Jerry York's Prescription for GM

Who is Jerry York? Why should you care?
Time for "Crisis Mode"


Jerome "Jerry" York was CFO of Chrysler during its 1990 crisis period. He's the person that Kerkorian wants to install on the GM board of directors, the one that Rick Wagoner has been fighting to keep off. Jerry gave a speech today at the Society of Automotive Engineers. His analysis: It's time for "Crisis Mode". GM will run out of cash in 1000 days, 3 years give or take, if nothing changes. His prescription: GM needs to cut its dividend. It needs to cut salaries across the board. It needs to sell or dispose of "noncore" brands such as Hummer, Saab and Izuzu. Incidentally, he does not believe that significant headway can be made through forced price cuts by suppliers.

Now, regarding the "if nothing changes" proviso, he acknowledged that a lot of thinks could happen to change that three year period. The impact of the Delphi bankruptcy seems to be number one on his mind. I'm not sure what kind of cash hit from Delphi that he's assuming to get to the 1000 day figure. To get to three years, he's assuming the sale of the non-core brands AND 1/2 of GMAC. I still stand by my earlier public pronouncement, unless GM picks up its sales or gets some form of government bail out, technical bankruptcy will be here sometime in 2007.

If I have any criticism of the speech, it is that he focused almost exclusively on North America. Yes, it appears that the biggest part of GM's negative cash flow (6.6 Billion in 9 months) has come from North American operations, but GM also has a worldwide presence. Coming with that is a world of problems and opportunities. What about Opel?

Overall, I was impressed by reading York's speech, and if I had a vote (which I don't because GM already spun off Hughes, and I had GM-H shares), I'd definitely vote to put him on the board.