Drum roll please; GM is coming back

By Justin Gallagher

As health care costs continue to go unchecked, employers across the country are cutting back health care programs.

If you’ve surveyed the headlines during the past days, you heard about the deal between General Motors and the United Auto Workers union. The word “deal” doesn’t seem to properly describe the importance of such an agreement.

The company spends $6 billion annually to fix its broken people. If final discussions go well $1 billion of that will be trimmed. This move alone doesn’t mean much for the company’s future, but it is a sign GM is taking necessary steps toward reclaiming its former respectability.

The workers and retirees now will shoulder some of the costs of health care, likely in the form of higher co-payments. Specific details are not available, as GM and UAW discuss the finer points.

GM was hemorrhaging money like the New Orleans levees were water. Ahem, Wall Street, that will be a $4 billion loss so far this year. The company also is contemplating the sale of its most profitable General Motors Acceptance Corporation – a move that, along with this agreement, sent GM’s stock up $2.11.

The whole situation feels like a drum roll before the march back to relevancy. Various auto scribes, granted privilege by GM to see certain future models behind closed doors, have come away nothing short of stunned. If we’re to believe the press releases, there’s a lot of movement going on inside GM, including a bureaucratic streamlining that should do away with the excessively money-driven policy that got GM where it is in the first place.

And if history is any indication, Ford and DaimlerChrysler are likely to follow in a similar fashion. The three are well known for having the Cadillacs of benefits programs. The general consensus among workers and retirees appears to be that they knew it wouldn’t last forever.

That sort of mentality is the only thing that will save GM. The problem is, you can’t be sure that mentality translates to the upper levels with equal resignation, or as I prefer to think, purity.

Hardly a sacrifice on their part. GM’s benefits program would still maintain its reputation as comprehensive if the plan goes through. Workers aren’t exactly happy, but they would be even less so if GM filed for bankruptcy.

By 2008, GM plans to have eliminated 25,000 blue-collar jobs and closed factories. You might think it’s a bad move, that it’s unnecessary to cut that many jobs. That’s understandable, but consider that GM doesn’t forget its employees. In the past, many laid-off workers received pay for doing volunteer work in their community. That may also sound like a poor business decision, but if GM suddenly needs workers again, they can tap into that pool of loyalty.

You have to understand, GM is something like an elephant or a hippo. They eat a lot, move at their own pace and when they’re sick, it’s a big mess. When a behemoth falls, getting up takes real effort.

Heck, even Mercedes lost its way these past few years. It took loads of bad press, one-time-only customers and lost customers to snap the company back into reality – a reality where Mercedes doesn’t make cars featuring parts that fall off.

Last week, a reader said I’m probably one of those weirdos that reads magazines while on the toilet. I’ll come clean and say, yes, I do. He stated something to the effect that cars are only tools to get you from point A to B.

That’s factually quite wrong. It’s also why GM is now forced to navigate through these financial straits. Put simply, the company made appliances, not cars, for too long.

Cars have become such an expression of individuality, with car-based subcultures spread throughout the world as evidence, that one has to consider them more valuable than a Hoover. Case in point, the company (coincidentally?) set on unseating GM on its own turf, Toyota created the Scion to specifically target the import racing culture.

Following last week’s column that essentially called American cars irrelevant, it may seem strange for me to say I have faith in GM. This isn’t blind faith, but rather more based on information that consistently points to a company that remembered what it used to do well. But I’m still worried.