Friday, July 13, 2007

Daniel Howes: GM's check engine light is flashing once again

Monday, July 09, 2007
Daniel Howes: GM's check engine light is flashing once again
June's slumping sales echo former board member's warning that automaker isn't in clear.

Nine months ago Jerry York, billionaire Kirk Kerkorian's flamethrower-in-chief, quit General Motors Corp.'s board and expressed "grave reservations" about the staying power of its North American turnaround.

After the crappy June GM delivered -- sales plunged 21.3 percent for a year-to-date market share of 23 percent and an all-time low of 22.3 percent in June -- could ol' Jerry have been more on target than the General's management cares to admit, thanks to fewer incentives, $3-a-gallon gas and its impact on the sales of trucks and SUVs?

"I have grave reservations concerning the ability of the company's current business model to successfully compete in the marketplace with those of the Asian producers," York wrote in his resignation letter last October to George Fisher, GM's top outside director.

Officially, GM scoffed at York's "reservations." But since then, fuel prices have stayed stubbornly high. Democrats, now in control of Congress, are pressing hard to ratchet federal fuel economy rules sharply higher. A three-way deal between GM, the United Auto Workers and bankrupt Delphi Corp. has been ratified, raising hopes of a breakthrough UAW contract in September.

Yeah, but. Talk of yet another stalled GM turnaround (how many, I've lost count) is percolating because market share keeps sliding, cash continues to be burned and anyway you cut it, too few Americans are willing to buy the General's improved metal without being paid an incentive to do it.

Midway through the year, sales of GMC are up 4.9 percent and Saturn is up 21.4 percent compared with last year, according to Autodata Corp. But sales of Buick are down 27.9 percent, Cadillac is down 11.7. Chevrolet is down 7.2. Hummer is down 17.3. Pontiac is down 14. Saab is down 3.9.

That's hardly a rousing endorsement of GM's North American turnaround or its product offensive, however real it may be to critics or patrons of the new "Transformers" movie.

We've seen this real-life movie in Detroit before, and it always ends badly -- more cost-cutting, more plant actions, more tortured explanations. A favorite: The myriad reasons GM is taking hits on its high-margin pickups and SUVs even as the same forces seem to almost always steer clear of foreign rivals like Toyota.

Drive revenue -- or die

Tacticians looking to this summer's national contract talks might spy opportunity in these speed bumps, another chance to plead poverty with union negotiators. They may see a chance to create a fund to off-load GM's retiree health-care obligations and put them under union control.

Perhaps, but the gnawing reality of GM's predicament is that cutting costs, closing plants, killing jobs and extracting union concessions may help improve the business model, but they are no guarantee of success in the market.

Even fielding better products isn't enough to keep GM's "check engine" light off -- the most worrisome sign of all.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, or

© Copyright 2007 The Detroit News. All rights reserved.


Post a Comment

<< Home