Cornered General Motors Bares Teeth

08 February 2006

Cornered US auto mammoth General Motors is fighting back against the pack that is dragging it down - not just global competitors but its own management laxity and soaring employee health and pension costs.

In survival moves announced yesterday (Tuesday), GM is to halve its common-stock dividend, slash pay for its top five executives and curtail benefits for salaried workers.

But these moves, even when combined with previously announced plans to cut 30,000 North American jobs and slash costs by up to $11 billion (€9.19bn; £6.3bn), won't exorcise GM's spookiest demon of ever-increasing sales losses to oriental rivals.

GM chairman/ceo Rick Wagoner, who has presided over the decline of the American icon, called the present situation "the most challenging in our 100-year history."

And as if to rub salt into an open wound, Japanese rival Toyota Motor Corporation on Tuesday unveiled a record quarterly profit and flaunted plans to pump mega-money into new auto and factories - primarily targeting the US market.

Meantime, president of the United Auto Workers Union, Ron Gettelfinger approved GM's halving its stockholder dividend and cuts in executive pay: "GM did the right thing," he said, "We asked for that" [in return for the union's agreement to cut retiree health-care benefits last fall].

But, Gettelfinger warns: "We're not going back into negotiations as far as concessions go."

Meantime, lurking in the wings, interventionist shareholder Kirk Kerkorian, who owns 9.9% of the auto giant, said nothing. But continues to tug on GM's strings.

Data sourced from Wall Street Journal Online; additional content by WARC staff