After Congressional Lashing, GM Moves to Cut Costs

Running out of cash and in danger of collapse, General Motors Corp. (GM) will try to negotiate for new union work rules and seek to cut debt levels in attempt to boost its chances of securing crucial federal loans.

GM is also considering dropping brands of vehicles and asking to delay a $7 billion payment to a union retiree health fund, people familiar with the plan told Bloomberg.

Last week, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid gave the “Big Three” – GM, Ford Motor Co. (F), and Chrysler LLC – a Dec. 2 deadline to give the government some legitimate reasons why they deserve a $25 billion federal loan.

From there, Congress could vote by Dec. 8 to approve or disapprove the bailout.

Congress’ demands stem from the now infamous performance of the Big Three’s CEOs – GM’s Richard Wagoner, Ford Chief Executive Alan Mulally and Chrysler’s Robert Nardelli – last week when they appealed Congress for an industry-wide bailout.

Instead, they were on the receiving end of a public lashing – most notably from Rep. Gary L. Ackerman (D-N.Y.), who lambasted the executives for flying separately in private jets to Washington D.C.

“There’s a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands,” Ackerman said. “It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo… I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?”

Whether selecting a different mode of transportation would have saved each company 1 cent or $1 million, the bottom line is that they need to cut any costs they can.

So far, GM’s been getting the message.

Since Wagoner flew home from Capitol Hill with his tail between his legs, the company returned two of its leased private jets. It stopped running its escalator at 7 p.m. at its headquarters. It stopped buying batteries for hanging wall clocks, eliminated voicemail in plants and consolidated printers and copies. It’s now buying cheaper toilet paper and pencils, The Wall Street Journal reported.

The goal is to cut at least $15 billion in costs.

GM reported a $4.2 billion operating loss for the quarter ended Sept. 30, while Ford posted a $2.98 billion operating loss during that same period. Together, the companies burned through a combined $14.6 billion of cash in the third quarter.

Ford chewed through $7.7 billion in cash taking its reserves down to $18.9 billion from $26.6 billion at the end of the second quarter. If the company continues to burn cash at this rate, Ford will run out of money by April 2009.

GM is even worse off. The nation’s largest automaker said that the amount of cash it has on hand fell to $16.2 billion at the end of September, down from $21 billion at the end of June.

If any, or all, of Detroit’s Big Three fail to acquire the financing they need going forward, the consequences for the U.S. labor market – and for the economy – could be devastating.

All told, the three automakers employ more than 200,000 people and support millions more U.S. workers indirectly through suppliers and dealerships. Their collapse could ultimately cost the economy more than 2 million jobs total. And that doesn’t count the estimated 1 million Americans – including many retired autoworkers – who rely on the U.S. auto companies for pension and healthcare benefits.

Original post

Comments

[pookster:]

let the big 3 go down, the fallout will be beyond belief. keep buying toyota, honda, etc.....you'll soon be without work. and oh yeah, screw my mortgage i'm just gonna let the government have it.....ask your politician, how much he makes, what his retirement is? that cuts it....I'm running for office

2008 Nov 24 05:50 PM

[situation#9:]

your ceo makes enough to take a lesser salary and put millions into the company.... doesn't he have loyalty to the success of the company.... he can take $3000.00 a month salary and still live better than me...... and invest the rest into the company. If we did get the bailout he would get 1/4 of it in bonuses...... go figure.


On Nov 24 05:50 PM User 306019 wrote:

> let the big 3 go down, the fallout will be beyond belief. why is
> it the big 3 are not allowed to sell in japan, but they can dump
> their shit here with no tariffs...nothing. keep buying toyota, honda,
> etc.....you'll soon be without work. and oh yeah, screw my mortgage
> i'm just gonna let the government have it.....ask your politician,
> how much he makes, what his retirement is? that cuts it....I'm running
> for office

2008 Nov 24 06:08 PM

[Robert Nabloid:]

Buying cheaper toilet paper and pencils? No batteries for wall clocks...

Maybe, after complete restructuring, they will turn into the most competitive company with all this new frugality...

2008 Nov 24 06:23 PM

[303820:]

THE AMERICAN WAY...Lets cut wages, cut benefits,eliminate pension, compete with the mexicans and the chinese, work longer hours,no vacations,no unemployment benefits,no holyday,and no safety rules in the work place...perhaps this is the plan that washington wants from detroit...perhaps this the plan that will make the american people happy.....

2008 Nov 24 08:20 PM

[303820:]

??

2008 Nov 24 08:24 PM

[RLLH:]

Well like it or not we are competing with the Mexicans and Chinese. And doing a damnably poor job of it. If we aren't willing or able to compete, do you suppose the Chinese and Mexicans will be willing to pay us unemployment, or put us all on welfare?

2008 Nov 24 09:36 PM

[303820:]

RLLH: YOU'RE RIGHT! OUR WAGES ARE TOO HIGH....HOW'S $1.90 AN HOUR (MEXICO)? OR MAYBE $120 A MONTH (CHINA)?12 HOURS WORK DAYS,NO LUNCH BREAKS, 7 DAYS A WEEK...YOU WANT TO LEAD THE WAY?

2008 Nov 24 09:59 PM

[American Me:]

The Congress handed AIG 152 Billion. they have 19 corporate jets and only sell Insurance. They handed the Banking Industry and Wall Street 700 Billion and the average hedge fund operator makes 2 times what GM CEO Waggoner makes and the average salary in the investment (Wall Street) sector is 400 Thousand. The Auto Industry asks for a combined total of 25 Billion and Congress wants them to come up with a plan. Auto Industry accounts for 13% of GDP but let's let them go under. Until the market crash Ford, GM and Chrysler were doing fine, on their way to massive restructuring. GM has 17 vehicles that get 30+ MPG, all the auto makers are quite far into developing technology to increase fuel economy. Toyota had more recalls in the past three years than ALL the Big 3 combined. Japanese Quality, or American Stupidity? Buy a Chinese auto and be the first fool on your block to own a Wang.

2008 Nov 24 11:27 PM