GM And Ford Declare Victory As Their Positions Are Overrun (F, GM)

 |  Includes: F, GM
by: Douglas McIntyre

Maybe it is something in the water or perhaps Bob Lutz and Bill Ford's bodies have been inhabited by the spirit of General George Armstrong Custer. Lutz said that General Motors Corp. (NYSE:GM) would see its market share stabilize in the low to mid twenty percent range, and indicated that bankruptcy was some kind of fairy tail dreamed up by Wall Street. He also said the investors with short positions in GM might be spreading the bad news. He must not have looked at the fine print in the deal to sell GMAC or at the GM share drop in March.

A bit earlier last week, Bill Ford said that bankruptcy was not an option for Ford Motor (NYSE:F). Sounds like an airline executive 30 years ago.

Taken together, these comments are an indication that Detroit is fighting back in the PR war about its future. Unfortunately, it looks like they are armed with sticks and rocks and the opposition has automatic weapons.

Lutz made the comment that he refuses to believe that there will be a labor strike at Delphi, an event that could shut GM's North American operations. His logic is that the strike would not benefit either side. So, the UAW will not use it to draw a line in the sand for the upcoming 2007 negotiations with GM, and Delphi CEO Bill Miller will get his wish that the unions will back off enough to make his company financially viable. Maybe.

The purchase of 51% of GMAC, lead by Ceberus Capital leaves an out if GM's debt rating continues to fall. In other words, they can walk away.

Media estimates of the cost to GM of a 60 day strike at Dephi range into the billions of dollars. If the UAW back down on Delphi, their hand of cards gets worse when they sit down with GM and Ford. The UAW leaders know that they have to get something to take to the rank-and-file, and massive job cuts and lower wages don't fit that bill.

And, by the way, the market shares of Ford and GM keep falling, taking the breakeven point for the North American car operations of both companies lower and lower.

It's spring time in Detroit and the mood has brightened, but the managements at GM and Ford might want to brag after we all see some progress instead of risking looking foolish once again.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also the president of when it was the 10th most visited site on the internet, according to MediaMetrix. He can be reached at