MD writes...

Know yourself. Nothing in excess. A pledge and ruin is near.

The three maxims of the ancient Greek city of Delphi.

Not long ago your correspondent wrote of the limp business reporting standards in the UK national press with reference to one piece in particular from The Daily Telegraph. That article suggested that GKN would be better off in the hands of Delphi. This despite Delphi at that time being to all intents and purposes bust. Well, guess what? Delphi filed for Chapter 11 protection on 8 October 2005.

This has serious implications for banks, regulators and the major US and other motor manufacturers who are dependent upon them. And then there are the pensioners, shareholders and debt holders. Delphi has already asked GM for guaranteed business of circa $12bn per annum and received, so far, nothing.

Understandably, GM must be loath to make any other pledges to Delphi having at the time of the spin-off of the former GM division in 1999 granted its 4,000 employees the right to return to the fold should things go pear-shaped. Counting wages and benefits this amounted to perhaps as much as an $11bn cost pledge with no similar offset on sales.

Meanwhile, Delphi's workers are pondering strike action, a result that would likely shut down GM's US production and burn through GM's cash pile (the last 10Q showed the auto ops had $13.7bn) faster than the current management is doing: GM's auto ops have lost $(6.0)bn YTD 9.

A strike, therefore, is just about the last thing GM needs now; and for UAW readers that's a survival not a negotiating assessment. Separately, the company announced yesterday the closure / running down of 12 plants and the sacking of 30,000 workers. Time will tell if this is enough to save the family home from burning to the ground but there must be doubts.

What may be concluded? Well, Visteon - the number two major US components maker - is probably not far behind Delphi despite recently handing back tens of plants and thousands of workers to previous parent Ford (one of those pledges again). GM may well fold in 2006; Ford may survive. However, it's not beyond the realms of imagination that there will be no major US-owned multinational car manufacturers within 5 years.

[Editor: And nothing stands but for his scythe to mow.]

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  1. David Foster // 9/14/2006 06:15:00 PM

    I think Mr Sloan would be unhappy with the degree to which his emphasis on *decentralization* has been reversed. As near as I can tell, there is now no one at GM with a level of product-line responsibility and authority equivalent to that once belonging to the general manager of Cadillac or Chevrolet. While I fully understand the benefits of manufacturing economies of scale, and of engineering synergies such as common parts, there are also some very real things lost in centralization, and I'm not sure the current management of GM understands this.

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