Uh Oh
March 30th, 2006 - 9:08 am
GM is one step closer to bankruptcy:
Delphi Corp.’s latest contract proposal offer, though better than two previous offers, still would have a “devastating impact” on the bankrupt auto supplier’s workers and their families, and cannot be taken back to workers for a vote in its current form, a top UAW official said Tuesday.
But marking a break from its hard-line stance, the United Auto Workers signaled a willingness to continue discussions with Delphi — provided that the supplier backs off a threat to begin voiding existing labor contracts by Friday without a deal on wage concessions.
If Delphi workers walk out (or if Delphi locks them out) then GM’s factories will have to shutter for lack of parts.
best thing that could happen for both companies.
Agreed. Delphi is bankrupt largely because of the union contracts. Chapter 11 let’s you reorganize and void burdensome contracts. If the workers don’t want to work, fine. Hire new ones.
I’m afraid a trip to the bankruptcy court is in the cards for GM even if Delphi workers do not strike within days. An unsustainable cost structure, too much capacity, too many brands, lousy cars all contribute to a business model the envy of no sane business person. Bankruptcy ASAP will allow GM to avoid wasting it’s capital on employee buyout schemes and devote this capital to investments in autos.
GM is slowing twisting in the wind. Better that the company honestly move swiftly into bankruptcy now and get it’s transformation underway.
I hear there’s a whole bunch of people out there who are willing to do the jobs “Americans aren’t willing to do”. Please. Delphi could offer those jobs at $15 an hour with a 401K and they could replace all strikers in a couple of months.
Don’t forget HSAs.
After reading the article, it brings to mind a question I’ve had for a number of years. Why don’t companies pay people piecework. You know, $4 per weld or whatever the measurement matrix is. It would allow companies to fix their cost per unit and allow employees to basically set their own wage.
I work on that method as a commissioned sales person and it works just fine. Why wouldn’t it work for everyone?
As long as the massive pension promises to the union workers are not dumped on the PBGC as the steel industry managed to do, I don’t have a problem with the creative destruction of a particular company. I draw the line at the point the American taxpayers have to pay for management’s profligate promises.
Free market economy at work. Self regulating marketplace. You make mousetraps, I make mousetraps. You make a better one than I do. I go broke. You thrive. At least for awhile. If you get fatheaded and give the farm away to some labor negotiators, or if somebody else comes out with a better mousetrap, then you will go broke too.
Witness Studebaker, Packard, Nash, American Motors, Kaiser-Fraser, Reo, Willys Knight, Star, Oakland, Whippet, etc. etc. Now it may be Delphia, GM, and then Ford. We’ll be left with some good cars built by Toyoto, Honda, Nissan, VW, and some others.
Don’t sweat it. The market regulates itself. The world continues to rotate. All is well.
Scott–try a couple of days. Maybe weeks for all the paperwork and interviews. It’s not tough or dangerous work any more and it sure beats cleaning motel bathrooms for a living.
A GM in bankruptcy will not disappear (it has a 25%(?) market share) but will look substancially smaller. Bankruptcy will not only allow GM to shead company killing labor contracts, but rid themselves of the dealer networks they are locked into and must continue supplying because of state laws and dealer supply contracts. Will anybody miss Pontiac, Buick or GMC trucks? If any of these brands have a good car, switch the lable to Chevrolet.
Since Saturn has never earned a return on all of the capital GM invested in this brand, this may go away if the future isn’t anything but bright.
Although GM will likely pull the trigger on GMAC, this is an exercise in eating your own seed corn. It only provides some cash in the short run to fund the folly of buying out their bloated work force to avoid bankruptcy and throws to the curb a GM entity that actually earned a market rate of return on GM’s investment.
An effective CEO and board would move quickly onto bankruptcy to save capital and not spend years of management time on these issues that won’t go away without drastic action. Better to spend their capital on developing great cars.