Hoosier state in firing line as GM announces major cuts

We reported the GM cuts earlier, but here are some interesting statistics I hadn’t seen before. Incentives amounting to $5,000 per vehicle! I had no idea it had gotten so high.


Because UAW labor contracts discourage layoffs and plant closings, the Detroit automakers can’t simply shut down their factories. Changes require UAW approval.

GM’s plan, presented by Chairman Rick Wagoner at the annual shareholders’ meeting in Wilmington, Del., follows a $1.3 billion first-quarter loss. GM has been propping up car and truck sales with heavy incentives that now surpass $5,000 per vehicle on average.

Although it has plenty of cash to stave off bankruptcy, GM’s falling market share has left it with too much production capacity even as it shells out $1,500 per vehicle to cover the health care costs of employees, retirees and dependents.

Earlier this year, GM executives pressed the UAW to renegotiate health care coverage, but union chief Ron Gettelfinger declined. The union said the nation ought to reform its health coverage rather than force workers to pick up higher costs.

Now GM is angling to come back to Gettelfinger with demands to first close plants and cut jobs, then bring back the health care issue, possibly before the 2007 labor contract talks open. GM’s medical plan covers about 1.1 million employees and retirees, including an estimated 50,000 in Indiana.

What’s opened the way for Wagoner to push for both job cuts and health concessions at the same time is Las Vegas casino mogul Kirk Kerkorian. He’s been amassing GM shares, leading to speculation he could lead a takeover of the automaker and oust Wagoner and his executive staff.

While GM’s stock is worth less than $20 billion, its various elements such as Allison Transmission in Indianapolis, OnStar safety network and its pickup truck plants could be sold off in pieces by Kerkorian, bringing in more than $70 billion.

“What GM in effect is telling the union is, with Kerkorian in the picture, who would you rather deal with, Kerkorian or us?” said David Cole of the Center for Automotive Research, a think tank in Ann Arbor, Mich.

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