John Batchelor and Lou Ann Hammond discuss the General Motors legacy costs.

John Batchelor and Lou Ann Hammond discuss the General Motors legacy costs.

April 22, 2005 -John Batchelor and Lou Ann Hammond discuss the General Motors legacy costs. Does the World need General Motors?

Does the world need General Motors?

According to John Casesa, automotive research, Merrill Lynch & Co., “General Motors has $20 billion of cash, pays a $2 annual dividend and believes that it can someday make $10/share under the right conditions. This is not the making of a persuasive argument for concessions. Second, the current contract doesnt expire until 3Q:07 and we believe it would be risky politically for the UAW leadership to convince it’s membership, which includes a large retiree constituency (which votes in elections for union leadership) to give up it’s attractive benefit package until it feels it absolutely has to. In conclusion, we think any discussions between GM and the UAW today represent the beginning of a long process that will conclude more than two years from now when the current contract expires, so, in our view, investors should not expect near-term relief from givebacks.” Mr. Casesa is one of several analysts who have downgraded G.M. to a “sell” rating this year.Back in December of 2000 General Motors announced the phase-out of Oldsmobile. Since then they have writtten down equipment and written off over $500 million on accrual in compensation to Oldsmobile dealers, who have separation agreements. Of the 2,802 dealers 99 percent of them have taken the Transition Financial Assistance Package (TFAP). Phasing out a product line is not cheap and it is an agonizing process. In the end the plant will probably be retooled and reopened. The employees will either go to work on another product line or will be given severance packages and start collecting their pension and health care costs, all of which will be added to the accumulating fixed cost General Motors is burdened with already.

The UAW used to hold a purpose for workers, but with every other car company manufacturing cars in America without the UAW is there still a need for them? The UAW does all it can to keep General Motors from shipping it’s production of vehicles to Mexico and China, but does it sit down at the table and talk to General Motors about what it can do to realistically keep General Motors, and it’self, as an ongoing concern?

The lack of loyalty the car manufacturers are seeing is indigenous to the marketplace in general. It is brought on by disloyalty from companies to their employees and the general public watching big companies play shell games with their money. Forget the brand loyalty of yesteryear, folks are going for the cheapest they can find that still have the active ingredients that are needed, whether it be over-the-counter drugs, prescription medicine or cars.

And dont expect a loan from the government either; Any company that has gone to the government looking for handouts or loans has asked their unions to make concessions beforehand. In the case of United Airlines some of the unions have conceded three times and they are still not out of the woods. General Motors shouldnt dream of going to the government without asking the UAW to concede some of it’s benefit’s.

General Motors needs to find some answers for it’s product and legacy problems. GM is too big, with too many lives at risk to have it go under. General Motors is the worlds largest automaker, selling nearly 9 million cars and trucks worldwide last year. It is the third-largest business in the United States, with revenue of $193 billion last year.

Losing them would would be felt all around the world. According to Wards Auto, General Motors is a lot more global than most people realize.

AM GENERAL

AM General builds Hummer vehicles for GM. GM supplies technology and parts for the Hummer vehicles and has rights to market the brand.

AVTOVAZ

AvtoVAZ and GM have an assembly joint venture in Togliatti, Russia. Each owns a 41.5% stake. It currently produces Lada Niva 2123-based Chevrolet Niva small SUVs and will add output of Opel Astras.

BMW

GM supplies automatic transmissions to BMW. The two auto makers also are teaming up to jointly develop hydrogen refueling standards as part of a goal to have affordable hydrogen vehicles on sale by 2010.

BERTONE

Bertone builds the convertible and coupe versions of the Astra. Bertone also did development work for Saab on the 9X concept, but the production program for that car has been ” postponed.” It also designed the body for the GM Hy-wire concept car.

BRILLIANCE

Shenyang Brilliance, a joint venture between First Auto Works and Brilliance, has a joint venture building SUVs in Shenyang, China with GM.

CHINESE AUTOMOBILE

Taiwans Chinese Automobile Co. Ltd. assembles and markets Opels for GM.

DAEWOO

In late 2002, Daewoo completed the transfer of several of it’s assets to GM Daewoo Auto & Technology Co. Ltd. GM Daewoo is owned 42.1% by GM, 14.9% by Suzuki, 10% by Chinas SAIC and 33% by former Daewoo creditors. Former Daewoo assets included in GM Daewoo are manufacturing facilities in Changwon and Kunsan, South Korea, and Hanoi, Vietnam, as well as nine overseas sales subsidiaries and parts operations in Europe. Daewoo supplies vehicles, powertrains and components to GM Daewoo from it’s Bupyong, South Korea, plant in a deal that runs for six years. GM Daewoo supplies components and vehicle kit’s for assembly by some Daewoo foreign joint ventures.

DAIMLERCHRYSLER

GM, Ford and DaimlerChrysler have several co-research projects under the direction of USCAR. Among them are projects on auto emissions and environmental pollution, advanced-battery and electric-vehicle technology and structural plastics. The three auto makers also have a partnership with the U.S. government called ” New Vision for the 21st Century Truck Partnership,” aimed at developing more fuel-efficient trucks and buses. DaimlerChrysler, Ford, GM, Nissan, Renault and Peugeot own stakes in Covisint, an e-business exchange. DaimlerChrysler, Ford and General Motors have a joint venture, named Route One, to create a uniform dealer credit application system.

FORD

GM and Ford are developing automatic transmissions together. Each will build the unit’s at it’s own plant. GM, Ford and DaimlerChrysler have several co-research projects under the direction of USCAR. Among them are projects on auto emissions and environmental pollution, advanced-battery and electric-vehicle technology and structural plastics. The three auto makers also have a partnership with the U.S. government called ” New Vision for the 21st Century Truck Partnership,” aimed at developing more fuel-efficient trucks and buses. DaimlerChrysler, Ford and General Motors have a joint venture, named Route One, to create a uniform dealer credit application system. Ford and GM own a stake in Budget Rent-A-Car Systems in Australia. GM supplies automatic transmissions to Volvo. DaimlerChrysler, Ford, GM, Nissan, Renault and Peugeot own stakes in Covisint, an e-business exchange.

FUJI Heavy Industries/ Subaru

GM owns a 20% stake in Fuji Heavy and the two are co-developing vehicle technology and complete vehicle platforms for use by Subaru, Saab and other GM brands. GM, Fuji and Suzuki are working together on recycling initiatives in Europe to meet end-of-life regulations there. GMs purchasing joint venture with Fiat performs some purchasing for Fuji. GM sells Saabs through Fuji dealers in Japan.

HONDA

Honda will supply 3.5L V-6 engines and automatic transmissions for the Saturn Vue as part of a 5-year agreement that gets under way in 2003. Honda uses GMs OnStar communication system in it’s Acura vehicles.

ISUZU

GM owns 12% of Isuzu and the partnership between the two companies is extensive. GM makes Isuzu-based medium-duty trucks for Isuzu at it’s Flint, MI, plant. GMs purchasing joint venture with Fiat performs some purchasing for Isuzu. The two exchange components, including engines, and share engineering and some sales and distribution activities. Omnibus Transportes SA in Ecuador, 53% owned by GM, assembles GM, Suzuki and Isuzu vehicles. GM owns 57.7% of General Motors Kenya Ltd., which assembles cars and Isuzu commercial vehicles. Joint venture GM Egypt S.A.E. is owned 31% by GM and 20% by Isuzu. Industries Mecaniques Maghrebines in Tunisia is owned 4.8% by GM and 2.4% by Isuzu. GM owns a minority interest in Isuzus diesel engine businesses. Isuzu-General Motors Australia Ltd. is a 60/40 Isuzu/GM joint venture. GM also assembles Isuzu trucks in several overseas countries. GM owns 51% of General Motors Isuzu Commercial Truck LLC.

LOTUS

GM and Lotus have developed engines together. Lotus Cars is building GMs Vauxhall VX220/Opel Speedster sports car at it’s Hethel, U.K., production center.

MAGNA

Magna builds the Saab 9-3 convertible in Austria.

MG ROVER

GM supplies transmissions to MG Rover.

MITSUBISHI

A Mit’subishi subsidiary supplies parts to GM under a contract that runs through 2005.

NISSAN

DaimlerChrysler, Ford, GM, Nissan, Renault and Peugeot own stakes in Covisint, an e-business exchange. Nissan gets a version of the vans co-developed by Renault and GM.

PEUGEOT

DaimlerChrysler, Ford, GM, Nissan, Renault and Peugeot own stakes in Covisint, an e-business exchange.

PININFARINA

Pininfarina performed design work for the Buick Excelle, based on the Daewoo Nubira from joint venture Daewoo Auto & Technology Ltd., owned by GM, Suzuki and Shanghai Auto. The car is built at the Shanghai-GM joint venture in China.

PORSCHE

Porsche helped develop 2.5L 6-cyl. engines produced by GM Australian subsidiary Holdens.

RENAULT

GM supplies axles and other components to Renault. GM sells Argentina-built Renault Trafic vans in Brazil and Renault sells Brazil-built GM models in Argentina. GM and Renault collaborated on the development of light-commercial vans and the two build vans for each other. Teksid, owned 33.5% by Renault, supplies cylinder heads to GM. DaimlerChrysler, Ford, GM, Nissan, Renault and Peugeot own stakes in Covisint, an e-business exchange.

SHANGHAI

GM and Shanghai Automotive have a car-building joint venture in Shanghai, China, called Shanghai-GM Automotive Co. Ltd. The JV also produces engines, transmission and stampings and has responsibility for vehicle marketing and distribution. GM and SAIC also have a vehicle assembly JV in Yantai, China, owned 25% by GM, 25% by SAIC and 50% by Shanghai-GM Automotive. GM and SAIC are partners in SAIC-Wuling Automotive Co. Ltd., a vehicle assembly operation in Liuzhou, China. SAIC-Wuling is owned 51.1% by SAIC, 34% by GM and 15.9% by Liuzhou Wuling Automotive Co. Ltd. GM Daewoo Auto & Technology Co. Ltd. is a joint venture owned 42.1% by GM, 14.9% by Suzuki, 10% by SAIC and 33% by former Daewoo creditors. Former Daewoo assets included in GM Daewoo are manufacturing facilities in Changwon and Kunsan, South Korea, and Hanoi, Vietnam, as well as nine overseas sales subsidiaries and parts operations in Europe.

SUZUKI

GM owns 20% of Suzuki. Suzuki holds a 0.7% stake in GM and a 2% stake in General Motors de Argentina. The two companies have collaborated on vehicle platforms and co-own an assembly venture in Canada, CAMI Automotive Inc. Suzuki and GM are assembling vehicles together at GM de Venezuela CA. The cars are sold through GMs sales network. Suzuki builds vehicles for GM in Japan. GMs purchasing joint venture with Fiat performs some purchasing for Suzuki. GM Daewoo Auto & Technology Co. Ltd. is a joint venture owned 42.1% by GM, 14.9% by Suzuki, 10% by Chinas SAIC and 33% by former Daewoo creditors. Former Daewoo assets included in GM Daewoo are manufacturing facilities in Changwon and Kunsan, South Korea, and Hanoi, Vietnam, as well as nine overseas sales subsidiaries and parts operations in Europe. GM, Fuji and Suzuki are working together on recycling initiatives in Europe to meet end-of-life regulations there. Suzuki uses GM transmissions in certain vehicles.

TOYOTA

In the U.S., New United Motor Mfg. Inc. (NUMMI), a GM-Toyota joint venture, assembles Corolla derivatives for each to market in North America and Japan. NUMMI also builds Toyota pickup trucks. In 1999, GM and Toyota signed a 5-year research and development agreement to develop advanced propulsion technologies.

OTHER

GM Nigeria Ltd., owned 60% by UAC, 30% by GM and 10% by it’s employees, builds light and heavy trucks and buses. GM has a vehicle-building joint venture, PT General Motors Buan, in Indonesia. GM has a 25% stake in ELAZ-GM, a venture with Elabuga Automotive Works that produces SUVs from knock-down kit’s in the Republic of Tartarstan. GM has a 49% stake in South Africas Delta Motor Corp. Frances Groupe Henri Heuliez S.A. will build a new 2-seat roadster for Opel beginning in 2004. Indias Hindustan Motors Ltd. supplies engines to GM for use in locally built vehicles.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.

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