UAW strike, failed Delphi talks among top threats to GM in 2007
A strike by the United Auto Workers or a breakdown in talks with bankrupt
parts supplier Delphi Corp. are among the biggest threats this year to
General Motors Corp.'s turnaround, the automaker said Thursday in a
government regulatory filing.
GM will move aggressively in UAW contract talks later this year to continue
reducing labor costs, the automaker says in the filing.
"Any UAW strikes, threats of strikes, or other resistance in connection with
the negotiation of a new agreement could materially adversely affect our
business," according to the filing with the Securities and Exchange
Another key issue is the ongoing talks with Delphi, spun off from GM in
1999, which were supposed to wrap up last year but continue to drag on.
Delphi is trying to finalize a deal with a group of investors who have
agreed to pump up to $3.4 billion in the parts supplier. The investors, led
by Cerberus Capital Management LP and Appaloosa Management LP, would control
a newly recapitalized Delphi once it emerges from bankruptcy.
The bid, however, is contingent on Delphi reaching a complex deal with its
unions to lower labor costs and an agreement with GM on its obligations to
Delphi. GM has said it expects its costs connected to resolving its issues
with Delphi to be between $6 billion and $7.5 billion.
Without an agreement, GM could run into trouble getting Delphi and its
affiliates to adequately fill parts orders, further straining GM's already
shaky North American operations, according to the filing.
The automaker listed a host of other risk factors for 2007, including the
rising costs of raw materials used in automobile production, volatility in
its supplier base and increasing fuel costs.
GM also said it will run into problems if its strategy to pare back
incentive spending results in reduced demand for its vehicles.
The company sold 9.1 million vehicles worldwide in 2006 for record revenue
of $207 billion, up from $195 billion in 2005.
The filing came a day after GM released its fourth-quarter and full-year
earnings for 2006.
In the fourth quarter last year, GM earned $950 million on sales of $51.2
billion, its biggest quarterly profit in more than two years. GM's important
North American operations narrowed its quarterly loss to $14 million from
$1.4 billion a year earlier, but the unit finished the year with $779
million in red ink.
For all of 2006, GM lost $2 billion, an improvement of more than $8 billion
compared to a restated $10.4 billion loss in 2005.
The credit belongs to the man who is actually in the arena; whose face is
marred by dust and sweat and blood; who strives valiantly; who errs and
comes short again and again; who knows the great enthusiasms, the great
devotions and spends himself in a worthy cause. Who at the best, knows the
triumph of high achievement; and who, at the worst, if he fails, at least
fails while daring greatly.
T.R. April 10, 1899