cash, an equity deal would make sense if it is interested in Chrysler, and an equity valuation of Chrysler at, say, 3 billion euros ($3.94 billion), would wind up giving DaimlerChrysler a 20 percent stake in GM," said Stephen Cheetham, a senior analyst with Sanford C. Bernstein Ltd. said.

"This kind of deal has some face-saving potential for management, and we believe that from a shareholder perspective, 20 percent of a combined GM/Chrysler entity is preferable to owning Chrysler outright," said Cheetham. "However, it does not give DaimlerChrysler a clean break from equity exposure to the troubled world of U.S. domestic carmakers, and we would expect the presence of a GM stake to be an ongoing irritant in (its) relations with investors."

Chrysler earlier this month announced it lost $1.475 billion in 2006 and said it expects losses to continue through 2007. Parent DaimlerChrysler, however, earned $4.26 billion in 2006.

The news was accompanied by plans to shed 13,000 jobs, including 11,000 production workers and 2,000 salaried employees as it trims expenses and factory capacity to match declining sales. The automaker also announced the closure of one plant and layoffs at several others.











© Copyright 2007 The Detroit News. All rights reserved.