Saturday, July 14, 2007

UAW juggles outside pressure

Friday, July 13, 2007
Daniel Howes
UAW juggles outside pressure

The Wall Street analyst, eager to discuss the United Auto Workers' imminent contract talks with Detroit's automakers, looked across the table this week and told me what "the Street" expects come September:

First, a landmark deal to essentially shift some $70 billion in retiree health-care liabilities to union control. Second, a two-tier wage structure to pay new hires a fraction of what current workers make and offer fewer benefits. And third, obliteration of the pay-for-no-work "jobs bank," Detroit's monument to dysfunction.

Gee, is that all?

The start of potentially landmark contract talks still are roughly two weeks away. Yet armchair experts already are rushing ahead to declare more forcefully than the automakers themselves what must be accomplished, and they're trading accordingly.

But they're forgetting to ask what can be accomplished in dicey negotiations influenced more by economics, trust, relationships, internal union politics and public theater than outsized expectations shaped by computer models and elite MBAs.

Union mega-deal expected

Fueled by ratification of the UAW's concessionary deal with bankrupt Delphi Corp. and expectations of something similar in September, shares in former Delphi parent GM are up 23 percent since June 1 to $37.54 and Fitch Ratings on Thursday removed GM from negative watch. Ford shares surged more than 15 percent to $9.64 by July 2, but have since settled back to $8.96.

Bottom line: Wall Street already is pricing in the "transformational" deal Detroit's automakers would dearly love to deliver, but can't guarantee -- mostly because they understand better than twentysomething hedge fund sharpies that crafting a national contract is more complex than ordering a pizza:

"I'll take an extra large, please. Give me a Voluntary Employee Benefit Association that will enable the union to pay retiree health care, topped with lower wages for new hires. No jobs bank -- it gives me indigestion -- or I won't pay for it."

No wonder UAW President Ron Gettelfinger already sounds like a harried father wearied by incessant bleating from the back seat. "We're not going into negotiations in a concessionary mode," he said this week, striking a necessary tone of defiance.

His union is facing an existential crisis -- three automakers in various stages of distress, bankrupt suppliers like Delphi and Dana winning massive concessions to stay afloat, union wages and benefits under siege -- and everyone's already decided how this drama has to end.

Or what?

Just asking, but are the actions of Gettelfinger's UAW those of a union leadership refusing to come to grips with the life-threatening challenges facing Detroit's automakers and their biggest suppliers? Has there been a strike against Dana? Or Tower Automotive? Or Collins & Aikman? Or Delphi, the mega-supplier Gettelfinger and the UAW sound like they love to hate?

No, no and no.

These contract talks are likely to be a watershed for the UAW and, certainly, Gettelfinger's legacy as president. They're about making GM, Ford and Chrysler more financially competitive, not destroying the union and what it has to sell to current and would-be members.

Bargaining, not demanding

Establishing a mega-VEBA for retiree health care theoretically is the big play this time. It could safeguard those benefits from the ravages of a bankruptcy at GM, Ford or Chrysler and remove a costly liability from the automakers -- a potentially huge win for both sides.

Kill the jobs bank? Why, when a) massive buyouts basically are emptying them anyway and b) preserving them, if only as a mostly empty shell (for now), improves the chances of creating a VEBA with the UAW?

Demand two-tier wages? Now, when ranking labor relations executives at Detroit's automakers will tell you (privately) that pay scales rank about 17th on their list of issues with the UAW?

Back in 2004, the UAW agreed to two-tier wages for new hires at Delphi and Visteon, the former Ford Motor parts unit. But the dirty little secret, which became clear in the denouement of the UAW-Delphi talks, is that these pressured suppliers basically don't need more people -- at least not for very far into the future.

What those suppliers, and especially Detroit's automakers, need more are competitive work and operating rules at local plants -- rules that typically are shaped by local bargaining.

There's a reason they call this quadrennial Detroit dance "bargaining" and not "demanding." Viewed empirically, the UAW has more to give to help make the automakers competitive, but the union can't give enough to guarantee Detroit's success and still be the union that Reuther built.

By the sound of things, ol' Ron would be less cranky if the automakers didn't talk at all about the upcoming talks, if Wall Street just waited to form expectations and render judgments until, say, Sept. 15, if the news media didn't focus on the stakes, the pressure points and potential outcomes.

It doesn't work that way, anymore than jetting into Detroit for a few meetings and heading back to New York the same day is adequate to understanding one of the great industrial dramas of our time.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, or Catch him Fridays with Paul W. Smith on NewsTalk 760-WJR.

© Copyright 2007 The Detroit News. All rights reserved.

GM to offer diesels in range of U.S. lineup

Friday, July 13, 2007
Auto briefs
GM to offer diesels in range of U.S. lineup

General Motors Corp ., the largest U.S. automaker, plans to introduce a range of diesel-powered vehicles in the United States, Vice Chairman Bob Lutz said. "We're doing a bunch of them," Lutz said in a video conference posted Thursday on GM's FastLane blog. He said Detroit-based GM will offer cars, sport utility vehicles and crossover SUVs with diesel engines, which are now available only on some large vans, heavy-duty pickups and medium-duty trucks. Selling more vehicles with diesel engines would help GM court buyers upset by rising gasoline prices and meet possible increases in U.S. fuel-economy rules. Engines that burn diesel generally are more fuel-efficient than gasoline models. Six-cylinder diesel engines would be offered on cars, light trucks and crossover SUVs, and eight-cylinder, 4.5-liter engines on SUVs, Lutz said. He didn't provide specifics.

Volkswagen car sales top 3 million for year

FRANKFURT, Germany -- Volkswagen sold more than 3 million cars during the first half of the year, the German automaker said Thursday, a 7.8 percent jump from last year fueled by an increased demand for VW and luxury Audi vehicles. The Wolfsburg-based company, Europe's biggest automaker by sales, said it sold 3.09 million cars from January to July, with its VW brand selling 1.8 million, up 7.4 percent from the same time last year. Growth was led by Europe, where sales rose 3.7 percent and in Asia, where sales were up 20.9 percent with 502,000 automobiles sold. Sales in North America rose 3.1 percent with 263,000 cars sold.

BMW shifts control of plant to partner DCX

Bayerische Motoren Werke AG transferred control of its half of a Brazilian joint-venture engine factory to partner DaimlerChrysler AG's Chrysler division. The transaction was effective Wednesday and the owners agreed not to provide financial details, Munich-based BMW said. Tritec Motors Ltd ., as the joint venture is called, was founded in 1997 and makes 1.4-liter and 1.6-liter motors. Chrysler is investigating long-term options for Tritec, which may include a sale to a third party, BMW said. The factory has a capacity to make 250,000 engines annually.

Actor Lowe helps pitch tax breaks for hybrids

WASHINGTON -- The chairman of the House global warming committee and actor Rob Lowe called for tax incentives for hybrid owners to convert their vehicles to plug-ins. To tout the effort, the pair tooled around Capitol Hill Thursday in a plug-in hybrid Toyota Prius surrounded by photographers and camera crews. U.S. Rep. Ed Markey, D-Mass., held a hearing to tout his proposal to offer hybrid owners a 35 percent tax break to convert their hybrids to plug-ins. Lowe's appearance drew network crews from Fox News and CNN. Markey's "Plug-in Hybrid Opportunity Act of 2007" would give gasoline-electric hybrid owners a 35 percent tax credit to defray the costs of converting their vehicle to plug-ins. Not all lawmakers support the proposal.

Detroit News staff, wire and Bloomberg News reports.

© Copyright 2007 The Detroit News. All rights reserved.

Friday, July 13, 2007

Equal work, unequal pay

Thursday, July 12, 2007
2007 UAW CONTRACT TALKS / Fifth in an occasional series
Equal work, unequal pay
With new workers paid far less than their colleagues doing the same job, Chrysler's Belvidere plant may be the future
Josee Valcourt / The Detroit News

BELVIDERE, Ill . -- At $18.50 an hour with limited benefits, Forrest Ammons earns a decent living building cars at Chrysler's Belvidere, Ill., assembly plant.

But Ammons toils side-by-side with workers who make $10 an hour more than he does and enjoy full health care coverage, generous vacation time and a host of other benefits and protections.

Ammons, 35, is what's known at the Belvidere plant as an "enhanced temporary worker," a designation that not only sets him apart from his full-time co-workers but also UAW members at every other Big Three assembly plant in the United States.

The unique arrangement between Chrysler and United Auto Workers paved the way for a third shift at Belvidere, which was awarded three new vehicles -- the Dodge Caliber, the Jeep Compass and Jeep Patriot. But it also has sowed dissention on the plant floor and spawned a federal lawsuit by temporary workers.

The Belvidere situation provides a glimpse of what could be the future for American auto workers -- two classes of workers doing equal work but earning unequal pay.

Cost-saving two-tier wage structures -- where new hires make less than veteran workers -- have already become a reality for plant workers at auto suppliers Delphi Corp., American Axle & Manufacturing Holdings Inc., and most recently Dana Corp. Illinois-based equipment maker Caterpillar Inc. The UAW agreed to two-tier wages in 2005.

General Motors Corp., Ford Motor Co. and Chrysler are expected to press the UAW for more changes in key areas including wages when bargaining starts this month on a new national labor agreement. A broader two-tier wage structure that stretches into more domestic auto plants would help the Big Three become more competitive but also could have profound implications for union solidarity and worker morale.

"Two-tier is a flashpoint word especially for the UAW, which has such an embedded notion of solidarity," said Karen Boroff, dean of the Stillman School of Business at Seton Hall University in New Jersey.

UAW officials last month began calling plant-level union leaders to gauge opinions about the possibility of a two-tier wage structure, said Chris Sherwood, president of UAW Local 652, which represents GM workers in Lansing's Grand River plant.

"They're talking about the feasibility of two-tier wages in the next contract," said Sherwood. "Whether (automakers) are going to get it or not is another issue."

Belvidere serves as a case study for the benefits and drawbacks of creating separate wage structures within an auto plant. Without the agreement, the plant might never have snagged the new vehicles and the third shift that keeps it humming around the clock while many other U.S. auto plants have been idled or work on one shift. The 40-year-old, 3.9 million-square-foot Belvidere received a $400 million renovation to build the new vehicles.

Toyota utilizes temp workers

Toyota Motor Corp., the Big Three's most powerful competitor, has used temporary workers liberally to keep costs down. It also allows the automaker to easily adjust its plant staffing when demand rises or drops. As much as 20 to 25 percent of Toyota workers in U.S. plants are temporary at any given time, said Sean McAlinden, chief economist for the Center for Automotive Research.

Chrysler has similar flexibility for the first time in Belvidere. Thousands of workers jumped at the chance to interview for the 600 new jobs last summer.

But some of those who hired in as "enhanced temporary workers" for up to two years have become embittered about the disparity in compensation that goes well beyond wages.

Ammons and other enhanced temps hired in Belvidere receive no dental or vision coverage, no pension credits or sick pay and no guaranteed raises. They can be laid off at any time -- and more than 100 have been -- and are not eligible to receive pay through the jobs bank that protects other laid off UAW workers.

"Enhanced temp workers aren't treated like regular employees," Ammons said. "It's like a caste system."

The only equality is in work load. In teams of six or seven workers, enhanced temporary employees assemble the small cars and SUVs beside permanent production workers.

Workers file lawsuit

The situation is complicated further by a federal lawsuit seeking class action status filed late last year by a group of enhanced temporary workers, including Ammons.

The suit against Chrysler and UAW claims that automaker and the union never made it clear to workers that they were applying for lower-paying, less secure positions until they had already committed to taking the jobs. Chrysler has countered that all workers signed documents that clearly laid out the terms of the positions.

The UAW "sold its soul to get these three cars," said Jim Doser, a 57-year-old enhanced temporary worker who joined the lawsuit.

Chrysler doesn't view its move as a two-tier system because the lower-paid workers aren't permanent hires. But some workers and union officials say that's just semantics. Unlike temps in other places who work a few weeks or months at a time as fill-ins, the enhanced temporary workers at Belvidere can work year-round for up to two years.

"These people are not replacing people that are off work or absent," said one union official who asked to remain anonymous. "They're actually there as full-time workers. There's a difference. They're there doing a full-time person's job."

Last October, Tom Littlejohn, president of UAW Local 1268, which represents Chrysler workers in Belvidere, filed an unfair labor practice charge with the National Labor Relations Board against the UAW International and Chrysler. He asserted the "enhanced temporary employees" designation violates the union's labor agreement with Chrysler that allows temp workers for a maximum for 120 days. Littlejohn later said he was instructed by UAW officials to stop publicly discussing the issue.

Union leaders at Local 1268 acknowledge the situation has caused friction.

"Do I think we got problems with (enhanced temporary employees) and senior employees? Sure," said William Pruitt, vice president of Local 1268.

But he wants enhanced workers to know that "at my plant, they are no less important," he said.

Pruitt said he isn't sure how the issue will play out in the upcoming contract talks, which run through Sept. 14, but he'd like to see the enhanced temporary workers in Belvidere become permanent workers. "We'll know more when September gets here," Pruitt said.

Some permanent UAW workers at Belvidere find the situation unsettling for what it portends. "They shouldn't be here," said Mary Beth Craw, a UAW production worker making full wages and benefits. She recently was sent home early after logging about five hours of work.

While Craw and some co-workers headed to "Take 20," a local watering hole four miles from the plant, enhanced temporary workers remained on the job for "their full eight-hour shifts," she said.

"They're making things tough for the full-time employees," said Ron Weaver, a production worker, who sat on a bar stool next to Craw.

He wondered aloud whether Chrysler's soon-to-be new owner, private equity firm Cerberus Capital Management, will demand the lower wage scale all workers. "Cerberus is going to say, 'Hey, they're making $18 an hour. Why can't you?'" Weaver said.

Is solidarity at risk?

Doser, an enhanced temporary worker, said he understands the auto companies "have to be competitive, no doubt," he said, but not by surrendering its core values. Doser has been an UAW member since 1973 and laments the loss of unity and shared sacrifice.

"Where is the solidarity? If the union had to take a cut in the past, the entire union would take a cut," he said. "Now these people are turning around and selling me out. You better believe that I'm angry."

But times have changed for both the UAW and American automakers.

Twenty years ago, the Big Three automakers possessed nearly 70 percent of the U.S. retail car market in 2000. Now GM, Ford and Chrysler have a 51.9 percent stake while Asian rivals, and Europeans automakers account for the rest.

UAW membership has fallen in tandem with the Big Three's shrinkage, dropping below 600,000 last year from a high of more than 1.5 million in 1979.

"The thing with the UAW is they're dealing with how to save jobs," said Gary Chaison, labor expert at Clark University in Worcester, Mass.

"That's really their primary objective right now."

However, some union officials are doubtful that the UAW would backpedal on wages to shield jobs.

"I don't see Ron Gettelfinger doing anything like that," said Ed May, president of UAW Local 961, who represents workers at Chrysler's Detroit Axle plant.

For those who bargained in previous UAW contracts talks, the reality of givebacks -- particularly in wages -- is a tough pill to swallow.

"It's not good to see things that you worked your whole life for slipping away," said Robert Denison, a former UAW international representative for Chrysler workers before retiring in 2000.

"But this is a long fight and sometimes you take a whipping in the third round and come back in the seventh round and kick butt."

You can reach Josee Valcourt at (313) 222-2575 or

© Copyright 2007 The Detroit News. All rights reserved.

UAW boss not in giveback mode

Thursday, July 12, 2007
UAW boss not in giveback mode
Gettelfinger says union has already made sacrifices
Louis Aguilar and Sharon Terlep / The Detroit News

DETROIT -- United Auto Workers President Ron Gettelfinger said the union is not entering the upcoming contract talks with Detroit automakers with givebacks in mind and defended the controversial jobs banks program that provides pay and benefits for laid off workers.

"We're not going into negotiations in a concessionary mode, I'll tell you that," Gettelfinger said Wednesday after speaking at the NAACP national convention at Cobo Center.

Asked whether the UAW will fight to keep the jobs bank, which Detroit automakers have made clear they want to eliminate or modify, Gettelfinger responded: "That may be what the companies' position is," but "we've done a lot with the jobs bank, the companies know that."

Gettelfinger repeatedly told reporters he refuses to negotiate the contract in the press. The negotiations formally begin July 20 with Chrysler Group and Ford Motor Co. officials. Talks with General Motors Corp. kick off July 23.

Gettelfinger accused automakers of using the media to portray the UAW as entering the talks willing to give deep concessions in pay, retiree health care and pensions. "Which it appears the media is more than eager to do," Gettelfinger said.

He argued that the UAW already has made many compromises -- particularly on health care benefits and plant level operating agreements.

Detroit automakers already have begun to chip away at the jobs bank. In May, the UAW cut a deal with GM to clear about 400 skilled trades workers out of job banks in Flint and Lansing. And through local agreements and massive buyouts, the Detroit automakers have reduced the number of workers in jobs banks from 12,000 in 2006 to 4,200 currently.

The union also has agreed to changes on health benefits. This month, the UAW reached a deal with bankrupt auto supplier Dana Corp. that will transfer retiree health care responsibility and long-term disability benefits for workers to union-managed voluntary employees' beneficiary associations, or VEBAs.

Dana would cease providing those benefits and fund the VEBAs, which are separate trusts, with a payment of about $700 million in cash and $80 million of stock in the reorganized company.

"That is a precursor to nothing," Gettelfinger said. "This is a company that was in bankruptcy, and a lot of people were predicting that we would not get anything in regards to people's health care."

UAW Vice President General Holiefield, who leads the UAW's Chrysler unit, challenged the notion that this year's talks will be more difficult than past negotiations.

"They've always been called the worst and we've always managed to get the job done," said Holiefield, who was at the NAACP event. "I know that things are tough economically for the company but they also have very good products. I always tell UAW members that we've always managed to find a light at the end of the tunnel."

In his speech, Gettelfinger delivered a blistering attack on discount retailer Wal-Mart, the nation's largest private employer, before hundreds of enthusiastic NAACP convention attendees.

"The fact that one half of Wal-Mart workers have no health care coverage speaks volumes about what's wrong with American health care coverage," Gettelfinger said as the crowd began to rise to its feet. "It is always low wages that are behind those low prices. We can do better in America. We can fight to keep good-paying jobs, manufacturing jobs. We can work together to find a solution to fix a broken health care system.

"We can hold employers accountable for being part of the problem and encourage them to become part of the solution," Gettlefinger said as he strained his voice to speak over the cheering crowd. "Let's stand up. Let's speak out. Let's take charge. Let's fight together.

"Solidarity. Solidarity. Solidarity forever."

You can reach Louis Aguilar at (313) 222-2760 or

© Copyright 2007 The Detroit News. All rights reserved.

Delphi bankruptcy bill: $200M

Wednesday, July 11, 2007
Delphi bankruptcy bill: $200M
It may grow to $300M, making it one of top 10 costliest ever
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- Delphi Corp. has racked up nearly $200 million in legal and accounting bills since it filed for bankruptcy in October 2005, and the tab could reach $300 million before it emerges by the end of the year, a Detroit News review of court filings shows.

With the Troy-based auto supplier spending $12.5 million per month, Delphi's bankruptcy is on track to become one of the 10 most expensive in U.S. history, said Lynn LoPucki, a professor of bankruptcy law at the University of California-Los Angeles who tracks Chapter 11 costs.

United Auto Workers leaders have vehemently criticized the bonanza of fees paid to teams of lawyers, accountants, turnaround experts and other firms that specialize in bankruptcies. Particularly galling to the union is that Delphi workers agreed to reduced pay and benefits to help the company emerge from Chapter 11.

"Bankruptcy is big business," UAW President Ron Gettelfinger told WJR-760 radio in Detroit on Monday. "One of these days, people will wake up and see what's happening here.

"We need to reform the bankruptcy laws. These guys are making a ton of money in this bankruptcy. Literally, it's obscene."

Delphi's Chapter 11 will easily end up as the most expensive in the history of the automotive industry, but other bankrupt auto suppliers also have amassed huge bills.

Federal-Mogul Corp., Dana Corp. and Collins & Aikman have all reported more than $100 million in bankruptcy expenses.

Toledo-based Dana's fees could reach $180 million by the end of the year. The trustee and judge overseeing the Dana case have questioned some of the bills, such as $300 cab rides taken by lawyers and expensive dinners in London.

On June 27, U.S. Bankruptcy Judge Robert Drain approved $49 million in fees and $3.3 million in expenses sought by Delphi's 38 law firms, accountants and consultants for the four-month period ending Jan. 31, 2006.

In total, Drain has approved $184 million in fees and $13 million in expenses at Delphi.

Delphi has hired 39 firms

None of those firms has submitted bills to the court for the past six months, which means the running tab for Delphi's Chapter 11 has likely surpassed $250 million.

A 39th firm hired by Delphi late last year, Detroit-based W.Y. Campbell & Co., on Tuesday submitted its first bill, for $500,000 for its advice on whether to sell a business unit.

The highest bills have been submitted by Delphi's lead bankruptcy law firm, Skadden, Arps, Slate, Meagher & Flom LLP, which has been paid $44 million for 15 months of work.

Drain has taken some steps to curb expenses, including limiting meal reimbursement to $20 for professionals, keeping photocopy expenses to 10 cents per page and limiting the number of attorneys at hearings.

But a review of hundreds of pages of billing records shows firms often bill Delphi for expensive meals and are still sending numerous attorneys to court hearings or conference calls.

Delphi's fee committee also has turned up some questionable expenses. One lawyer charged exactly eight hours for every day she worked -- between five and 10 days each month -- while Cadwalader Wickersham & Taft requested $10,000 in travel expenses for two lawyers without detailing any expenses. KPMG didn't appear to be billing its travel time at half its normal rate -- as is customary in bankruptcy court.

One FTI Consulting employee charged Delphi $185 for a taxi taken in June 2006 from the Newark, N.J., airport to his home.

Last year, Delphi hired Legal Cost Control Inc. to help reduce its legal and accounting fees. That firm billed Delphi $481,000 for the past four months.

PriceWaterhouseCoopers LLP has billed about $21 million since being hired in June 2006. While the bulk of work done by PWC has taken place in the United States, Delphi has also paid for work done by PWC employees in Morocco, India, Korea, Germany, Mexico, Turkey, France, China, Poland, Australia, Romania, Hungary, Czech Republic, Portugal and Italy, PWC's billing statements show.

Delphi didn't return calls seeking comment, but the company has previously defended the bankruptcy expenses as appropriate.

Delphi's cost called very high

LoPucki, the UCLA professor and Detroit native, said Tuesday that Delphi's bankruptcy costs were extremely high based on an economic modeling program he created with a colleague. That program is based on a review of 74 major bankruptcies over a six-year period.

The computer program also found that Skadden Arps billed for far more hours than other law firms in comparable cases.

LoPucki said that his study showed that bankruptcy fees in U.S. cases rose an average of 8.6 percent yearly between 1998 and 2004.

He also said cases filed in New York or Delaware, where many companies are incorporated, are more expensive. Delphi, which is headquartered in Troy, filed in New York.

"Based on where Delphi is today, they are clearly going to be in the top 10. These are very high costs," LoPucki said.

Enron's bankruptcy was the first to top $300 million in fees and remains the most costly by far, at $800 million, by one estimate.

Delphi reported $17 billion in assets when it filed for bankruptcy in October 2005, making it the fifth largest bankruptcy in U.S. history by revenue and 13th largest by assets.

Skadden Arps notes in court records that it has voluntarily shaved several million dollars off its bills. It cut its most recent four months of bills by 8.3 percent, or $1.2 million. The bills are justified by the "unique circumstances surrounding these unusually large and complex cases," Delphi's lead bankruptcy attorney, Jack Butler, wrote in a court filing.

Butler also noted that the bankruptcy court has thrown out 8,300 claims seeking $8.1 billion from Delphi after objections were raised by Skadden attorneys.

Experts suggest that large-scale corporate bankruptcies may be increasingly unlikely as the costs of court-overseen restructuring continue to skyrocket.

On Saturday, Delphi formally canceled its financing deal led by Appaloosa Management LP and Cerberus Capital Management LP to buy up to 70 percent of Delphi when it emerges from bankruptcy.

Appaloosa said it is in talks with Delphi to reach a similar deal, though without Cerberus, which dropped out in April.

Delphi's board is set to meet Monday and may approve a new financing deal. Drain will hold a hearing July 19 to approve the new labor agreement with the UAW and could approve an amended financing deal. Delphi said it hopes to have the deal in place by the end of July.

Delphi hopes to reach deals with its five other smaller unions by Aug. 16, the date of another court hearing. It is in "active bargaining" with its second- and third-largest unions.

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

© Copyright 2007 The Detroit News. All rights reserved.

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.

Ford and GM expand deals to boost sales

Tuesday, July 10, 2007
Ford and GM expand deals to boost sales
Bryce G. Hoffman / The Detroit News

Ford Motor Co. said Monday it is extending its July Fourth incentives through the summer and General Motors Corp. is doubling the incentives on its new full-size pickups as the automakers move to bolster sagging sales.

Ford's offers include zero-percent financing for 36 months on all 2007 Ford, Lincoln and Mercury models, as well as $2,007 in cash on trucks and SUVs. Customers can opt for up to $2,500 cash instead of the free financing.

Sales of Ford's domestic brands were down 8 percent last month and are down 11.3 percent for the year.

One bright spot in June was truck sales, which rose 2.6 percent -- a sharp contrast to the double-digit declines in truck demand reported by the other U.S. automakers. Ford F-Series outsold its top rival, the Chevy Silverado, by more than 20,000 units in June.

To maintain momentum, Ford is offering dealers that meet July F-Series sales goals a chance to sell one of 50 Shelby GT500 KR editions when they go on sale next spring. Ford plans to produce 1,000 of these 540-horsepower sports cars.

Ford spokesman Wes Sherwood would not comment on the initiative, first reported by Automotive News. "We're aggressively promoting our trucks to continue our 30-plus years of truck leadership," he said.

GM is trying to recover lost ground by offering up to $2,000 in cash on the Silverado and its sibling, the GMC Sierra. The automaker is also offering to pay up to six months' lease payments for owners of its midsize SUVs, as well as the Chevy Equinox and Pontiac Torrent, who trade up to a 2007 Buick Ranier, GMC Envoy or Chevy Trailblazer and finance through GMAC.

© Copyright 2007 The Detroit News. All rights reserved.

GM's risky challenge

Monday, July 09, 2007
GM's risky challenge
Carmaker bets on showroom face-off with Asian cars
Sharon Terlep / The Detroit News

ANN ARBOR -- A look of disbelief crossed Karen Smith's face as a Saturn salesman handed her the keys to a shiny new Toyota Camry.

"Really, go ahead and drive it," he told Smith, who was car shopping for her teenage son. "Try the Honda, too."

Off she drove, rolling out of a Saturn dealer's lot in the hot-selling Toyota, her two sons and their grandmother in the car. For the next 15 minutes, the brood weighed the pros and cons of the Camry and the Saturn Aura, from the handling on a tight corner to the arrangement of the instrument panel.

The unlikely exercise is part of a new promotion from General Motors Corp.'s Saturn brand that pits the new Aura four-door against American car buyers' perennial favorites -- the Camry and Honda Accord -- in Saturn showrooms across the nation.

Not the type of risky tactic GM would likely have tried even a few years ago. The strategy could backfire if Saturn shoppers drive a Camry and Accord and like it better.

But after decades spent defending its dominance in the market, the auto giant is going on the attack against a bigger, healthier competitor -- Toyota Motor Corp. -- and trying to loosen Toyota's and Honda's grip on the sedan market.

"We want to make sure people understand we're unbelievably confident in our product," Saturn General Manager Jill Lajdziak said. "You've got to try different ways to cut through the clutter in a very crowded marketplace."

The Smiths make a perfect target for Saturn: a family of four living in the trendy Ann Arbor area, and Smith and her husband were once Ford Motor Co. loyalists. A run of malfunction-prone vehicles turned the couple toward the competition. In recent years, they have been happy owners of a Camry and a Honda Pilot SUV.

A desire to bolster Detroit's struggling auto industry has them tentatively considering buying American. Their 15-year-old, Kevin, will soon need a car, and they want something safe, practical and appealing. The family also is encouraged by signs that domestic automakers are closing the quality and reliability gaps with foreign companies.

"We're ready to try again," Smith said.

At first, the family compared the vehicles' exteriors. They all preferred the Aura's sloping front end to the flatter Camry.

Inside the Camry, Smith's sons complained they couldn't see the dash-mounted clock from the back seat. Having driven the Aura, they talked about the roominess and overall feel of both vehicles.

Kevin Smith, the soon-to-be driver, thought the Camry had "pep" and was impressed by its handling.

His grandmother, Beverly Good, was mostly pleased that the Saturn saved them the trouble of visiting a Toyota or Honda store.

When the drive was done, the foursome huddled. They mostly agreed on the Aura, though the Camry's cavernous trunk almost won Kevin over, since he needs space to haul hockey equipment to and from camp all summer. A final decision will come later, after Smith's husband gets a chance to weigh in.

"It's a good idea," Karen Smith said of the promotion. "If they're really confident in their product, they've got nothing to lose."

Strategy similar to Ford's

Buoyed by a slew of well-received products, GM desperately wants to convince consumers that it really can compete against foreign nameplates that have cannibalized sales of Detroit's Big Three. For the first time in 76 years, GM lost its claim as the world's largest automaker when Toyota outsold it worldwide in the first quarter.

"For years, people bought Japanese cars because they thought it was the smart choice," GM marketing chief Mark LaNeve said in a recent interview. "Our products are every bit as competitive."

As part of GM's assault, Saturn dealers nationwide bought or rented a Camry and Accord to have in showrooms for the "Side-by-Side-by-Side" national campaign that runs through July.

The automaker may try a similar promotion when the redesigned Malibu hits showrooms this fall.

GM's strategy is similar to Ford's, whose recent Fusion Challenge ads pitted the Fusion sedan against the Camry and Accord.

Battle to win back buyers

Winning back customers is going to be a battle for GM.

Among consumers who bought Honda Accords between November and January, only 1 percent had also seriously considered the Aura, according to data from J.D. Power and Associates' 2007 Initial Quality Study, which measures consumer satisfaction in the first 90 days of ownership. Among Camry buyers, none had considered the Aura.

Saturn's Lajdziak acknowledges the challenge of getting on some shoppers' lists.

Sales of the Aura, which won the North American Car of the Year award at the Detroit auto show in January, totaled 27,200 through June, compared to 212,500 Camrys and 180,000 Accords.

Mentioning the Aura along with the Accord and Camry will help consumers familiar with the Japanese models recognize the Aura as a midsize sedan, Lajdziak said.

Toyota, which saw sales jump 10 percent in June compared to GM's 21.3 percent drop, is taking the heat in stride. Having its vehicles shown in Saturn showrooms may even help draw customers who wouldn't normally buy an import, spokesman John McCandless said.

"We're being targeted as very good, high-quality products," he said. "I'm not so sure that's a bad thing."

You can reach Sharon Terlep at (313) 223-4686 or

© Copyright 2007 The Detroit News. All rights reserved.

Baseball, hot dogs and hybrid vehicles

Saturday, July 07, 2007
Business Insider
Baseball, hot dogs and hybrid vehicles
The Detroit News

For Tuesday's Major League Baseball All-Star Game in San Francisco, Fox Sports is renting 30 "environmentally friendly" vehicles for its personnel.

Fox Sports employees will drive vehicles from EV Rental Car, including the Ford Escape Hybrid, Toyota Highlander Hybrid, Toyota Prius and Honda Civic Hybrid. But they won't be driving any Chevy products, despite the fact that General Motors Corp. is a major sponsor of Major League Baseball.

"Driving hybrid vehicles falls in line with our company's environmental initiatives, and we wholeheartedly support EV Rental Cars in their efforts to share the experience of driving 'green' with those renting vehicles across the U.S.," said Jerry Steinberg, senior vice president of Field & Technical Operations at Fox Sports.

But Chevy isn't being totally shut out. On Friday, the Malibu hybrid made its public debut at the All-Star Fan Fest. On Monday, Chevy E85 flex-fuel vehicles will transport players in the All-Star parade, and on Tuesday night, the MVP of the game will win a Tahoe Hybrid vehicle.

GM spokesman Greg Martin noted that large SUVs can more efficiently carry lots of people and gear than smaller hybrids, especially if they are running on E85, an alternative fuel made mostly of ethanol. "Sometimes the rush to assume a green mantle outpaces common sense," Martin said.

A Chevy Tahoe running on E85 for 15,000 miles will use 130 gallons less gasoline than a compact hybrid. And the Tahoe can haul twice as many people and gear, Martin added.

Alive and blogging

General Motors Corp.'s Bob Lutz channeled Mark Twain on his recent video blog posted on GM's Fastlane Web site and on YouTube. In other words, rumors of his death and that of GM's Buick brand have been greatly exaggerated.

The silver-haired and still gimlet-eyed 75-year-old opened the video saying "Hello everybody, I sort of came to the conclusion that it's time to get on camera and assure you that that I am still alive and still working for the company -- still vertical and taking solid nourishment."

He then went to say that Buick, a brand born 104 years ago, also is alive and well.

We just call her Mary

You have heard of POTUS and FLOTUS, the Secret Service code names for the president and the first lady of the United States. But even Cabinet secretaries get cool nicknames these days.

In e-mails released by the Transportation Department this week about its efforts to lobby members of Congress to oppose California's proposed emissions standards, Transportation Secretary Mary Peters is referred to as "S1." The name refers to her mail code.

"Can you go brief S1 on the calls, etc. when she gets in? Should be any minute," wrote Husein Cumber to the department's deputy chief of staff Simon Gros on June 7.

Cumber, an assistant to the secretary, raised more than $200,000 for the Bush/Cheney re-election campaign as the youngest "Ranger" at age 28. Does that make him R1?

Contributors: David Shepardson, Mark Truby

© Copyright 2007 The Detroit News. All rights reserved.

Union's stake in Delphi fading

Saturday, July 07, 2007
Union's stake in Delphi fading
By 2012, parts supplier expects to have one tenth of the UAW employees it entered bankruptcy with.
David Shepardson / The Detroit News

WASHINGTON -- Delphi Corp. expects to have as few as 2,300 United Auto Workers members working in four remaining plants by 2012, the company said in a court filing this week.

The estimates give the clearest picture yet of just how dramatically the giant Troy-based auto supplier is shrinking in the United States.

When Delphi filed for Chapter 11 in October 2005, it employed more than 24,000 UAW workers, including about 10,000 in Michigan. Only Detroit's Big Three Automakers employed more.

Delphi's UAW membership has since dropped to about 17,000 due to buyouts and early retirement programs.

By the end of 2007, the supplier will have 4,703 UAW employees, Delphi said. That will fall to between 3,101 and 3,604 by 2011, depending on new business added at the four UAW plants that Delphi intends to keep open in Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; and Grand Rapids. Total UAW employment could drop to as low as 2,306 in 2012.

Of those plants, Grand Rapids is expected to slightly increase employment -- from 535 workers in 2007 to about 543 in 2011, according to charts attached to the recently ratified UAW-Delphi contract, which was part of a 996-page document that Delphi filed in New York bankruptcy court this week.

Despite the cuts, Wall Street was counting on downsizing to be even deeper. CRT Capital Group LLC auto analyst Kirk Ludtke said the 2011 UAW staffing levels "are higher than the preliminary estimate (of about 1,600 UAW workers) we made late last week."

But Ludtke concluded in a research note Friday the contract that Delphi reached with the UAW will allow the company to reduce its work force "to a level at which Delphi should be able to reach its long-term potential." He rates Delphi stock a "buy."

Delphi spokesman Lindsey Williams noted that the company earlier had announced its intention to exit 21 of 29 core businesses. As a result "you're going to be a smaller business," Williams said.

Of 21 UAW plants, Delphi will continue to operate four, sell seven to other parties and close 10. Some employees will be eligible for $105,000 buy-down payments over three years, and others may get relocation allowances of up to $67,000 when plants close.

About 12,400 UAW-represented Delphi workers opted to retire by Jan. 1, 2007, while 1,400 took buyouts.

Delphi and the UAW reached a contract last month that voting union members subsequently ratified by 68 percent. Federal bankruptcy Judge Robert Drain will decide on July 19 whether to approve the contract, which will reduce the auto supplier's labor costs and help it emerge from bankruptcy this year.

Delphi has withdrawn motions asking Judge Drain to void its collective bargaining agreements and allow it to unilaterally reduce the benefits of certain UAW retirees.

Delphi hopes to reach agreements with its five other smaller unions by Aug. 16, the date of another court hearing. It is in "active bargaining" with its second- and third-largest unions -- the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers and the United Steelworkers.

The court also must still approve a financing plan. A group of investors led by Appaloosa Management LP wants to invest up to $3.4 billion for 70 percent of Delphi ownership.

It's not clear if a rival bid will emerge. Dallas-based private equity firm Highland Capital Management LP renewed its interest in Delphi after the court rejected its first bid earlier this year. Other investors also could add to Appaloosa's bid. Pardus Capital Management, which had previously teamed with Highland for a bid, has joined the Appaloosa group.

Earlier this year, Cerberus Capital Management LP, which is buying DaimlerChrysler AG's Chrysler Group, withdrew from the Delphi bidding.

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

© Copyright 2007 The Detroit News. All rights reserved.

Big Three's magic pill: Union-run fund may cure health care headache

Friday, July 06, 2007
Big Three's magic pill: Union-run fund may cure health care headache
Bryce G. Hoffman / The Detroit News

-- This Rust Belt town of idled tire factories has long depended on Detroit's automobile industry for its survival. Now, the survival of Detroit's automakers may depend on a landmark labor agreement reached here.

In December, Akron's Goodyear Tire and Rubber Co. and the United Steelworkers signed a contract that transferred responsibility for retiree health care from the company to the union. Goodyear paid $1 billion up front, but it no longer has to carry those costs on its balance sheet.

Detroit automakers, desperate to rein in soaring health care expenses that undercut its ability to compete with foreign rivals, see a Goodyear-style deal as a potential game changer. The United Auto Workers, which proposed a similar arrangement during talks with General Motors Corp. in 2005, is studying the possibility.

When national contract negotiations begin later this month, a Goodyear-style health plan is expected to be a central issue at the bargaining table.

With a deal like this, the automakers would make a massive one-time cash payment to a union-managed fund, freeing the companies from all future responsibility for UAW retiree health care.

Analysts say such a deal would dramatically narrow the competitive gap dragging down Detroit automakers and give the UAW enough starting capital to guarantee retiree health benefits well into the future, assuming the funds are managed wisely.

The CEOs of GM and Ford Motor Co. have publicly expressed interest in such a deal, and sources familiar with the situation say they, along with DaimlerChrysler AG's Chrysler Group, see it as a way to bolster their tarnished credit ratings, improve cash flow and ultimately shore up earnings.

For the UAW, the agreement could preserve health care coverage at current levels for years to come and safeguard the benefits in case one or more of the automakers goes bankrupt in the next few years.

"There's probably no one single element that could have as big an impact as this one," one high-ranking company official told The Detroit News. "But this is not a slam-dunk by any means."

The Goodyear model

GM, along with Ford and Chrysler, will spend more than $10 billion on health care this year -- more than they will spend on steel, by some estimates.A study by the Troy-based Harbour-Felax Group found that health care costs add as much as $1,400 to the price of vehicles produced by Detroit automakers compared to those made by their Japanese rivals.

As U.S. automakers have downsized in the face of foreign competition, their retiree ranks have swelled. Of this year's $10 billion health care bill, $6.4 billion will go to retirees and their dependents.

While the annual costs are hard enough to shoulder, accounting rules compound the problem. They require the automakers to include the projected long-term cost of those benefits on their balance sheets. That is a big part of why credit ratings for GM and Ford are so low.

"The operations in North America can't sustain those types of expenditures anymore," said analyst Bradley Rubin of BNP Paribas. "It's just not feasible. They have to find a way to get rid of that if they're ever going to be profitable again."

Goodyear faced much the same dilemma.

"When I started, there were 14,000 workers out there," said Howard Kropff, benefits officer at USW Local 2 in Akron, as he gestured out his window at the quiet Goodyear factories that once produced many of the nation's tires. "That was 40 years ago."

Now, fewer than 500 workers labor there. But Kropff proudly notes that the other 13,500 all made it to retirement.

In October, the Steelworkers went on strike to protect the benefits promised to those retirees in better times. Though Goodyear had capped its contribution as part of a previous contract, the company insisted it could no longer afford to pay for retiree health care. The union said it already had given up enough three years earlier, citing the rising premiums retired workers were already being forced to pay.

As the talks dragged on without resolution, Goodyear proposed a novel solution. It would establish a voluntary employee beneficiary association, or VEBA, to pay for current and future retiree health care -- and transfer responsibility for those benefits from the company to the union.

The deal, which is awaiting final court approval, works like this: Goodyear will put $1 billion into a union-run trust fund to cover the cost of all current and future retiree health benefits.

That amount will be supplemented by contributions from active workers, who agreed to deposit a $1-an-hour cost-of-living raise into the retiree fund. The fund will be managed by investment professionals, but it will be up to the union to decide whether to continue offering the existing benefit plan or to modify it.

Goodyear will no longer have any responsibility for health benefits for union retirees. Prior to the deal, the cost of those benefits was set at $1.2 billion for accounting purposes, and Goodyear was able to eliminate that liability for 83 cents on the dollar.

According to the company, the deal will reduce its annual retiree expenses by an estimated $110 million and improve cash flow by $145 million annually.

As for the Steelworkers, the deal protects retiree health benefits from the threat of a Goodyear bankruptcy. Under the old system, those benefits were not guaranteed. If Goodyear had filed for Chapter 11 bankruptcy, retirees would have had to line up with all of the company's other unsecured creditors. If the union fund reaps strong investment returns, the union also may be able to eliminate some or all of the premiums retirees now pay.

"The money is there, and that's a big thing," Kropff said. "I'd rather have the money in our bank, with us managing the plans."

Active workers will still receive their health insurance through the company until they retire, when they will be covered by the union-run plan.

Goodyear shares, along with the company's credit rating, soared on news of the deal.

Help for Detroit

Many analysts believe a similar agreement could go a long way toward addressing Detroit's financial woes.

Himanshu Patel of JPMorgan believes GM and Ford could convince the UAW to take over retiree health care for 50 to 70 cents on the dollar.

At 60 cents on the dollar, Patel says Ford would see the most immediate relief, with earnings improving by 17 cents per share in 2008 and cash flow increasing by $600 million. Earnings would further improve by 25 cents per share in 2010, with Ford's cash flow up by nearly $1 billion.

GM's cash flow would also improve by $600 million in 2008, according to Patel's model, but the company would see little immediate earnings improvement. GM would generate $1.6 billion more in cash in 2010, with earnings improving by 73 cents per share.

Assuming the same 60 percent funding level, Patel estimates it would cost GM $29 billion to fund its portion of a Goodyear-style health care trust. He puts Ford's cost at $12.5 billion.

While that might seem like a steep price given the financial troubles at GM and Ford, Patel and other analysts say neither automaker should have too much difficulty raising the cash.

Both companies already have set aside significant sums to pay for retiree health care; the rest can be raised through asset sales and existing financing.

Wall Streeters like Patel have not analyzed how such a deal would work for Chrysler because it will no longer be a publicly traded company once its sale to private equity firm Cerberus Capital Management LP is finalized.

Patel notes that the UAW has hired its own financial advisers to advise it on a Goodyear-style health care deal.

"We think the UAW leadership will see the benefits of becoming an asset manager," he said.

UAW mum on health plan

Top UAW officials would not discuss the health care issue, but many members and retirees are already worried about the future of their health care benefits.

"It's caused me a lot of stress, and it's caused a lot of other people a lot of stress," said Bob Bowen, a Ford retiree and former president of UAW Local 849 in Ypsilanti. "You can see it in their eyes."

Bowen is the man many former Ypsilanti Ford workers go to with their questions and concerns. While he is worried that retirees could lose everything if Ford is forced into bankruptcy court, he is not sure a union-run trust like the one at Goodyear is the answer.

"At one time, I thought it would be ideal," Bowen said. "Now, I'm not certain they've got the expertise to handle that. We don't have the experience."

Bowen would rather see a national health care solution, and he believes the UAW's top leaders are missing an opportunity to make the union relevant again by leading the campaign to establish universal coverage.

Some observers say adopting a Goodyear-type plan could give the UAW far more clout in the national health care debate.

The UAW would become one of the largest health care providers in the nation. It would also become the manager of one of the country's largest private investment funds.

Using Patel's numbers, that fund would have a starting balance of nearly $42 billion -- higher if Chrysler also participated.

If UAW manages its own retiree health care, some say it could become a more attractive partner to other companies as well.

While the UAW has talked tough about maintaining the status quo, it has also shown some willingness to compromise on retiree health benefits. In 2005, workers at GM and Ford approved changes to their contracts that required retired workers to pick up a small part of their own health care tabs. Part of that agreement involved setting up a union-run VEBA, albeit on a much more modest scale.

That move saved the companies millions of dollars, but some analysts say it could also block a Goodyear-type deal until 2011 because the court settlements that finalized those deals prohibit either company from making further changes to retiree health benefits before then.

The high-ranking company official with knowledge of the companies' thinking says they will argue that they are not changing retiree benefits, but protecting them, since a Goodyear-type deal would preserve retiree benefits in the event of a bankruptcy.

That source said GM and Ford could fund their retiree health care obligations for something closer to 50 cents on the dollar.

"The issue is going to come down to what the funding level is," the person said, acknowledging that neither Ford nor GM are in as good a position to bargain as Goodyear was because they have not capped retiree health care liabilities. "There's no question that the hurdle is much, much higher."

To clear it, the automakers would be willing to make their own concessions to the UAW. That could include agreements to spare plants already marked for closure or promises of new investments.

Whether that is enough will likely be the subject of many late-night bargaining sessions come September, when current UAW contracts expire. Until then, both sides are keeping a close eye on what is happening at Goodyear.

You can reach Bryce Hoffman at (313) 222-2443 or

© Copyright 2007 The Detroit News. All rights reserved.

GM thinks design for green cars

Wednesday, July 04, 2007
GM thinks design for green cars
Firm's success hinges on whether it can develop battery to make car appealing to the masses.
Sharon Terlep / The Detroit News

General Motors Corp. thinks it can clear technological hurdles involved in creating a plug-in electric car for the mass market.

Now the forces behind GM's Chevy Volt and other environmentally minded vehicles are going all out to make sure the vehicle's visual appeal matches its high-tech allure.

"GM is once more a design-driven company, so it's only natural that design keep pace with the engineering development of the E-flex system," Vice Chairman Bob Lutz recently wrote in a blog on GM's Web site.

E-Flex is the powertrain system behind a new generation of electrically driven vehicles GM hopes to build by the end of the decade.

The system matches battery power with several different energy sources. GM's success hinges on whether it can develop a lithium ion battery with the endurance, durability and affordability to make the car appealing to average consumers.

While hundreds of engineers and a number of battery suppliers tackle that job, Lutz says GM's top designers will dig in as well.

The automaker has opened a design studio within its Warren Technical Center campus to fine-tune the design of the Volt and vehicles built on the same architecture.

Bob Boniface, GM director of advanced design, will head up design work on the Volt. He was lead designer for the Chevy Camaro concept vehicle and the hydrogen fuel cell Sequel concept vehicle.

Boniface also worked for DaimlerChrysler's Advanced Product Design Studio, overseeing the architectural design of the popular stow-and-go seating for Chrysler minivans.

Lutz said exterior styling of the Volt is 90 percent complete and will include all the key design cues of the Volt concept GM showed off in January at the North American International Auto Show.

The Volt's front end, with its brawny face, wide bumper and narrow headlights separated by the narrow dual port grille, will be slightly less dramatic, he said, to accommodate safety regulations while fitting with GM's global architecture for small cars.

"This vehicle is so important that it is getting maximum attention from all of the top Product Development leadership and from the senior people in powertrain," Lutz told The Detroit News.

A Volt leadership team meets every two weeks to hammer out glitches and keep up momentum on the project, he said.

The steps aren't unusual in the course of bringing a new vehicle to market. The level of detail GM is making public, however, is atypical. The automaker's strategy aims to cultivate an Earth-friendly image at a time when the environment is a hot-button issue, while discrediting critics who have dismissed the Volt as a publicity stunt.

Lutz said last month that GM had probably spent "at this point" $100 million, "but ramping up very fast as it becomes a high-priority product for launch in '10."

GM has spent about $4 billion on advanced propulsion budget the past five or six years, he said.

GM must walk a fine line in designing the Volt, said Rebecca Lindland, a Global Insight analyst in Lexington, Mass. History has shown that hybrid vehicle buyers gravitate toward distinct vehicles. Toyota Motor Corp.'s hot-selling hybrid Prius, for example, looks unlike any other vehicle on the road. It's outselling Toyota's hybrid Camry, indistinguishable from the traditional Camry except for a badge on the rear, more than three to one this year.

The Volt won't succeed unless it is visually appealing, Lindland said. Lutz has repeatedly promised that the Volt won't "look like a science experiment."

Hybrid buyers, Lindland said, "really want people to know what good people they are."

© Copyright 2007 The Detroit News. All rights reserved.

Weak truck sales hurt GM

Wednesday, July 04, 2007
Weak truck sales hurt GM
Aggressive discounting boosts Asian carmakers
Christine Tierney / The Detroit News

General Motors Corp.'s sales plunged in June as demand for its small cars sagged and unusually aggressive discounting by Toyota Motor Corp. hurt its pickups.

Of the major automakers, GM suffered the biggest monthly decline, with sales down 21.3 percent in a market that was slightly weaker than the previous June.

Overall, car and truck sales fell 3 percent from year-earlier levels, and the drop would have been steeper if there hadn't been an additional selling day last month.

On a seasonally adjusted basis, the annual selling rate fell to a weak 15.6 million vehicles in June from 16.2 million a year earlier.

Ford Motor Co.'s sales were down 8.2 percent, for an eighth consecutive monthly decline, and DaimlerChrysler AG's sales slipped 1.8 percent. But Japan's leading automakers reported big gains.

"The industry is substantially below normal levels right now and below where we'd like it to be," said Paul Ballew, GM's director of industry analysis.

In addition, "we weren't anticipating that Toyota would go zero (percent interest) for 60 (months) on a brand new truck, and that has hurt our results," he said.

Toyota, flexing its financial muscle, offered big discounts on the Tundra to put the truck's launch back on track. Demand for Toyota's first full-size truck was running below the company's annual sales target of 200,000 units.

But last month, Tundra sales more than doubled to 21,727 after the Japanese automaker offered no-interest loans and other incentives amounting to $5,083 per pickup, according to auto data firm

"The only large truck with a higher level of incentives in June than the Tundra was the (Dodge) Ram," said Alex Rosten, manager of pricing and market analysis at "Everybody else was lower."

GM's truck sales fell 22.9 percent, reflecting big declines in its relatively new GMC Sierra and Chevrolet Silverado pickups, which carried incentives averaging less than $3,700 in June. Sales of the GMC Sierra pickup fell 26.5 percent, while sales of the Chevrolet Silverado declined by 23.5 percent.

GM is weighing its response. "If we have to make changes in our incentives play, we will," Ballew said. "We're certainly not going to cede ground in a category where we're best in class."

Asked about the incentives on the Tundra, Jim Lentz, executive vice president of Toyota Motor Sales USA, said: "Any time a manufacturer puts incentives (on a vehicle), it's probably deeper than they want to go."

However, "in a segment like full-size trucks, customers expect and in some cases need incentives to help them out of negative-equity positions," Lentz added. He was referring to trade-in vehicles worth less than the payments owed.

Fleet sale cuts hurt Big 3

The fierce competition in the truck segment illustrates the difficulty U.S. automakers face as they try to correct bad habits, such as excessive discounting, which weakened their brands and their financial results in the past.

In recent months, they have reined in low-margin sales to rental car companies that had boosted their volumes but undercut their profitability.

That was the main reason for a 24.7 percent drop in Ford's car sales in June, said Ford industry analyst George Pipas.

"That's where the decline in daily rental occurred," he said. "There are 20,000 Tauruses that got shaved off the year-to-year comparison."

He said Ford's share of the retail market -- sales to individuals through dealers -- was stabilizing this year at about 13 percent, at a level consistent with the targets set in Ford's recovery plan.

GM executives said they had anticipated a slowdown in June as the company scaled back its business with rental car companies.

"Our retail performance for the month was also below the solid running rate we've experienced for the first half of the year, which we attribute to a soft industry and lower incentive spending than our competitors," said Mark LaNeve, GM vice president for North American sales.

"However, we continue to believe that maintaining a disciplined approach to both incentives and daily car rental sales is key to making our marketing strategy work in the long run," he said.

Shift to cars aids Japanese

By contrast with its bigger Detroit rivals, Chrysler reported a 58.2 percent surge in car sales, reflecting big gains for the Chrysler Sebring and 300 sedans, while its light trucks volumes fell 14.9 percent. Chrysler's overall sales were down 1.4 percent. The U.S. market's shift away from trucks and toward more fuel-efficient cars helped Japan's leading automakers. Car sales accounted for 49.3 percent of light vehicle sales last month, up from 47.7 percent a year ago.

Honda Motor Co.'s sales rose 11.5 percent in June, and Nissan's jumped 22.7 percent, helped by strong sales of the Altima and Sentra cars.

Toyota's sales increased 10.2 percent to 245,739, putting it just 200 units behind Ford in June.

"What's most important is to make sure you don't put all your eggs in one basket, and make sure you have a balanced lineup," Toyota's Lentz said.

Toyota's Yaris, Camry and Prius gas-electric hybrid cars all recorded strong sales gains as gas prices averaged more than $3 a gallon.

Although the U.S. passenger car market held steady in June -- edging up 0.2 percent -- GM's car sales were down 20.1 percent. Analysts say some of GM's small cars are aging and others are not competitive. "It's a category where we haven't been doing as well as we should be," Ballew said.

You can reach Christine Tierney at (313) 222-1463 or

© Copyright 2007 The Detroit News. All rights reserved.

Big 3 seek to shut jobs bank

Monday, July 02, 2007
Big 3 seek to shut jobs bank
Union won't back down easily from program it fought decades to win
Louis Aguilar / The Detroit News

FLINT -- Paying factory workers nearly full wages and benefits even when they no longer have jobs is a practice Detroit automakers hope to drastically overhaul during contract talks this summer with the United Auto Workers.

The two-decades-old program, known as the jobs bank, is costing the companies billions of dollars at a time when they are losing billions.

Many also view it as symbol of a hidebound union that failed to change with the times.

But at UAW Local 599 in Flint, General Motors Corp. workers staunchly defend the jobs bank. They fought for many generations to secure their middle-class lifestyle and don't believe they should give up the safety net because someone in Mexico or China will build cars for a few dollars a day.

Half of Flint job bankers were laid off during the first Clinton administration; most others at the beginning of this century. Many worked in a plant that no longer exists, the sprawling Buick City complex that closed in 1999 and was razed.

Throughout those years, GM has paid them between $70,000 and $85,000 annually. They still enjoy health care coverage far more generous than the typical American worker. They continue to collect years of service toward their pensions, another benefit most U.S. workers no longer have.

While outsiders may criticize them for refusing to acknowledge that such guarantees are unsustainable in today's ultra-competitive global auto industry, they consider protecting the jobs bank a mission.

"We want to save the American auto industry," said Terry Everman, a Local 599 official who helps oversee the jobs bank. "We know what kind of trouble we face, but to give up the jobs bank is to give up everything the union fought decades to win.

"None of these workers wanted to stay in the bank for this long. But they stayed because GM made them a promise that if we cooperated, which we have all along, if we worked hard and produced quality, which we have, then we would keep our jobs. How do you save the American auto industry by sacrificing the rights and protection of workers?"

Changing fortunes shift deal

The jobs bank was created more than 20 years ago in exchange for the UAW's help in making auto plants more flexible and automated. The union, bruised by the loss of half a million jobs during the recession of the late 1970s and early 1980s, wanted to preserve the jobs that were left.

The theory was that if GM and other automakers had to pay laid-off workers, they would always make sure they had work.

But Detroit's automakers have lost huge chunks of market share and, as importantly, have become more efficient, no longer needing as many workers to run a plant.

The situation reached a boiling point as plant closings and production cuts funneled more than 12,000 workers into jobs banks at GM, Ford Motor Co. and the Chrysler Group.

Stories proliferated about jobs bankers sitting in rooms for eight hours a day, filling out crossword puzzles, watching World War II movies and even taking naps. It received less attention that many in the jobs bank did important work in the community.

Waves of buyouts across the industry have reduced the number of workers in jobs banks to about 4,200, a number that automakers privately say is still untenable.

The UAW has recently shown a willingness to compromise. In May, GM cut a deal with the UAW that will allow it to eliminate the jobs bank for skilled trade workers in Flint and Lansing. Under the agreement, GM can force workers who refuse buyout and early retirement offers to retrain for another skilled trade, move to an unskilled production job or relocate to a plant in another city or state. The program will clear out 100 skilled trades workers in Local 599's jobs bank.

"This is about GM and the UAW continually looking for ways to improve competitiveness," GM spokesman Dan Flores said.

Some see it as a trial run for how Detroit's automakers may try to close the jobs bank for good during the coming contract talks.

Detroit automakers declined to say how much they currently spend on their jobs banks, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the expense.

GM agreed to contribute up to $2.1 billion over four years. Chrysler set aside $451 million for its program, along with another $50 million for salaried union employees. And Ford agreed to contribute $944 million.

"The domestic auto companies are playing by rules that no longer apply to the 21st century global economy," said Dana Johnson, chief economist for Comerica Inc.

Workers want promises kept

Job bankers like Dean Braid in Flint say the program should remain until Detroit automakers start investing more in America rather than shifting production to lower-cost countries.

"We made one of the best products in the world and yet, here we are," said Braid, a 28-year GM veteran, as he sat in the conference room at Local 599 with several others in the jobs bank. He believes the UAW granted too many concessions in recent years and agreed to close too many plants.

"Do we want the Wal-Mart standard for all workers?" he asked. "Who's going to able to afford to buy a car or truck if we all get paid that way?"

Workers at Local 599 say the cost of abandoning the jobs bank is too high for union members in Flint and elsewhere, today and in the future.

"It's about the social contract being broken," said Everman, the UAW Local 599 official. "It's about not letting the companies ship all those jobs to Mexico and China. It's about not walking away from the American worker. It's about not letting what happened to the American steel industry happen to the American auto industry."

A long history of union clout

It's not hard to understand the workers' sense of betrayal after spending time at Local 599 and in Flint, where the culture is grounded in celebrating the auto industry and the jobs and rights the UAW earned the hard way -- through strikes and tough bargaining.

The factories and jobs in Flint have been vanishing for decades, but the workers aren't ready to give up on their ideals.

The lobby of Local 599 feels like a museum. It's quiet these days, as membership has dwindled from a peak of 28,000 to 2,500.

A two-story montage of photos on the lobby wall displays the deep bond between UAW and this broken city. There's a photo of throngs of UAW workers involved in the storied Flint sit-down strike of 1936-37. The strike legitimized the UAW as a powerful force.

There's a 1950s-era photo of President Truman visiting a local plant, and a 1960s era photo of black and white GM workers sitting together in a diner. Local 599 members played an active role in desegregating area businesses.

"The UAW has set the standard for the common men and women in so many ways, and for so long," said Local 599 President Bill Jordan. "General Motors never gave us anything. We fought for every right we have."

A look outside Local 599 tells the story of how much has been lost. The union hall now overlooks 235 acres of empty weed-choked concrete where Buick City once stood.

At the time of its closing, it was ranked one of the top plants in the world for efficiency and quality. But fewer and fewer people were buying Buicks. When the plant closed, the brand accounted for 1 percent of the U.S. market.

What remains is Flint Powertrain North. The factory on the complex that builds a 3.8-liter V-6 engine for GM passenger cars will be shuttered in 2008. The entire facility will close two years later as part of GM's plan to become profitable again in North America.

A physical sense of abandonment pervades much of Flint, from its struggling downtown with boarded-up stores to its many desolate neighborhoods.

"If GM would have built just one plant here that they built in Mexico, we wouldn't have people in the jobs bank," Everman said. "And you know Flint wouldn't be as bad off."

Jobs bank part of city's fabric

The jobs bank has been around so long at Local 599 that it will be a painful rip in Flint's social fabric when the workers leave as a result of the May agreement. Dozens of charities count on the idled workers to collect toys for children, clean area parks, raise money for veterans, build wheelchair ramps and organize food drives.

Braid spends at least 40 hours a week helping an old high school friend, Doug Conn, who is in a wheelchair. Braid customized Conn's 1984 Econoline van, rebuilt his garage and made Conn's home in Owosso more accessible by build ramps, among other things.

"He's been invaluable to me," Conn said as he watched Braid inspect the van. "I hate it when guys like him are called lazy or noncaring. That's just a lie."

Braid has heard all the arguments about how Detroit automakers need to cut labor costs to become competitive and profitable. "I just ask, at what cost are we going to sacrifice the rights of workers to save GM?" he said. "What goal is being achieved by lowering the standard? Who are the people who benefit from this? Does Flint look like it's benefiting? Does Michigan look healthy to you?"

You can reach Louis Aguilar at (313) 222-2760 or

© Copyright 2007 The Detroit News. All rights reserved.

Fuel rules scrap some GM concept cars

Tuesday, July 03, 2007
Fuel rules scrap some GM concept cars
John D. Stoll / Dow Jones Newswires

DETROIT -- General Motors Corp. Product Chief Bob Lutz said the company has killed some of its concept-car ideas because of an increased emphasis on fuel economy and sensitivity over the automaker's public image.

Lutz, speaking during a video podcast on the company's Web site released over the weekend, said GM has "arranged our priorities on now getting more fuel efficient, (and) spending a lot more money on alternative(s)."

Those alternatives include hydrogen fuel-cell vehicles, and hybrid-electric vehicles with a battery that can be recharged by plugging in. Congress is debating fuel-economy legislation that would boost requirements significantly.

Lutz said it is challenging to make certain show cars a reality when operating "in an era where everybody is talking about 36 miles per gallon by 2017 and 4 percent (increase) a year after that.

"Something had to give at the other end," Lutz said, referring to the company's decision not to build meaty sedans such as the Cadillac Sixteen super-luxury car concept, and the Buick Velite roadster and instead focus on more fuel-efficient technologies. "We had to prioritize" and the Velite "got prioritized out."

GM's move to become more fuel-efficient in its product line has eaten up considerable investment in current and longer-term technologies, and has come following years of criticism related to the its product line.

© Copyright 2007 The Detroit News. All rights reserved.

Sunday, July 08, 2007

Sales decline weighs on GM

Friday, July 06, 2007
Sales decline weighs on GM
Wall Street drives stock down after June demand drops 21 percent; dealer calls for higher incentives.
Sharon Terlep / The Detroit News

Slumping truck sales and hand-wringing on Wall Street have cast doubt over General Motors Corp.'s turnaround bid, threatening to overshadow the automaker's cost-cutting and product successes of the past year.

This week's June sales report showed surprising weakness in GM's new full-size pickup trucks, a linchpin of the automaker's comeback plan.

An investment analyst downgraded GM on Thursday, fueling a 3 percent decline in GM shares.

And with GM still burning cash in its key North American operations, analysts say second-quarter earnings due out later this month are expected to be less than stellar.

"We believe the near term outlook may get rocky," Deutsche Bank analyst Jochen Gehrke wrote in a research note in which he reduced GM's 2007 production and earnings forecasts. "We see no reason for GM to post strong earnings or market share trends over the next few months."

GM's June sales were down 21 percent from a year ago, with sales down 7 percent year to date.

Particularly troubling is that sales of GM's redesigned full-size pickup trucks fell 23 percent, while sales of Toyota's new Tundra, its first full-size pickup, more than doubled. The Tundra was helped along by no-interest loans and other incentives adding up to $5,083 per pickup, according to auto data firm

"The bottom line was that it was a tough quarter and a first half that was weaker than we expected," GM sales analyst Paul Ballew said.

GM blamed the decline on its strategy of scaling back incentives and low-margin fleet sales, though the extent of the drop surprised many industry watchers. GM's foreign competitors also offered more aggressive discounting than expected, which hurt each of Detroit's automakers.

Knoxville, Tenn.-based Chevrolet dealer Jim Quinlan said GM's Chevy Silverado is as good as advertised but it is being hurt by attractive deals on the Dodge Ram and Toyota Tundra. "We are just not in the game on incentives," he said. "We are not competitive at all."

Pointing to disappointing June sales as well as a market made volatile by rising gas prices and continuing worries in the mortgage market, Bear Sterns analyst Peter Nesvold downgraded GM's stock to a peer perform rating from outperform.

Nesvold bolstered his GM rating less than two months ago, saying the automaker could gain significant concessions from the UAW.

GM's stock has climbed since then, and Nesvold, in his Thursday note, said it's time for investors to cash in.

He then quoted economist John Maynard Keynes: "When the facts change, I change my mind."

GM shares closed Thursday at $36.76, down $1.22, or 3.2 percent.

GM's troubles put even more pressure on the automaker and the United Auto Workers to reach a deal that will help the automaker cut labor costs.

The labor question is the lingering unknown in a turnaround that began after a $10 billion loss in 2005, said auto analyst John Casesa of the Casesa Shapiro Group.

Since then, GM has successfully eliminated waste and downsized to cut costs. It's also becoming clear that the automaker's market share woes aren't going to lift dramatically anytime soon, he said.

"On revenue, the company is struggling, on cost it has done a fabulous job -- the open question is labor relationship," Casesa said. "The turnaround will hinge on automaker's ability to forge a radically different relationship with the UAW."

Casesa said the stock price drop isn't cause for too much concern, given GM's gains over the past year.

Even after Thursday's drop, GM shares are up more than 20 percent from a year ago.

Some promising product launches, namely the redesigned Chevrolet Malibu and Cadillac CTS sedans, are set for later this year. Analysts also seemed hopeful that GM will strike a favorable deal with the UAW.

"We nonetheless believe structural changes will be significant," Gehrke wrote. "And that these changes will prevail in the intermediate term."

You can reach Sharon Terlep at (313)223-4686 or

© Copyright 2007 The Detroit News. All rights reserved.

GM credit rating drops after 'surprisingly weak' June sales

Thursday, July 05, 2007
GM credit rating drops after 'surprisingly weak' June sales
The Detroit News

Bear Stearns & Co. dropped its rating on General Motors Corp. shares to "peer perform" after the company reported a decline in its June U.S. sales from a year earlier, according to Bloomberg News.

Analyst Peter Nesvold, in a note to investors today, wrote that GM's shares may fall to as low as $33 as the automaker battles increased discounting by Japanese rivals and higher gasoline prices. Nesvold had rated the shares as "outperform."

GM's shares fell $1.41 to $36.57 at 7:47 a.m. before the start of regular New York Stock Exchange trading. They closed at $37.98 on July 3.

Meanwhile, Deutsche Bank AG, calling the June sales "surprisingly weak," lowered its full-year earnings estimate for GM to $2 a share, a 30 percent reduction.

The automaker's annual sales may be 2.8 million vehicles, less than its target of 3 million, analyst Rod Lache wrote in a note. He maintained his "buy" rating on the shares.

© Copyright 2007 The Detroit News. All rights reserved.

General Motors gets $5.6 billion for Allison Transmission; shares trade at 2-year high

Thursday, June 28, 2007
General Motors gets $5.6 billion for Allison Transmission; shares trade at 2-year high
The Detroit News

General Motors Corp. today said it will sell its Allison Transmission unit for $5.6 billion.

The news drove the auto maker's shares two a two-year high, with investors betting the influx of cash will help GM's bargaining position as it enters this summer's contract negotiations with the United Auto Workers.

Shares of GM closed at $38.15, the highest price since January 2005.

The sale, to The Caryle Group and Onex Corp., includes seven plants in Indiana and Allison's global sales network. Allison employs 3,400 workers worldwide.

GM said it will keep a truck and SUV transmission plant in Baltimore, however.

Carlyle is a private equity firm; Onex is a publicly traded Canadian corporation with a private-equity unit.

GM said in a statement that the deal could close by the third quarter of 2007.

© Copyright 2007 The Detroit News. All rights reserved.

GM gives Buick, Pontiac, GMC ad business to one agency

Tuesday, June 26, 2007
GM gives Buick, Pontiac, GMC ad business to one agency
The Detroit News

General Motors Corp. said today that one advertising agency will handle creative work for GM's Buick, Pontiac and GMC brands effective October 1.

The Leo Burnett company, owned by the Publicis Groupe, was awarded the work.

The automaker said the move isn't a reflection on prior ad agencies but will better support its strategy of aligning those brands at the retail level.

"We believe having one dedicated agency will help us get there effectively and efficiently," said Jim Bunnell, general manager for Buick, Pontiac and GMC.

© Copyright 2007 The Detroit News. All rights reserved.

General Motors shares rise in early trading

Monday, June 25, 2007
General Motors shares rise in early trading
Detroit News wire services

General Motors Corp.'s shares rose as much as 3.9 percent after Goldman Sachs rated the stock a "buy," Bloomberg News reported today.

GM's shares gained 91 cents to $36.37 at 9:51 a.m. in New York Stock Exchange composite trading, after rising as high as $36.84.

Saying the United Auto Workers union may offer larger concessions than expected to the biggest U.S. automaker, Goldman Sachs analyst Robert D. Barry today raised his rating on the Detroit-based automaker from "neutral," Bloomberg reported.

Overall, sentiments were mixed on Wall Street this morning.

In the first hour of trading, the Dow Jones industrial average rose 1.78, or 0.01 percent, to 13,362.04. The Standard & Poor's 500 index fell 2.91, or 0.19 percent, to 1,499.65, and the Nasdaq composite index fell 6.84, or 0.26 percent, to 2,582.12.

The Associated Press contributed to this report.

© Copyright 2007 The Detroit News. All rights reserved.

Wagoner to investors: Battery research a 'top priority' for General Motors

Tuesday, June 05, 2007
Wagoner to investors: Battery research a 'top priority' for General Motors
Sharon Terlep / The Detroit News

General Motors Corp. Chairman Rick Wagoner told investors today that the automaker has signed two suppliers to develop advanced battery technology for the Chevy Volt's E-Flex system.

GM is in a race with Asian rivals to develop an affordable battery with sufficient lasting power -- a development critical to automaker's efforts to build an electric vehicle.

In January, GM announced plans to build the Volt electric vehicle, which would be powered by a lithium ion battery. The company is developing a system for the Volt called E-Flex, which matches battery power with several different energy sources.

The challenge is to create a battery that can recharge quickly, last long stretches of time and not overheat, while being small and cost-effective enough to sell on the mass market.

"Given the huge potential that the Volt and its E-Flex system offers to lower oil consumption, lower oil imports and reduce carbon gas emissions, this is for sure a top priority program for GM," Wagoner said.

The two new technology suppliers are Troy-based Compact Power Inc. and Continental Automotive Systems, a subsidiary of Continental AG. They were picked from a field of 13 contenders.

Compact Power will launch a yearlong development program that aims to have a battery pack ready for an in-car test by next summer, the company said in a statement.

In addition to the Volt, GM is developing a number of battery-powered hybrid systems, including a plug-in Saturn Vue hybrid and a system for full-size SUVs.

GM's annual meeting got under way shortly before 9 a.m. today at the Hotel du Pont in Wilmington, Del.

Wagoner, in his speech, outlined priorities for GM in 2007:

*A labor deal with the United Auto Workers union will be key, as will resolving negotiations with bankrupt part supplier Delphi Corp. Tackling GM's suffocating health care costs, which last year amounted to $4.8 billion, is also critical, Wagoner said.

*GM will continue to focus on its businesses outside the United States, which last year accounted for more than 60 percent of the company's global sales. The company also will work to further integrate its global operations, cutting costs by adopting uniform standards throughout its worldwide operations.

*Finally, Wagoner said, GM will focus on developing advanced fuel technology to will reduce vehicle dependence on fossil fuels with programs such as the E-Flex system.

"It's not about short-term initiatives to react to short-term challenges," he said. "We're taking the profound actions necessary to transform the company for the long haul."

Wagoner has responded good-naturedly to barbs -- and some name-calling -- from a few activist shareholders, several of who have already spoken on a number of issues. He has listened even as speakers surpassed their two-minute time limits, talking through the loud bell that indicates their turn is up.

One longtime activist shareholder, Evelyn Davis of Washington, D.C., labeled Wagoner and executives "accounting flunkies." She then announced that even though she is a Republican, she plans to vote for Hillary Clinton.

"I'm sure Senator Clinton will be happy to hear that," said Wagoner, who also clarified that his degree isn't in accounting, as Davis had said.

Following Wagoner's speech, executives began addressing questions from shareholders, including a core group of company critics who make annual trips to the shareholders' meetings.

Fritz Henderson, GM's chief financial officer, spoke to criticism over faulty accounting practices that have forced GM to restate financial results for several years and resulted in an investigation by the Securities and Exchange Commission.

"We're not at all proud of that," Henderson said of the restatements.

To address the problems, Henderson said, GM has brought in a new controller, a new chief accountant and added more than 30 people to its accounting staff.

Shareholders again voted down a proposal that would have forced GM to reduce its emissions by a set amount. The board of directors had opposed that measure as well, arguing that the automaker already is working hard to make its vehicles cleaner and more environmentally friendly.

As is typically the case, each of the shareholder proposals that came up for a vote failed, most by wide margins. The most popular proposal, which would have given shareholders the authority to call special meetings with GM leadership, received 41 percent support with 55 percent of shareholders voting no and 3 percent abstaining.

Analysts had predicted a more upbeat tone at this year's gathering compared to last year, when the automaker was facing shareholder ire about its $10.4 billion 2005 loss and continuing to founder amid oceans of red ink. GM posted a $2 billion loss for 2006.

Since late 2005, GM has trimmed more than $7 billion in yearly expenses and cut 34,000 hourly workers. It posted a $62 million profit in the first quarter of 2007, despite an $85 million loss for its North American business.

Come back to all morning for continuing updates from the meeting room floor.

© Copyright 2007 The Detroit News. All rights reserved.