Can GM Turn Itself Around? Page 3

February 19, 2006

Compounding the situation, the longer GM’s problems remain in the news, the longer the dreaded “b-word,” bankruptcy, is headlined, the more consumers walk away. “Folks don’t like to do business with companies they fear might not be there” when it’s time for an oil change or warranty repair, laments a divisional marketing director, also asking anonymity.


Can GM avoid bankruptcy? Analysts and investors seem evenly split on the idea, despite Wagoner’s passionate assertion that Chapter 11 is “not part of our strategy.” The smaller GM gets, the harder it becomes to come up with funding to cover its massive legacy costs. And it’s facing new federal rules that could force it to cough up even more. Worse, as it pushes to bring capacity in line with demand, it actually worsens the situation, sending still more union employees onto the retirement rolls. And then there’s the seemingly intractable situation with Delphi, which could offload countless more of its workers back onto the GM payroll.


“I think they’ll struggle mightily to avoid bankruptcy,” says the CEO of a major supplier — which is currently preparing to emerge from Chapter 11 itself. “But I don’t see how that can happen, not without huge concessions from the UAW,” added the exec, who began his career at GM.


Ron Gettelfinger, the union’s president, recently ruled out further concessions, certainly before the two sides return to the bargaining table in 2007.


In January, Jerry York, the front man for billionaire investor Kirk Kerkorian, warned that GM had perhaps 1000 days’ worth of cash reserves left at its current burn rate. It’s possible, some GM insiders suggest, York will change that tune now that he’s been given a board seat. Perhaps not. The latest financial figures seem to indicate he’s on target.


So pumping some of that cash into the Pontiac plant is risky. Of course, it’d be even riskier to scrimp. GM has to invest in product and hope that it’s finally delivering what customers expect. The challenge is to then get consumers to believe that message. “It could take a generation,” warns analyst Phillippi, and GM simply may not have enough time.

The Car Connection
See the winners »
The Car Connection
Commenting is closed for this article
Ratings and Reviews
Rate and review your car for The Car Connection
Review your car
The Car Connection Daily Headlines
I agree to receive emails from the site. I can withdraw my consent at any time by unsubscribing.
Thank you! Please check your email for confirmation.