DETROIT – General Motors Corp. is not stockpiling inventory in advance of contract negotiations with the United Auto Workers union, a top executive says.
“We’ve made no decision to do that,” says GM North America President Troy Clarke, speaking to reporters at the North American International Auto show here.
“We review inventory a lot. Right now, we reduced our schedules in the first quarter by almost 10%. To say we don’t talk about these things is not true, because we do. But we’ve made no decisions.”
Clarke says media reports suggesting GM is preparing for a fight with the UAW “probably does not serve us well.”
UAW contract negotiations are to begin in June. A top issue is the Jobs Bank – the contract-enabled program allowing laid-off hourly workers to retain nearly full salary and benefits. Clarke has said there is room to change the Jobs Bank but has not called for ending it.
“We talk a lot about it,” he says. “When you’re in the bargaining process, you usually don’t land on stuff so early. But I am encouraged by the discussions. Let me just say there are options and opportunities.”
In addition to the labor talks, GM enters 2007 with a full plate that includes a needed final resolution of a bailout deal with bankrupt supplier Delphi Corp. It also will have to continue to manage a downsizing of its workforce.
GM eliminated 34,000 employees, about 30% of its hourly workforce, in 2006 through a special attrition program.
Clarke says the auto maker needs to see its current hourly worker attrition rate, which is running about 5%-7%, continue into 2007 to avoid another round of job cuts.
“If it continues to work, then we’re OK,” he says. “If it doesn’t, then we’ve got an issue we’ve got to address.”
The special attrition program did not alter the demographics of GM’s hourly workers, with nearly 60% more than 45 years old, Clarke says.
Another major cost drag is the yearly $2 billion GM says it spends above market prices for Delphi parts.
Competing equity firms Appaloosa Management LP and Highland Capital Management LP have proposed $3.4 billion and $4.7 billion refinancing plans, respectively, for Delphi. A Jan. 11 U.S. bankruptcy hearing will review Delphi’s proposed 6-month extension for submitting a formal plan of reorganization.
“We would certainly hope that as Delphi gets itself squared away, we could get on another path that allows us to cut some of that (extra cost) back,” Clarke says.
Meanwhile, GM is focusing on boosting its vehicle residual values, which it says grew an average 3% company-wide in 2006.
The Saturn Aura, which this week won the North American Car of the Year award given by a select panel of automotive journalists, currently is showing a 3-year residual value of 49%. That’s close to the Toyota Camry’s territory of 51%, Clarke notes.
While the Aura is a feather in GM’s cap, sales of GM’s midsize SUVs (the Chevrolet TrailBlazer and GMC Envoy) will continue to trail off this year, though perhaps not at the rate they did in 2006, Clarke says.
TrailBlazer and Envoy deliveries were down 28.4% and 15.4%, respectively, last year. GM has stopped making the extended versions of the midsize SUVs.
“That (segment) fell off the end of the Earth,” he says, adding even incentives won’t spur demand.
GM is betting its new Lambda-based cross/utility vehicles for Buick, GMC and Saturn will make up for the volume lost by the midsize utilities.
Clarke says he expects significant industry growth in the highly contented and high-priced sector of the small-car market, which is dominated by BMW Group’s Mini Cooper and Volkswagen AG’s Golf.
Saturn will attempt to crack that import-heavy market with the 3- and 5-door Astra, which will be imported from Adam Opel GmbH’s plant in Belgium.
Saturn will begin Astra sales in late 2007. Clarke hints that Chevy could be stepping up its game in that sector, as well.
“That is one of the growth segments of the (U.S.) market, and we really hope to tap into that,” he says. “We think Saturn is a good way to do that, and ultimately Chevrolet will be a good way to do that as well.”
