Over the past couple of days, there have been many news articles concerning General Motors Corporation (GM). Three subjects that do not interest me much are the reduced pensions, reduced pay and benefits, and some for of federal assistance. While important, I do not believe that those three subjects will decide the fate of GM.
Two other subjects are important. One is the negotiations between GM and the UAW. In a Wall Street Journal article GM-UAW Negotiations Stall Over Restructuring at Delphi (subscription required), Jeffrey McCracken highlighted the concerns.
Negotiations among General Motors Corp., Delphi Corp. and the United Auto Workers union to restructure Delphi's work force outside of bankruptcy court have hit a snag in the past few days, raising doubts about whether GM and the UAW can engineer a "soft landing" for thousands of Delphi workers whose jobs and pay are at risk, according to people familiar with the matter.
The talks are being watched closely on Wall Street as a harbinger of how difficult it will be for GM to reduce its U.S. work force. One setback came within the past week when UAW negotiators didn't make an expected presentation about helping GM to reduce its hourly work force through retirements or buyouts, people familiar with the talks said.
The discussions also have stalled over concerns that Delphi workers won't agree to transfer back to GM, which spun off its Delphi parts unit in 1999 but kept responsibility for many of Delphi's employees. UAW officials also are concerned about how much or how long GM is willing to subsidize compensation for Delphi workers who could see their pay and benefits slashed by 60% or more.
The negotiations with regard to Delphi are critical. GM relies on Delphi parts, and GM can ill afford a work stoppage now.
The other critical item is the launch of the Toyota Tundra, as outlined by Micheline Maynard her New York Times article Toyota Vies for One of Detroit's Last Strongholds (free registration required).
"It's the last bastion of American vehicles," said Ron Pinelli, the president of Autodata, an industry statistics firm in Woodcliff Lake, N.J.
The success of this truck is critical if Toyota, which held 13.2 percent of the United States market last year for fourth place, is to finally pass Chrysler for the No. 3 spot — and ultimately unseat G.M. as the world's biggest carmaker.
James Press, the chief operating officer of Toyota Motor Sales U.S.A., said the new Tundra is as vital to Toyota as Camry, which has been the best-selling family car in the United States for the past five years; Lexus, the country's top-selling luxury division, and Scion, the three-year-old brand that has been a hit with young, hip consumers.
Although Toyota has set a goal of only 200,000 Tundras this year, it might sell many more. As everyone knows, the profits for the Big Three come not from car sales, but from truck and SUV sales. Toyota has the potential to begin making significant inroads on the Big Three's turf.
The two problems that I believe are most pressing are a) can GM solve its Delphi negotiations to the satisfaction of both parties, and b) can GM produce a product that the consumer wants. The Delphi negotiations will be tricky as the workers are being severely hurt by this process. Should Toyota enjoy tremendous success with its Tundra model, it will be another big wrench in the gears.
