By accessing this website, you acknowledge that Edmunds and its third party business partners may use cookies, pixels, and similar technologies to collect information about you and your interactions with the website as described in our
Privacy Statement, and you agree that your use of the website is subject to our
Visitor Agreement.
Comments
But these execs still do not get paid anywhere near the "going rates" at US competitors. Sony is the only company which openly bid for such executives for their movie and music business, and has had mixed results. Other companies have stayed away from this.
In the auto industry, my understanding is that Japanese companies are not that desperate to hire US executives, so what they offer is reasonable, but not a top end package. Doubt if anyone gets more than a million a year (the salary which the guy serving coffee to GM board gets, I presume).
I bought 4 new Japanese vehicles in the 1970s. Out of the 4 only the 1970 Datsun PU was any good. The worst was the 1978 Accord. A real piece of junk. The 1973 Subaru was worthless in snow and went through head gaskets several times before I traded it in on a 1974 Dodge van. Never bought a small US made car, only trucks, vans & SUVs, all better quality than small cars from any manufacturer.
I would agree the Vega was poor. No more so than the Japanese cars of that time.
The car was a joy to drive and had very few problems.
Since then, we have owned two Volvos (they were OK), one Ford Taurus (absolutely wretched), one Nissan Altima (great car), and seven Hondas (all of them excellent).
Financial Times
By Bernard Simon
March 24, 2006
"Is it possible for outsiders to cut into this deal?" was the response of Peter Feuille, director of the University of Illinois' Institute of Labor and Industrial Relations, to General Motors' offer of early retirement and severance packages for its entire U.S. blue-collar workforce.
Mr. Feuille is not alone in believing that GM will have little trouble persuading tens of thousands of its 113,000 unionized workers to sign up for the offer.
"The dollar amounts are amazing," says Rob Ashmore, partner at Fisher and Phillips, an Atlanta labor law firm, describing the deal as "the most generous early retirement incentive that I've seen".
Michael Bruynesteyn, analyst at Prudential Equity, adds: "The (United Auto Workers) union showed again it is in the driver's seat but will play ball with the vehicle manufacturers if the money is right."
GM has also agreed to finance buy-outs for 13,000 UAW members at Delphi , the bankrupt parts supplier it spun off seven years ago.
Cutting labor costs is one element in a four-point strategy outlined by Rick Wagoner, GM's chief executive, at last June's annual meeting. Mr. Wagoner said that GM, which lost $10.6 billion last year, also needed to improve its vehicles to regain market share, revamp its sales and marketing strategy, and contain fast-rising healthcare costs.
John Murphy, analyst at Merrill Lynch, says: "Until GM stabilizes market share, rationalizes capacity at every point in the value chain and invests heavily in product, its restructuring actions will only allow it to tread water at best."
Under the buy-out plan, 36,000 workers already eligible for retirement after more than 30 years of service would receive lump-sum payments of $35,000 each.
Employees with more than 10 years' service would pocket $140,000 but would no longer qualify for healthcare benefits and receive only their vested pension benefits. The pay-out for the most junior workers is $70,000.
Mr. Feuille says GM had little choice: "Massive concessions from the union that would substantially reduce labor costs is a very unlikely outcome. So why not take another approach?"
Still, the buy-outs raise several risks for GM. The number of acceptances remains a matter of conjecture.
"What the employees have to think about is that they're in an industry that is not growing," says Mr. Ashmore. "This is the kind of thing that may not come again."
Workers in depressed northern states, such as Michigan , would have more difficulty finding new jobs than those in the south. Foreign carmakers, which have complained about a growing skills shortage at their non-unionized plants in southern states such as Alabama and Tennessee , are continuing to expand in the US . South Korea 's Kia, for example, this month announced plans to build a $1.2 billion plant in Georgia , operational by 2009.
Himanshu Patel, analyst at J.P. Morgan, estimates that 39,000 workers could be gone by the end of 2006, well above the target of 30,000 over three years that GM set last November when it unveiled plans to close a dozen assembly plants and parts facilities.
Says Mr. Patel: "GM may face logistic challenges (reducing the number of) workers this rapidly."
Mr. Feuille warns of the potential for "adverse selection", where the best workers leave and the least motivated remain.
GM says there is no cap on the number of buy-outs. But if the response threatens to disrupt operations, "there is contractual language so that we feel we could address that on a plant-by-plant basis".
The company has several options to deal with a stampede for the exits. About 7,500 idled workers are in its "jobs bank", continuing to receive full pay and benefits. Under this week's agreement, up to 5,000 Delphi workers can "flow back" to GM by September.
The departures could spell both good and bad news for GM's pension and healthcare obligations. On one hand, the more young workers who leave, the bigger the reduction in these liabilities.
But GM could face the challenge of a smaller active workforce supporting pensions and healthcare benefits for a bigger corps of retirees. Even now, the carmaker has an unusually heavy burden of 2.5 retirees for every active worker.
Workers will have 45 days to decide whether to take the buy-outs after briefings at individual plants. Those who accept will have another week to change their minds.
An amount that modest shouldn't be such a big deal to all the fans of GM management, who apparently have no problem whatsoever with more than twice that amount being blown on one deal alone. Drop in the bucket, right?
Unlike bad M&A deals that simply result in additional expenses, perhaps these buyout packages that will surely create future cost reductions (and additional lost leverage to the union) should be viewed as being a pretty good value. But whether it will to lead to more competitive products, I have my doubts.
Adds to the already bad news for them.
2021 Kia Soul LX 6-speed stick
The competitiveness of Italy's workforce has not improved and the country ranked one place above Botswana, and below countries like Jordan and Greece, in an annual report by the World Economic Forum.
For all this, however, there also have been bright spots.
Other large employers, like Fiat, are turning themselves around after a number of difficult years.
http://news.bbc.co.uk/1/hi/business/4832898.stm
No, the stated reasons for the deal was so that GM could share drivetrain development with FIAT, and to get access to South America, about the only market outside of Italy where FIAT had much traction.
The funny thing is that it was fairly obvious to observers in the business that the deal wasn't such a great idea when it was done. Per Ward's Automotive in 2000 -- "Fiat, GM Ripe with Overlap"
While engine sharing alone will provide savings of $180 million by 2003, filling gaps in product lineups and gaining entrance into previously untapped markets arguably are the most beneficial reasons for an alliance. And they largely are absent in the GM-Fiat deal. Investors didn't believe the benefits presented by GM and Fiat, and on March 14 inflicted on Fiat one of its worst one-day share price losses (10.8%) in recent years. Ironically, Fiat likely stands to gain more from the tie-up than GM because it plans to use the alliance to re-enter the U.S. market with its Alfa brand. GM, meanwhile, was neither punished nor rewarded by Wall Street despite being criticized by some analysts who thought it paid too much for a midsize auto company with past quality problems.
And if you want to talk about the lack of a coherent strategy, the same article goes on to make a fairly cogent observation that is obvious to many but not to GM's own "management" (if we dare call them that):
There also is legitimate concern about GM's ability to coordinate its recently adopted tentacle-like approach to the industry. In Europe, GM is overflowing with brands: Vauxhall, Saab, Opel, Cadillac and Chevrolet. It owns small chunks of three companies in Asia. While a minority arrangement lessens risks for GM, it diminishes control, too.
And GM's buckshot strategy (Read: Even if you have your eyes closed, you'll probably hit something) isn't done yet. GM and Fiat both are bidding on buying Daewoo Motor Co. Ltd. and could combine efforts if given the option by the South Korean government.
This stuff would be happening, union or no union. This is sheer ineptitude, nothing more.
Because GM management got outsmarted yet again. FIAT was being courted at the time by Daimler, but Daimler was going to require a change in the FIAT management team as a condition to entering the deal.
GM made a mistake that a first-year MBA should have known was a significant error -- it allowed FIAT to retain the same management team that had led it to its then-current state of decline, including falling market share in its own home market.
It was simply stupid to negotiate a forced buyout clause with a losing management team in charge of the company. How did GM expect these same people to improve FIAT's fortunes when they had already contributed to its decline? Daimler was smart to insist on control prior to any deal, too bad GM management wasn't as insightful.
The post again explains it pretty well. Tood bad for them and, yep, pretty dumb management going on. Too many fires going on to put that one out? Everyone has heard that one too many times in the corporate world. Oh, we overlooked or spaced on that deal becuae our finger was in this pot and that pot and this pot and that pot.
Yikes..GM is too big for thier own good.
The partial buyout of Daewoo Motors in South Korea, however, was not a dumb move and it has already paid GM dividends. They are into the Asian market now and there's more news to follow as they continue to look into buying more Daewoo factories and consumption of more of other people's ideas and input.
GM's sort of a multitasking mega-giant car maker. Only the UAW and huge health care costs and huge labor costs and lower sales are really putting the hurt on them right now. That's where unions seem way too useful in their own eyes and not nearly powerful enough to really help the company they are in "alliance" with. GM needs serious concessions now just to survive the import onslaught and the stupid UAW says "not on our watch".
Glad I'm not directly involved. Been there and done that already with The Boeing Company. There's a company that will forget you just as fast as they reward you, then turn around and decide to rehire for the same positions that they jjust laid off people from. Talk about just enough people who feel like they're Chieftains screwing it up for the Boeing worker Bee's. What a zoo. Once again, glad I'm no longer involved with them. :mad:
2021 Kia Soul LX 6-speed stick
Last time I checked Boeing is doing GREAT. Wished I could get a job there whipping togeather airplains at $28-30 bucks an hour. I'm a big supporter of Boeing. They are making the best R&D modules in the world. thus has created a rebirth of this once great company.
Rocky
http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_levin&sid=ab91- 7RzYI5uY
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060325/AUTO01/603250334/1148- /AUTO01
http://www.chicagotribune.com/business/chi-0603260182mar26,1,4327366.story?coll=- chi-business-hed&ctrack=1&cset=true
http://www.freep.com/apps/pbcs.dll/article?AID=/20060327/BUSINESS01/603270401
http://abclocal.go.com/wjrt/story?section=local&id=4027448
http://www.autoindustry.co.uk/news/27-03-06_2
http://msnbc.msn.com/id/12018694/
http://www.truthout.org/docs_2006/032406F.shtml
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/03/26/MTGAQHU2Q01.DTL
Agreeing to the put option was an extremely stupid move on GM's part - you're right about that. But Fiat still had something to offer a partner (small-car expertise, diesel technology). The way GM went about getting it WAS stupid.
The problem is fairly obvious as a classic tale of corporate bloat gone awry: For a time during the 1990's, GM was a cash cow. Lacking a decent strategy to consolidate their product lines and come up with a few home runs in the US, GM management elected instead to buy every single automaker that it could get its hands on.
Unfortunately, in the midst of the Big 2 buying spree (Saab, Volvo, Land Rover, Mazda, Jaguar, etc., etc., etc.), in large part, the only mass market brands that have been up for sale have been the losers. (You might say that Chrysler and Nissan were the two possible exceptions to this -- at least Chrysler offered Daimler a mass market channel that it didn't have, and Nissan had a US market that Renault didn't have for itself, and good nameplates such as the Z that could be restored and repaired.) Since the BMW's and Toyota's of the world haven't been for sale, Ford and GM have had to content themselves with the dogs with fleas. Hence, all of these bad deals.
Again, Toyota had the right idea: since there was no great luxury brand for sale, they created their own. GM's "strategy" has been to acquire several losing companies, in the vague hopes that they'll get some "synergy" as a result. So far, generally not so good.
Take it from another MBA -- if someone promises you "synergy", chances are good that you're going to probably end up with a black eye and a lot of headaches. The idea behind synergy (increased efficiency) is a great theory, but if the companies getting married have little to offer, there's no synergy to be created. It would have been one thing if FIAT had great products or strong brand loyalty, but since it had neither, it was a bad choice from the start. Blame GM management for not just that one bad decision, but for a long series of bad decisions just like it.
Have they diversified too much, or not enough, and will that help them?
Are they going to totally bankrupt or emerge out of this a stronger, leaner Mr.General Bestest carmaker on the planet? Or don't we quite know the answers to these questions yet?
socala, what is your take on GM's future?
2021 Kia Soul LX 6-speed stick
Be honest now, how do you really feel about the Fiat deal? I have no love for Fiat. I bought a Spyder for my son and it was the most costly vehicle to repair that I ever owned. I do think you are over reacting to the whole Fiat deal. I also think you are not seeing the linkage between GM and our government. Favors to other countries are common.
The only hope is bankruptcy, which is what would justify a major housecleaning, but I wonder whether even that will be enough.
The problem with GM is that it is far too big, and its structure was designed to work in a time when there was no signficant competition from abroad. Almost none of the nameplates have any value, nor do the badges, and what little competitive advantage they do have is invested in gas guzzlers that are subject to increasing competition from abroad. Add to this a tired series of products that can't be expected to set the world afire, and the problem seems pretty entrenched. The unions don't help, but regardless, the business model is inherently bad.
I suspect that GM will simply shrink over time and become a mid-market player, while others such as Toyota, Renault-Nissan, Daimler-Chrysler and possibly Ford leave it behind. There seems to be no vision at the top -- the whole strategy seems built on payoffs (whether its mergers or the union), which is not the best strategy to have when there's no more money left.
I have 4.4 billion reasons to be critical of such a lousy deal. The deal did nothing that it promised, and was obviously negotiated very badly for GM. It's a shame that we can't blame the union for it, but we can't.
I also think you are not seeing the linkage between GM and our government.
Aside from some left-field conspiracy theory, explain to me why GM would do this to help the US government?
It has already been covered -- GM did the FIAT deal as a part of a long series of bad M&A deals, most of which have largely failed. It has absolutely nothing to do with the US government, the Italian government or anybody else except GM management and it's Let's Buy Everything That Moves (Even If Its Legs Are Broken) "strategy."
You help our ally and military contracts will be sent your way. Legislation that favors our friends at GM is included in the energy bill, etc. Nothing is free, but I have no problem believing that GM would spend big bucks to keep their friends in Congress on their side. No conspiracy, just business as usual.
It seems that you think that GM is unique in their ability to screw up. I can say from experience that the companies I have worked for were no better. The Only exception would be Pacific Telephone before divestiture from Ma Bell.
In this case, that's just fanciful talk meant to provide justification for yet another GM management error.
There was no Congressional mandate to save FIAT. If anything, it's quite something that GM would even agree to the put option (which was FIAT's idea), when the Italian government would likely be unhappy with any foreign takeover of FIAT, be it GM or any other firm.
There's no need to cook up fanciful reasons for the deal. GM was quite forthright about its desire for synergies. Getting beyond that, it would seem that there was some degree of auction fever involved, a desire to beat Daimler to the punch, which it accomplished by giving FIAT the one thing that it wanted most -- control over management.
Again, you don't leave bad management teams in place if you expect companies to turn around. (That applies to both FIAT and GM, by the way.)
It seems that you think that GM is unique in their ability to screw up.
If this was a general business forum, then we could discuss a whole host of businesses. But in the automotive industry, GM is the consummate example of repeated failure, and one in our own backyard. No reason that we shouldn't expose this bunch of lackeys for the bumbling failures who they are, particularly when their incompetence puts the livelihoods of many thousands of Americans on the line, and so many second-rate cars on our roads.
2021 Kia Soul LX 6-speed stick
Even cut in half GM pays a better dividend to the stockholders than Toyota. Thus a better stock to own. You can have your Japanese style of management. I'll take GM in spite of their poor decisions. Even with a 9 billion dollar profit year Toyota kept it all for themselves. Talk about greedy. If you think that Toyota is doing better check out the 2007 Camry compared to previous models. They are headed down hill.
I assume that you aren't investing your money in the markets, as most stocks, particularly those of mature companies, are valued based upon a multiple of their earnings. So the more that they earn, the better for the shareholder.
I can tell you that you would have been better off with Toyota in your portfolio. Had you bought Toyota shares two years ago, you would find that your investment would have increased in value by 50%: TM graph
In contrast, had you bought GM stock two years ago, you would have lost half of your money, a loss that would have been barely offset by the dividend: GM graph
GM management has created a lot of victims here, including the employees whose jobs and pensions are lost or will be lost, and the shareholders who have lost much of the value of their investments. (I know one guy who has pretty much kissed his retirement goodbye because his $70 GM shares of some years ago are now worth less than $25, and will probably decline further.) Soon enough, I suspect there will a BK that will cost a lot of creditors a lot of money. Incompetent management wreaks a lot of havoc, and many Americans are going to pay the price for their bad decisions.
If you are into buying and selling that may be. I believe we bought GM in the early 1980s. It has paid a nice dividend every year. I have no desire to buy and sell stock. I buy and keep it. I still have the shares from the splits of AT&T that we bought working at Pacific Telephone. It split so many times I have no idea where we are. Way ahead of the price paid. If GM goes belly up the stock is so far under valued there will be plenty to go around. It is not going out of business. Toyota stock is so far over priced that the least blip and it drops 50% of it's value. And still no dividend from the greedy Japanese. GM is not an Enron or MCI with stock price built on lies.
PS
We did sell our Cisco before the crash. It was over priced just as Toyota is.
Not sure where that's coming from, given that Toyota's PE is below 17. Except for the post-9/11 decline that was suffered by most of the market, TM shares have shown steady growth over the last decade.
In any case, you need to get a bit up to date -- most stocks don't pay dividends, and those that do tend to pay very little.
GM's dividend is $1.00 per share, so if you bought it at the $100 per share peak, you'd be making a whopping 1% on your investment. You'd be better off leaving it in a checking account.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060328/BIZ02/603280385/1148/- BIZ
http://www.freep.com/apps/pbcs.dll/article?AID=/20060328/BUSINESS01/603280336/-1- /BUSINESS07
Been following GM's deals and M&A as it directly affects us here on the supplier level. Seems you get "it" like most of us. It kind of amazes me that most of the errors where on the fundamentals, the basics, common sense. One of my profs. from the masters program always stated "You have to get up from the table and look out the window to see the world passing by you. If you don't the world still passes you by, just faster." It's like GM management suffers from an extreme case of groupthink.
And you also must admit, GM is going to make a great series of HBS case studies in MBA and even undergraduate business programs. I think HBS can just make a "What Not To Do" case book from GM. Almost makes me want to enroll in another MBA program just to get the case studies - almost.
That's funny, I was thinking exactly the same thing. Ironic that HBS will probably end up roasting one of their own at the end of all this (Wagoner is an HBS alum.)
It's like GM management suffers from an extreme case of groupthink.
That really seems to be it. The problem is that the company is so large that it has been possible to completely blow it again and again and again, and still have a large chunk of the market (even if that share of the market is shrinking.) Even after a long series of mistakes, they've had enough cash and assets on hand to be able to conceal the bleeding and the effects of poor decision making, a company that large has a long way to go before it actually hits bottom.
It's similar to what happens to your average lottery winner -- you can give them an enormous sum of cash and resources, yet all they do is fritter it away, spending themselves into the ground. GM's sheer mass allowed it to acquire companies that it had no good reason to buy, but the management team was unable to step back and see that the deals didn't make sense, whether or not they had the money. Now that the money is gone, what are they going to do next?
Exactly. A large cash reserve can help hide bleeding, but only for so long. The past large SUVs helped them quite a bit, and the new ones are showing some initial interest but again this is only for short money. Another major gas price hit and people may not be so warm to get a guzzler. They simply got comfortable and are now in a hurried reactive mode, which leads to making a product that is having an low impact on the market and it is not enough.
Now that the money is gone, what are they going to do next?
The BK bounce baby. :P
Note ! This is the first of about 5 such events that will take place during the year. Approx. 500 per event.
Don't EVER remember that happening that abruptly at GM.
A sign of the things to come ? Watch what happens at Delphi. A strike could bring down the whole Corporation.
Or do you mean both companies? :surprise:
2021 Kia Soul LX 6-speed stick
How did you et 5 events? 2500/500? Probably less than that due to attrition?
I have heard from all my siblings except one. And he was probably the least secure in his job.
Or as the verses of a dated country song state:
"I'm lookin' for a lot less talk and a little more action"
The current corporate condition and Wall Street mandate that direction.
http://www.freep.com/apps/pbcs.dll/article?AID=/20060328/NEWS99/60328001/-1/BUSI- NESS07
http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20060- 329&ID=5603347
http://www.wben.com/news/fullstory.php?newsid=04661
http://charlotte.bizjournals.com/milwaukee/stories/2006/03/27/daily16.html
Yes, the "500 rule" seems to be the norm nowadays. At my last company you were given 15 minutes after the hatchet dropped to gather your things and go, with security escorts.
But most were given a "notification" that morning. Some workers' key cards suddenly didn't work; others got to their desk/office, couldn't log in to their computer, phone was missing or inoperable. None of the bosses, VPs, Presidents or officers were in that day, with HR slinking in around 10am. Very bad times.
http://www.thestate.com/mld/thestate/business/14216105.htm
http://www.dfw.com/mld/dfw/business/14212605.htm
Rocky
If you let people go with their respect and dignity intact, there's less likely a chance one of them will return in camouflage with an RV full of 53 assault rifles and 200 large-caliber handguns.
I know company's in the Michigan, that when there employees went on vacation and then returned to work, they opened up their office door and found a replacement sitting in their chair, with there personal belongings boxed up. One guy I knew started asking questions of why ? They instantly called the "rent a cops" security an had him escorted with his personal belongings to the parking lot. This kind of act is the biggest insult to someone who sacrificed everything for his/hers company. No respect, period.
Rocky
The scenario Rocky described above happened to my Dad and a whole lot of other older guys at his plant. He put in 24 years, came back from vacation only to find he lost his job. The company was even more chicken because they simply left a message on his answering machine. Dad's boss at the time was a real [non-permissible content removed]. He would openly brag about all the women he slept with and told him that he could fire my Dad and everybody else and still sleep well at night. Dad was furious and I'm sure the thought of taking a .357 Magnum and whacking this loser came to mind. I would know he was only dispensing frontier justice. However, the press would paint his ex-boss as a wonderful family man, a beloved supervisor, and everybody's best friend. Dad would be portrayed as a troubled disgruntled loner - totally false.
Rocky
Escorting someone off site is to protect everyone from someone going ballistic. This is not to mention averting chaos in potential data files or corrupting engineering information on their computers. It just takes ONE person to do that and it is catastrophe.
Do I think it is insensitive ? Yes.
Do I think it was necessary ? Because of the numbers required.Yes