I consider this to be unfortunately, inevitable. The union cannot back off decades of worker entitlement, and they cannot protect their workers from direct competition in the same state. GM has tolerated this conflict because we have had a health product market for twenty five years and this allowed them to pass on the costs. It also allowed their competitors to build up massive new capacity in their North American markets.
It is time to pay. GM is down sizing right where they are no longer competitive. Chapter 11 will break all those contracts and refinance the industry. GM will emerge intact with the same cost structure as Toyota down the street. And if no one likes it, it is too bad. Remember the bad old days at British Leyland. The cleanup was ugly, but it saved the industry in the end.
There is a global price to pay for a service, just like there is a global price to pay for a commodity. Juicing it up sooner or later opens the door for your competition to wreck your margins. Union leaders cannot afford to admit this, so they always run out the clock.
GM considering Chapter 11 filing, new company: report
Sat Feb 14, 2009 4:03pm EST
CHICAGO (Reuters) - General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.
"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."
Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.
GM declined to comment, the story said.
General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.
Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.
GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.
GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.
In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.
(Editing by Eric Walsh)