General Motors' Crawl out of the Red
If you've followed the saga of General Motors in recent years, you probably know the struggling auto manufacturer unloaded a massive weight from its shoulders when it cut a deal with the auto workers' union. The Wall Street Journal had a worth-reading op-ed a few days ago about the "Two Heroes of Detroit," Robert S. Miller and Ron Gettelfinger. Miller is chairman of Delphi Corp, Gettelfinger is the president of the United Autio Workers.
In late 2005, Miller took over Delphi, an auto parts maker that was spun off from General Motors, and immediately took it into Chapter 11. He demanded steep wage cuts and declared that Delphi's losses brought "into sharp relief the different value the global market places on knowledge workers versus basic manufacturing workers." Many in Detroit, including Gettelfinger, lambasted Miller. The union eventually backed Miller's plan.
Two years later, Gettelfinger took a page out of Miller's playbook.
"On the heels of the Delphi agreement, Mr. Gettelfinger led the union into its quadrennial contract talks with the Detroit Three -- starting with GM. He hired a Wall Street bank, Lazard Ltd., to analyze GM's financial condition, and to assess objectively whether saving GM meant sacrificing such UAW shibboleths as full-freight health insurance, guaranteed medical benefits for retirees, full pay for laid-off workers and the like. The answer, of course, was yes.
Last fall the union reached historic deals that shifted retiree health benefits from the Detroit car companies to a union-run trust fund that the companies will fund at 60 cents on the dollar. The union also accepted two-tier wages, with lower pay for many new hires, and agreed to let the companies offer workers lump-sum buyout plans to shed unneeded positions. The short strikes that preceded the agreements with GM and Chrysler stemmed from Mr. Gettelfinger's need to sell the deal to the union's rank-and-file."
To cut is to cure.
More recently, reports say GM's plan to cut annual U.S. labor costs by $5 billion in the next three years will significantly improve earnings.
More recent GM news:
-- GM Daewoo developing low cost car for emerging markets
-- GM Wants Bigger Piece Of China Joint Venture
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