General Motors last week belatedly promised to give up two of its five leased executive jets, after its boss had used one to fly to Washington to plead for more cash from the government in order to stay in business.
The United States car firm said less symbolic cuts were also on the way as it and fellow Detroit giants Ford and Chrysler teeter on the brink of insolvency.
But the contrition came too late to spare them a further lashing as investors weighed their pile of debts.
Barack Obama appears to be putting Detroit on notice that his arrival in January could mean a drastic shift. Bloomberg news reported this week that the president-elect’s advisers are talking to lawyers about an auto bankruptcy, a prospect dismissed as “pure fantasy” this week by GM’s chief, Rick Wagoner.
On the Republican side, when asked about the chief executives of GM, Ford and Chrysler, leading senator Richard Shelby quipped: “I’ll tell you what: they seem to be three of the most arrogant, non-repentant people I’ve ever seen to be running three losing companies.” A GM spokesperson replied that it was very sensitive to “the symbolic issue of people showing up in Washington in corporate jets”.
Although GM and Ford inched back towards parity after falling in early trading following last Thursday’s sell-off, market values are ravaged: GM shares are down 88% for the year and Ford is down 80%.
As a demonstration that workers are also prepared to change, the United Auto Workers union is reportedly considering cutting its “jobs bank” agreement whereby employees laid off halted production lines are paid for 48 weeks, and sometimes for years at a time – a deal as symbolic as executive jets for many in Congress befuddled and annoyed by the industry’s unwillingness to admit mistakes.
A year ago the union cut its healthcare benefits, but nine days ago it asserted to scepticism that labour costs were not why American firms were being beaten by foreign competitors when US plants produced cheaper cars of equivalent quality.
Ford in fact made a $100-million profit in the first quarter, before the global meltdown and the hike in gas prices, and also cut its pensions commitments and began to move to fuel-efficient hybrid models. But Ford’s US SUV sales fell 53,9% last month, more than twice the fall of car sales. GM posted sales figures not seen since the oil shock of the Seventies, with its truck sales down 51% and cars by 34%.
All three automakers are now racing to produce recovery plans by December 2 in a bid for congressional rescue. They have been warned that their initial request for $25-billion in low-interest loans is now a ceiling and any bail-out may be much lower.
Two factors are behind the difficulties: shrinking sales of gas-guzzling trucks and SUVs, and a growing bill for retiree healthcare and pensions have cost GM some $103-billion from 1993 to 2007. Critics say this burden stifles investment and delays the development of eco-cars and the plants to build them. —