Thousands of workers take buyouts at GM - good news, sort of
Former General Motors Corp. (GM) President Charles Wilson once famously quipped, "What's good for General Motors is good for America." That statement was made in the 1950s, when GM's dominance of the automotive world was unquestioned. Things have changed quite a bit since then, of course, though the saying still holds true in a strange way. Now, instead of celebrating national industrial strength, high profits and a well-paid workforce, the phrase calls up a desperate kind of hope that the U.S. and its core manufacturers can recover.
Today's announcement that that 7,500 UAW members at GM are taking buyouts brings that new paradigm to mind. "We're pleased," GM spokesman Tony Sapienza told Bloomberg News. "This is a significant milestone in progress in our restructuring plan."
Shares of General Motors, which are down more than 85 percent over the past year, soared on the news. But even with today's 11 percent rise, the stock is only trading at about $3.34. More workers took the buyouts than some analysts predicted. Bloomberg points out that GM has trimmed about 60,500 jobs in three buyouts since 2005.
GM's future, though, remains cloudy. U.S. auto sales may drop as much as 40 percent in March compared to last year, according to industry forecasts. Meanwhile, the numbers of car shoppers who say their primary choice would be a GM vehicle fell by almost 12 percent, while the share for Chrysler dropped by a third, according to CNW Research.
GM and Chrysler got $17.4 billion in loans from the Bush administration to keep themselves afloat. They have told the Obama administration that they will probably need another $21.6 billion. Ford Motor Co. (F) has declined government assistance thus far, though some analysts have speculated that the automaker may eventually need it. The automakers have until the end of the month to prove they can be viable with the emergency funds.
Steven Rattner, the banker who is the Obama administration's chief auto advisor, recently said the plans being offered by the automakers were too ambitious and that they may need "considerably" more than the $21.6 billion that they request.
Administration officials are trying to prevent GM and the other automakers from going bankrupt, arguing the results would be catastrophic.