GM faces pressure on losses Directors, markets want bolder action


DETROIT -- Pressure is mounting for executives of General Motors Corp. to take swifter, bolder action to stop further deterioration of the giant automaker's ailing North American operations.

With the economy stalled and some union locals fighting attempts to consolidate jobs, GM is facing losses of $4 billion to $5 billion in North America this year, according to analysts, after losing more than $7 billion last year.

Fifteen new car and truck models have failed to stop the erosion of GM's market share, which has dropped to 34.7 percent through the first nine months of the year, from 35.3 percent last year.

Since April, when outside directors demoted GM's president, Lloyd E. Reuss, and replaced him with the vice chairman, Jack Smith, who was put in charge of North American operations, the board has been supervising GM management more closely, painfully aware that the automaker's vaunted treasury is not bottomless.

Indeed, financial markets have been restive, waiting for tangible signs of improvement that could signal the automaker's recovery. After GM's regular board meeting Oct. 5, investors speculated that major cost-cutting moves might be at hand or that GM's management might be realigned once more.

"I see improvements in productivity, but they are very slow," said David Healy, automotive analyst for S. G. Warburg & Co.

Credit-rating agencies have warned that they will soon downgrade GM securities if the company cannot cut costs, a move that would add hundreds of millions of dollars to GM's borrowing costs.

Strikes within the last two months at two GM factories, and labor unrest at others, have heightened fears that the United Automobile Workers union might be obstructing cost-cutting to prevent the loss of jobs.

The Washington Post, quoting unidentified sources, published an article yesterday saying that GM's outside directors were putting pressure on Robert C. Stempel, GM's chairman, to get tough with the UAW or face the loss of his own job.

But the article appeared to be based on false premises, since a GM official said he believed top leaders of the UAW were not standing in the way of productivity improvements. Rather, GM told directors Monday that the strikes were caused by isolated union locals angry about the loss of jobs.

Moreover, negotiations with the UAW have been the responsibility of Mr. Smith, GM's president, not Mr. Stempel.

"We think the UAW leadership would have preferred not to approvethe strikes but was forced to do so for internal political reasons," said a GM labor relations expert, who spoke on condition of anonymity. Productivity increases have been accomplished at scores of GM plants without any fallout, he said. Privately, some UAW officials have confirmed this.

In response to questions about whether GM's outside directors were unhappy with labor relations and their impact on cost-cutting, Mr. Stempel issued a statement saying, "There is no disagreement between management and the outside GM directors on the position the corporation must take in bargaining with the unions representing our employees."

On plant closings, GM executives apparently cannot decide which to eliminate until they decide which car and truck models to continue building, a process that has proved more complex and lengthy than originally thought.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad