AFSCME 3357-HOF'S BLOG

General Motors: "There is No Plan B"
$18 Billion request Calls for Drastic Cuts - No bankruptcy

It's 1:00 AM on Wednesday, and I'm finally getting to the Detroit News summary of the GM plan. GM wants $18 billion in government funds. It plans to cut 30,000 jobs, close 9 plants, eliminate 1,750 dealerships (about a fourth of the total). Pontiac will be cut back to specialty cars. Saturn will be "reviewed". All of this cutting will allow the government to be paid back by 2012 according to the plan. Oh yeah, they're selling the jets, and Wagoner will take a dollar a year salary.

Naturally, the devil is in the details. GM's plan would require deep concessions from the unions including -who knows what- will happen to the VEBA. Also, the dealers will need to be paid off if the restructuring is taken outside of bankruptcy court.

Quite frankly, I don't see how the math adds up. It takes time (and money) to do a restructuring. To get people to give up benefits without making a fuss, you have to offer them something. What about legacy costs, pensions? Retiree health care? In 18 months, GM will owe just the VEBA $12 billion. It took them 3 years to shut down Oldsmobile. GM is losing up to $3 billion per month right now. Burning through $3 billion per month, $18 billion only buys GM 6 months. Right now, it doesn't look like the auto market is going to be a whole lot better 6 months from now than it is today.

With a Chapter 11 and $40 billion in new money, GM has an excellent chance at emerging as a new strong company. All $18 billion does is buy some folks a paycheck for half a year or so.