TodayOctober 16, 2021

York Interview

General Motors at a fork in the road and a possible solution for a robust resurgence

When Kerkorian talks, everyone listens Kerkorian is a billionaire casino owner and founder of Tracinda, an investment company, that owns 7.8 percent of General Motors. Jerome “Jerry” York is Kerkorian’s trusted advisor and assistant to Tracinda. On January 11, 2006, York gave a speech to the Society of Automotive Analysts talking entitled “General Motors at a fork in the road and a possible solution for a robust resurgence.”

I sat down a couple of days after the speech,(January 13, 2005) in a telephone conversation with Mr. Jerry York (JY);

Lou Ann Hammond: Mr. York, Do you still have faith in Wagoneer?

Jerome “Jerry” York:

Yes, he is a highly knowledgable man with the motivation to make this turnaround happen.

Lou Ann Hammond:

If that is the case, what is stopping him?

Jerome “Jerry” York:

Up to mid-2004, the resolve was quite good. It was in the third quarter of 2004 that the numbers started to drop and they dropped again in the first quarter of 2005. I think they were blindsided. After that came the announcement that they were cutting back.

Lou Ann Hammond:

How long will the board give him?

Jerome “Jerry” York:

If you watched the Disney debacle with Eisner you can see how this type of thing plays out. With all the cooperate governance and corporate fraud in other companies the board and the senior management are more attuned today. There are varying points of view on the board, but they will need evidence of a turnaround.

Lou Ann Hammond: How long will you give General Motors to implement “crisis” mode before selling your stock?

Jerome “Jerry” York:

General Motors is losing $24 million daily from their cash flow. At that rate, they have three years of cash on hand. It’s not just whether senior management and the board are in crisis mode. The approval percentage by the UAW was not resounding. That means the company doesn’t understand the depth of the problems.

Lou Ann Hammond:

In an article by Brett Clanton of the Detroit News on January 12, 2006, Lutz is quoted as saying, “I have to say I gave at the office,” GM Vice Chairman and product chief Bob Lutz said, referring to what he estimates is a 60 percent drop in his salary after company losses forced him to forgo a bonus and rendered his stock options worthless.
Lutz asserted that cutting executive pay could trigger a talent drain at a time when the automaker needs to marshal all of its resources.
“Heres where people get this wrong: They say, Why are executives paid so much? You have to ask: Why are professional athletes paid so much?”

What is your reaction to Bob Lutz’s comments?

Jerome “Jerry” York:

I’ll keep my comments private.

Lou Ann Hammond:

Do you think Wagoneer will have to do damage control with the UAW from Lutz’s comments?

Jerome “Jerry” York:

I won’t be talking to Rick for a couple of weeks, but I’m sure the UAW has read the story.

Lou Ann Hammond:

Do you think the UAW will open the contracts before 2007?

Jerome “Jerry” York:

It’s highly unlikely. The UAW officer elections are this summer (2006). It will be a year after that the contract has to be reopened. I know all the active workers get to vote for (UAWs President) Gettlefingers job. I believe retired and active workers elect all local officials. The concern with these elections that there may be people that vote for “anti-making concessions” officials.

Lou Ann Hammond:

Do you think UAW ought to get rid of job banks, reduce salary and freeze pension?

Jerome “Jerry” York:

Yes, it is worth noting the fewer companies are retaining pensions and instead of going to 401Ks.

Lou Ann Hammond:

If things don’t go well and the UAW were to go on strike, would GM import cars from China to the United States?

Jerome “Jerry” York:

I am not sure, but I don’t believe these cars are homologated for the U.S. market when it comes to safety and emissions. If GM had anticipated this need – which I think is unlikely – it would have cost more because of research and development and cost.

Lou Ann Hammond:

Is there a point where General Motors should go bankrupt?

Jerome “Jerry” York:

When there is a smallish cash level, companies go bankrupt. I have already stated the state of General Motors running out of cash. They have, at the current rate of spending and economics, three years of cash on hand.

Lou Ann Hammond:

GMAC loans on commercial and personal home mortgages as well as cars. Ford only loans on cars. Does that make General Motors more volatile in the marketplace?

Jerome “Jerry” York:

Yes, car sales are cyclical, the number 3 in the most cyclical, but housing is cyclical too. The only industries that are cyclical are aircraft manufacturing and shipping.

Share
Lou Ann Hammond

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 founding member of the Women's World Car of the Year #WWCOTY, and board member of the Women in Automotive.

Leave a Reply

Your email address will not be published.