After General Motors
This week, GM made two new announcements. First, the automaker plans to start cutting its salaried workforce. Second, GE
I think the cuts in salaried workforce signal two things. First, the company is posturing as it prepares for talks with the United Auto Workers union in April. Management has to begin looking for concessions from the largest part of its labor force to reduce expenses related to employee rolls and benefits. Cutting salaried workers shows that management is willing to spread the pain around. (But will management salaries and bonuses take a hit?)
Second, I think this move may signal the beginning of a reduction in the product line. GM presents its customers around the world with nine well-known brands and many other smaller ones, while Toyota
And although the GE news is not really new -- GE has already ended similar programs with Ford
As I was writing this piece, GM also announced it was in talks to sell a stake in GMAC's commercial mortgage business. According to The Wall Street Journal, the deal could raise up to $1 billion, which happens to be the outstanding balance that GM owes to GE. Although desperate times call for desperate measures, I think selling parts of the golden goose to provide liquidity for the clunker is not a value-enhancing proposition. My long-term track record doesn't compare with those of Mason Hawkins or Charles Brandes -- both have recently taken big stakes in GM -- but the automobile unit is a major drag on the profitable GMAC business. In an immensely competitive environment, there may not be enough time to turn things around.
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