Daily Edition: Jan. 27, 2006

January 27, 2006

GM Loses $4.9B in Q4, $8.6B in '05

General Motors produced another awful financial surprise Thursday by announcing it lost $4.9 billion during the fourth quarter and more than $8.6 billion for all of 2005.

The company says the wide losses were due to the heavy cost of the company's contracts with the United Auto Workers and the need to bail out the bankrupt Delphi Corp.

Richard Wagoner, GM's chairman and chief executive officer, said, "Our results were dramatically and adversely affected by charges for restructuring and matters associated with Delphi Corp.'s Chapter 11 filing," Wagoner said.  It "was one of the most difficult years in GM's history," he said.

"In order to improve financial results in 2006 and 2007, we are moving quickly to implement several important actions that will address these weaknesses inNorth America," he added.

However, Wagoner and Fritz Henderson, GM's new chief financial officer, said the pace of the restructuring will depend on talks with the UAW, which must sign off on any plan that includes worker buyouts or early retirement.

The fourth-quarter financial report was worse than most analysts expected and is certain to revive talk about a bankruptcy filing by the giant automaker.

GM Loses $4.9B in Q4, $8.6B in '05 (1/26/2006)
Staggering numbers underscore gravity of restructuring.

Bush: Detroit Needs "Relevant" Cars

Financial problems at Detroit's Big Two may have some clamoring for government help for the companies, but the idea hasn't won President Bush over. In an interview with The Wall Street Journal, the President said that the current problems at GM and Ford needed to be worked out by the marketplace: "I think it's very important for the market to function," the President told the paper, adding that Detroit's automakers needed to focus on building "a product that's relevant" to today's gas prices and technological needs. While the Administration has discussed new fuel technologies with automakers, it has not been approached for financial assistance, Bush noted: …"I haven't been asked by any automobile manufacturer about a bailout," the President told the Journal. He added that dissolving pension obligations would not amount to corporate responsibility.

UAW, DCX Talking Healthcare

The United Auto Workers has granted Ford Motor Co. and General Motors Corp. concessions on the healthcare benefits for union workers, albeit reluctantly. But when it comes to DaimlerChrysler, the signals for a deal on healthcare are altogether more ambiguous.

Both Dieter Zetsche, DaimlerChrysler chief executive, and Tom LaSorda, Chrysler Group CEO, have indicated they are confident the union is prepared to approve healthcare concessions similar to those already delivered to GM and Ford. 

However, UAW president Ron Gettelfinger, who likes to say the devil is in the details, is a master at drawing out negotiations, particularly when there is no advantage to the union in a quick settlement. He has noted there are subtle differences in the so-called pattern contracts at DaimlerChrysler, General Motors, and Ford. For one thing, going back to the concessions days in the early 1980s, Chrysler always had an escape clause that allowed the company to shift some costs in some plans to employees if the company's overall bill increased too quickly, which it did last year.

Thus, Gettelfinger noted recently that the union had already adjusted healthcare plans at Chrysler. Gettelfinger also said the concessions, while painful for the union, were necessary because of U.S. market share losses at Ford and GM. Both automakers saw their U.S. sales drop four percent in 2005.

"It was a long year," Gettelfinger said in a speech to the Automotive News World Congress. "It was probably one of the most painful, excruciating decisions that we ever had to deal with as a union."

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