kansaiwalker1

Can new lineup of big SUVs revive GM?

Ailing automaker hopes 12 full-size models will invigorate a segment that has been shrinking.

By Bill Vlasic / The Detroit News


WARREN -- General Motors Corp. on Tuesday unveiled the most important new vehicles in its effort to turn around its troubled North American operations.


But by betting big on a redesigned fleet of 12 full-size SUVs, including the Chevrolet Tahoe and Cadillac Escalade, GM is trying to buck a consumer shift toward smaller, more fuel-efficient cars and crossover vehicles.

Rising gas prices have hit the large SUV segment hard this year, with U.S. sales down 11 percent through August.

Yet GM, the biggest player in the full-size SUV market, expressed confidence that its new lineup will invigorate a segment that has been steadily shrinking.

"It may contract, but it's not going away," said Mark LaNeve, GM's head of sales and marketing. "This is a very large, very important and very profitable market."

GM Vice Chairman Bob Lutz said the new SUVs will average an industry-best 20 miles per gallon for combined city and highway driving -- an incremental improvement over competitors such as the Ford Expedition and Toyota Sequoia.

"It can't hurt, but that segment is in a state of long-term decline," said David Healy, an analyst with Burnham Securities. "To me, GM is kind of whistling past the graveyard."

With GM losing $2.5 billion in North America in the first half of this year, the automaker can ill afford a lukewarm reaction to its new large SUV lineup, which debuts early next year.

Earlier this year, GM said it decided to launch the new sport utilities ahead of schedule in the order to speed its turnaround efforts.

"It's very important that GM reach the customer base that is turning in their big SUVs coming off lease," said Joseph Phillippi of Auto Trends Consulting in Short Hills, N.J. "It cannot afford to lose those people to other products."

The stakes are huge. Lutz said GM expects to sell about 375,000 full-size SUVs annually, and to account for more than 60 percent of an annual market he estimated at 750,000 vehicles industrywide.

But with gas prices fluctuating wildly in the wake of Hurricane Katrina, the industry will be hard-pressed to sell that many big SUVs this year.

"GM obviously didn't see $3-a-gallon gasoline when they made the decision to speed up the development of these vehicles," Healy said.

In 2004, large SUV demand slumped 6 percent. Tahoe has been the top-selling large SUV since 2001, but sales are off its 2002 peak of nearly 210,000 units. Tahoe sales fell 9.2 percent through August. The Chevrolet Suburban is down 16 percent, and the GMC Yukon 5.9 percent.

But Lutz said short-term spikes in the price of gas hardly diminish the appeal of brawny SUVs that can carry nine passengers and haul trailers and boats.

"We're realistic, and we don't expect the segment to grow," Lutz said. "But there are people who want and need the capabilities of a full-size SUV."

To that end, GM is embarking on one of its most ambitious vehicle launch programs in recent memory.

In the first half of 2006, GM will roll out 12 models off of its so-called T-900 truck platform, beginning with the Tahoe, Escalade and the GMC Yukon in the first quarter.

The automaker also is planning to offer hybrid gasoline-electric versions of the SUVs by 2007, but GM execs gave few details about sales volumes or fuel efficiency targets for the hybrid models.

The sheer breadth of GM's lineup dwarfs the competition in the large SUV segment

From the mass-market Tahoe to the upscale Escalade, GM went to great lengths to differentiate the new vehicles with unique grilles, headlamps and interior packages. The company also will offer quasi-pickup versions like the Chevy Avalanche and Cadillac Escalade EXT.

And while the dimensions of the big SUVs have changed ever so slightly, the company's designers gave the new vehicles a sleeker look with narrower front ends and sharply angled windshields.

"They're not smaller," Lutz said. "But they look smaller."

Gary White, GM's vice president of North American truck operations, said the product development team had two guiding principles for the new SUVs -- "living larger" and "driving smaller."

Additional head- and kneeroom was added in the passenger compartment, and second-row seats can be folded flat or "tumbled" forward for extra cargo space.

In addition to dual-stage air bags for the front passenger seats, GM put roof-mounted side air bags for all three rows of seats.

New suspension and steering systems and an available 6-speed automatic transmission will improve the overall driving experience, White said. New, available safety equipment includes rear-mounted cameras.

GM dealers hope the improvements will retain existing customers and draw new ones.

"We're really anticipating the release of the new vehicles," said Rick Resinger, new-truck sales manager at Champion Chevrolet in Howell. "We've done well with the current models and are looking forward to the '07s. As soon as we can start ordering, we've got customers ready."

Russ Shelton, owner of Shelton Pontiac-Buick-GMC, said he doesn't think he'll have a problem selling the new GMC Yukons when they arrive on his lot.

"For the majority, gas price is not a big issue," Shelton said. "We are still selling SUVs. It's new. It's beautiful. It's exciting. I wish we had it today."

GM executives declined to discuss pricing for the new models, except to say that they expect better profit margins than in the current incentive-driven environment. The current Tahoe, GMC Yukon and Cadillac Escalade are priced from $35,000 to more than $51,000, but GM has had to offer generous discounts to lure buyers.

"We've obviously had to accept some reduction in (profit) margins," Lutz said.

"We naturally plan to re-establish those margins."

While the automaker showed off the entire new lineup to members of the media Tuesday, the vehicles will be introduced to the public sequentially, beginning with the Tahoe's appearance next week at the Texas State Fair.

The challenge will be to build interest in each version of the SUV and to establish separate brand identities in the marketplace, something GM has struggled to accomplish with its passenger cars.

Lutz was quick to point out that the big-SUV introduction is only part of GM's "full-frontal product assault on the marketplace," and noted that the company expects to increase its lineup of smaller crossover vehicles from six to 14 within four years.

But there was no denying the importance of the large SUVs to GM's future prospects.

"This launch," said LaNeve, "is critical to us."

You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.



Article and full size picture at:

http://www.detnews.com/2005/autosins...A01-322175.htm

kansaiwalker1

Related article:

Tuesday, September 20, 2005


GM stresses fuel efficiency as it introduces new SUV lineup


By Dee-Ann Durbin / Associated Press


WARREN -- General Motors Corp., in the awkward position of introducing a new lineup of full-size sport utilities as oil prices reach record highs, stressed the vehicles' fuel efficiency during a media preview Tuesday.

"We're very aware of fuel prices and the impact that they have on our business," said Mark LaNeve, GM's vice president of vehicle sales, service and marketing for North America. "We understand this, and we've been committed to fuel efficiency."

GM unveiled the 2007 Chevrolet Tahoe, GMC Yukon/Yukon Denali and Cadillac Escalade, which will be in dealerships in January. Later in 2006, the Chevrolet Suburban and Avalanche and larger versions of the Yukon and Escalade also will be available. The company didn't reveal prices, but the current models start between $35,000 and $51,000.


Some analysts have questioned GM's emphasis on SUVs at a time when gas prices are high and demand for smaller crossovers is growing. Sixty-six percent of GM's new vehicles are trucks, compared to 37 percent for the industry, and GM also is introducing fewer crossover vehicles than average, Merrill Lynch analyst John Casesa said in a recent report.

LaNeve said full-size SUVs aren't likely to see the boom times they saw early this decade, when industrywide sales approached 900,000 a year. GM is expecting 750,000 in sales next year.

But LaNeve said full-size SUVs remain a very important and profitable vehicle in the company's portfolio. Of the 6.5 million full-size SUV owners in the United States, 62 percent own GM vehicles, LaNeve said.

GM said the new, four-wheel-drive Tahoe can achieve an average fuel efficiency of 20.1 miles per gallon, compared to 18.2 for the 2004 Tahoe. That's better than competitors such as the Ford Expedition and Toyota Sequoia, GM said.

"Even before the spike in fuel prices, GM led this segment in fuel economy," LaNeve said.

GM's new SUVs are about 100 pounds heavier than current models, but the company got fuel savings by installing new V-8 engines that shut off half the cylinders when the truck needs less power.

Engineers also made the vehicles more aerodynamic. The windshields tilt at a more dramatic angle and there are smaller gaps between vehicle panels. Even the luggage rack and running boards are shaped differently to improve efficiency.

GM Vice Chairman Bob Lutz said drivers who want even better fuel economy will be able to get hybrid versions of the SUVs in 2007. LaNeve said the company also is considering diesel versions.

LaNeve said vehicles with the 5.3-liter engine also are capable of using ethanol, which is less fuel efficient but cheaper than regular fuel and contains only 15 percent gasoline. GM already has 1.3 million vehicles on the road that can run on ethanol and gas and will produce up to 500,000 more next year, LaNeve said.

LaNeve said GM plans to heavily promote ethanol capability in states with a lot of ethanol fueling stations, including Minnesota and Illinois. It also plans to send letters to owners who may not realize they have ethanol-compatible vehicles.

LaNeve said surveys indicate fuel economy is the most important feature to drivers right now. But GM also has significantly upgraded interiors. GM slimmed down the seats and contoured them to increase leg room. It replaced shaggy ceiling upholstery with smooth fabric and gave individual lines distinct colors and materials, such as metal finish on the console and steering wheel in the GMCs. New options include power liftgates and rear seats that fold up automatically.

The vehicles also have new safety features, including seat belts that tighten if the vehicle is struck from the front, side or rear and standard stability control to prevent rollovers. Side-impact air bags and rearview cameras are optional.

GM shares closed down 23 cents to $31.08 on the New York Stock Exchange.

Dee-Ann Durbin can be reached at ddurbin@ap.org.

http://www.detnews.com/2005/autosins...suv-321456.htm

JJ4Short

Hmm gas is expensive...lets boost our SUV production

Loseit

iTrader: (1)

wow, it's like watcing a dinasaur die. Kinda sad, actually.

agranado

those fucking retards

heyitsme

They have to redesign their suv/trucks no matter what gas prices are, they're an important part of their business and that market isn't going to die in the next five years unless gas would continue to spiral out of control which would just be a problem in general for everyone.

They do need to be on top of engine developments for the future to lower fuel consumption though and it seems they are.

titan

SUV sales will continue slump, but they're really not going anywhere.

chef chris

And 20 MPH isn't "good" no matter how you look at it.

Let's get these things up around 25 mpg...I'm sure they have the ability to do it...if it costs more to do, so be it ~ let the people guzzling all the gas pay for the new technology.

Infamous425

i doubt it will get 20mpg in real-world driving

Edward'TLS

This is marketing propagada. They always give mpg and acceleration numbers that are only achievable in closed, controlled test environment.

srika

ridiculous.

heyitsme

Fibonacci

Delphi Bankruptcy Looking More Likely Each Day: Doron Levin
2005-09-22 00:02 (New York)


(Commentary. Doron Levin is a Bloomberg News columnist. The
opinions expressed are his own.)

By Doron Levin
Sept. 22 (Bloomberg) -- Anyone who thinks Steve Miller,
Delphi Corp.'s chief executive, will try to pull off a last-
second miracle so his company can avoid bankruptcy at any cost
ought to reconsider.
Signs are accumulating that suggest the biggest U.S. auto-
parts supplier -- spun off from General Motors Corp. in 1999 --
is moving closer to a Chapter 11 filing by mid-October, and
perhaps any day.
Delphi has had cumulative net losses of $5.7 billion over
the past four quarters, capping a dismal run in which it lost
money in three out of the past four years. Standard & Poor's
CCC-credit rating on Delphi's 6.5 percent bonds due 2009 is nine
rungs below investment grade. And Delphi shares have fallen
about 50 percent since mid-August, closing at $3.48 yesterday.
The reason for the losses is simple: In the midst of strong
consumer demand for vehicles, Delphi's costs, particularly for
labor in the U.S., are out of whack because of union contracts
that pay workers and retirees some of the world's most generous
health-care, pension and other benefits.
While bankruptcy would inflict plenty of pain, it might
also set in motion a series of events that lead to a
restructuring of other auto-parts suppliers, as well as GM and
Ford Motor Co. A judge could void labor contracts, and
eventually Delphi might even terminate its pension plan --
forcing competitors to seek similar concessions or face
bankruptcy.

Talking the Talk

In a speech last week in Frankfurt, Miller sounded as
though he was setting the stage for the type of bankruptcy he
intends to conduct if needed. It included a promise that Delphi,
based in Troy, Michigan, will keep shipping parts to automakers
to comply with contracts.
``The word bankruptcy scares people, particularly here in
Europe, where it means the same as liquidation and shut-down of
the business,'' he said. ``If Delphi were to choose Chapter 11,
it will be business as usual in Europe, in the rest of the world
and even in the U.S. while we adjust our labor costs.''
European automakers, and U.S. counterparts, are
understandably nervous. On May 17, Collins & Aikman Corp.,
another big parts maker, became the latest U.S. auto supplier to
file for bankruptcy protection.

Reagan's Guy Out

Collins & Aikman's former chief executive, David Stockman,
had been denying speculation of an impending collapse a few
weeks before the board forced him out. Stockman, one-time budget
director for President Ronald Reagan, resigned on May 12.
Miller, who has said he prefers to avoid bankruptcy, called
Collins & Aikman ``an embarrassment to our whole industry, not
because they had to file Chapter 11, but because of the way they
did it.''
In addition to reassuring Delphi's customers, Miller's
speech implied that automakers and the United Auto Workers
union, shouldn't necessarily fear court-supervised restructuring
if that's what it takes to save their companies and lots of
jobs.
The plants and tools that make parts and vehicles in
Detroit can produce healthy profits if they're managed properly.
That's why financier Wilbur Ross, who bought Bethlehem Steel
Corp. assets after Miller took the steelmaker into bankruptcy in
2001, has bought Collins & Aikman bank debt and is browsing
Delphi's operations.

Concessions Needed

Delphi needs big concessions from the union, which must
understand by now that labor costs of $60 an hour can't endure
much longer in the global market for industrial products. Delphi
also is seeking financial help from its former parent GM, which
can't build vehicles without Delphi parts.
Let's assume UAW leaders agree that wage rates and benefits
have to be trimmed for the good of all. Such an agreement still
could spark a revolt by the rank and file. Leaders, therefore,
will portray themselves as driving a hard bargain.
A Delphi bankruptcy, though damaging to the union, will
force UAW workers at GM and elsewhere to confront the stern
reality that conditions of employment are destined to be less
generous.
Yesterday, Miller in an interview said Delphi's talks with
GM and the union have been ``constructive.''
Before Delphi and UAW reach an agreement, it's likely the
UAW will wait until the Canadian Auto Workers union concludes
its contract negotiations with GM. The CAW set Sept. 27 as the
deadline with GM; it already has concluded agreements with Ford
and DaimlerChrysler AG.

Buyouts, Stock Options

One possible settlement in the U.S., which would let UAW
leaders save face, might include buyout packages for older
workers and stock options or shares for younger workers. In
return, Delphi (and eventually GM, Ford and other unionized
automotive companies) would benefit from labor costs as much as
30 percent lower and more flexible work rules.
Benefits such as paid furloughs for laid-off workers, which
cost the industry hundreds of millions a year, are probably
doomed.
Since profitability and strategic flexibility will be
``likely higher post-bankruptcy, from a managerial and secured
creditor's point of view, Delphi may see itself better off in
bankruptcy,'' Brian Johnson, an equity analyst for Sanford C.
Bernstein & Co., wrote in a report yesterday.
Himanshu Patel, an automotive analyst for JPMorgan Chase &
Co., said on Sept. 20 that the stock market's fears of a Delphi
bankruptcy are ``overdone'' and that the chances it will happen
remain slim. He is recommending the shares as a ``buy.''
I'd have to disagree with Patel. While it's possible the
UAW will make historic concessions to prevent a Delphi
bankruptcy, don't bet on it: The record of union willingness to
adapt to a changing economy and auto industry is spotty at best.

Source: Bloomberg.com

Fibonacci

Delphi Imperils GM's SUV Profits With Threat to File Bankruptcy
2005-09-22 00:00 (New York)


By John Lippert and Jeff Bennett
Sept. 22 (Bloomberg) -- In 1980, when Chrysler Corp. was on
the brink of bankruptcy, Robert ``Steve'' Miller, then the
company's treasurer, took a fake hand grenade into a beige-colored
conference room on the 54th floor of the Pan American Airways
building in New York. He presented it to the German bankers who
were resisting the restructuring of Chrysler's debt and said,
``You can pull the pin and blow up Chrysler, and the world will
know you are the guys who did it,'' recalls Gerald Greenwald, then
an executive vice president at the company.
Today, Miller, 63, as chief executive officer of Delphi
Corp., the largest U.S. auto parts company, wields a real weapon.
If General Motors Corp. and the United Auto Workers union don't
help rescue Delphi, Miller says, a bankruptcy of the company's
U.S. businesses may be unavoidable -- and may come before Oct. 17.
``What happened in steel four years ago, what happened in airlines
over the last couple of years, is coming to this town,'' Miller
says. The U.S. auto industry can't support generous retirement
packages from the past, he says.
Troy, Michigan-based Delphi, which employs 185,000 people,
faces a $14.5 billion unfunded liability for pensions and retiree
health care. ``The legacy liabilities are humongous,'' says
Miller, who won't receive a Delphi pension or retiree health care
after age 65.
A Delphi bankruptcy could trigger bankruptcies among dozens
of smaller companies that supply components to Delphi, says Craig
Fitzgerald, a partner at accounting firm Plante & Moran PLLC in
Southfield, Michigan.

Crucial Parts

That, in turn, could disrupt shipments of crucial parts just
as General Motors, Delphi's largest customer, is launching a new
generation of Chevrolet Tahoe sport utility vehicles.
GM sold 483,912 full-size SUVs last year. Even with U.S.
gasoline averaging $2.96 a gallon in mid-September, each big SUV
generates $5,000 in pretax profit, more than any other high-volume
vehicle at GM, Burnham Securities Inc. analyst David Healy says.
A bankruptcy could saddle GM with $4.9 billion in pension
liabilities for Delphi workers who were on the automaker's payroll
before it spun the subsidiary off in 1999, says Darren Kimball, an
analyst at Lehman Brothers Holdings Inc. in New York. GM accepted
this liability in its 2003 UAW contract, Kimball says.
Scott Sprinzen, an analyst at Standard & Poor's, which
lowered GM's credit rating to BB, or junk-bond status, in May,
says its entanglement with Delphi could drive the rating even
lower. GM shares had fallen 23 percent in 2005 as of Sept. 21,
trading at $30.77.

`Old Social Contract'

Miller is pressing the UAW for the elimination of health-care
coverage for retirees over 65, higher out-of-pocket payments by
current employees for health care, and an end to restrictions on
plant closings, according to UAW Local 909 in Warren, Michigan.
Lindsey Williams, a Delphi spokesman, declined to comment on the
talks.
``The old social contract in Detroit was, you could work 30
years and retire with health care and a high proportion of your
income,'' says Dan Luria, an analyst at the Michigan Manufacturing
Technology Center in Plymouth, Michigan. ``The new social contract
is, we'll pay you as long as you're here.''
If Miller gets the contract changes he wants, only three U.S.
companies -- DaimlerChrysler AG's Chrysler unit, Ford Motor Co.
and GM -- would be left to honor the UAW's traditional social
contract. A cave-in at Delphi would make it harder for the union
to defend itself at these companies, Luria says.
Even now, GM is pressing to cut $20 billion from its $61
billion health-care and life insurance liability for UAW workers,
retirees and dependents, as well as trim its U.S. hourly payroll
by 25,000, or about 20 percent.

Highest Unemployment

Job cuts at GM, Delphi and other automakers and suppliers
could saddle Michigan with unemployment as high as 9 percent for
the foreseeable future, says Sean McAlinden, a labor economist at
the Center for Automotive Research in Ann Arbor, Michigan.
The August unemployment rate in Michigan was 6.7 percent, the
highest among U.S. states.
Miller has a history of tough negotiations. Since 1980, he
has helped reorganize eight troubled companies: Bethlehem Steel
Corp., Federal-Mogul Corp., Morrison Knudsen Corp., Olympia & York
Developments Ltd., Reliance Group Holdings Inc., UAL Corp., Waste
Management Inc. and Chrysler.
Among those, six declared bankruptcy, three of which --
Federal-Mogul, Reliance and UAL -- are still under the protection
of the courts. The others are part of bigger companies.
``Most CEOs view bankruptcy as an admission of failure,''
says Wilbur Ross, 67, CEO of New York-based WL Ross & Co., who
purchased bankrupt Bethlehem Steel from Miller in 2003. ``Steve
views it as one of several tools people can use.''

Bad News

Miller brought along a well-developed management technique
when he arrived at Delphi on July 1, says Gerald Meyers, a
business professor at the University of Michigan in Ann Arbor.
Miller works fast, Meyers says.
He communicates bad news himself and works mostly with people
already employed at the company he's trying to save. He identifies
his own successor as soon as possible and uses a variety of
strategies to slice healthy business units away from those that
are sick.
``If the most sensible thing is to sell the company, that
won't bother him a bit,'' says Ross, who adds he may use part of a
$4.5 billion fund earmarked for acquisitions to buy Delphi.
Siemens AG, Germany's largest engineering company, may also be
interested in parts of Delphi if they would strengthen its
automotive electronics business, spokesman David Ladd says.
What have caught their -- and potentially others' -- interest
are Delphi's high-tech businesses. In addition to conventional
auto parts, the company invents and makes electronic components
that control combustion inside gasoline or diesel engines,
activate airbags and operate entertainment systems inside cars.

Personal Digital Assistants

Those products represent about half of the company's $28
billion in annual revenue. Delphi has also leveraged them into
nonautomotive uses.
The company makes portable and stationary devices that
capture and record signals from XM Satellite Radio Holdings Inc.
as well as a $1,495 personal digital assistant through which
doctors can access patients' medical records.
The woes within Delphi's traditional activities date back to
the 1999 arrangement under which GM distributed 80.1 percent of
its Delphi stake to shareholders, contributed 2.2 percent to a
pension trust and sold the rest in an initial public offering.
Then GM CEO John F. Smith Jr., 67, agreed to the UAW's demand
that Delphi match GM's pay for longtime workers. Those workers now
receive $27.50 an hour.

Oil Filters

Delphi always knew it couldn't keep making oil filters at
$27.50 an hour, says Don Runkle, 60, who retired as vice chairman
in June. At the time of the spinoff, GM promised to wind down its
business with Delphi at approximately the attrition rate of high-
wage workers, Runkle says.
As GM's own difficulties deepened -- leading to this year's
$1.39 billion first-half loss -- the automaker allocated less work
to Delphi.
``Right from the start, the business we anticipated and
planned during the spinoff analysis came in much lower than what
the business plan and capital structure could handle,'' Runkle
says.
Delphi now operates 11 U.S. factories with 11,000 high-wage
workers making commodity parts such as oil filters, air cleaners
and brakes, mostly for GM. For every $100 of auto parts sold to GM
in the first half of 2005, Delphi's operations lost $11, compared
with a profit of $4 on everything else, Lehman's Kimball says.
The full extent of Delphi's troubles became apparent on June
30, when the company restated four years of earnings and reported
a $4.8 billion loss for 2004. This loss, which included a $4.7
billion writeoff of previous tax benefits, compared with a loss of
$36 million that was first reported for 2004.

$338 Million Loss

For the second quarter, Delphi posted a $338 million loss,
following a $143 million profit a year earlier.
Miller says he's fixed all of the accounting problems he
knows about and is cooperating with an ongoing investigation by
the U.S. Securities and Exchange Commission. At issue, among other
things, is how Delphi accounted for inventory sold in one quarter
and repurchased in subsequent periods, the company said in a March
4 SEC filing.
Delphi also announced that as of June 30, the money it owed
suppliers totaled $3.6 billion, almost $1 billion more than cash
on hand. That means suppliers could spark a liquidity crisis if
they demand immediate payment for delivered parts, says Rod Lache,
an analyst at Deutsche Bank Securities Inc. in New York.
That could still happen, Miller says, if suppliers conclude
that GM and the UAW won't help Delphi. ``I don't expect that to
happen,'' Miller says. ``I expect them to work with us.''

Worker `Buyouts'

Miller says he hopes GM will help him ``buy out'' long-time
workers by offering them cash to retire, quit or accept lower pay.
He has asked for an answer from GM and the UAW before Oct. 17,
which is when new U.S. bankruptcy laws go into effect, according
to UAW Local 909.
These laws limit executive compensation, including retirement
bonuses, to 10 times the average pay of non-management workers.
They also allow debtors other than the company's managers to
file a reorganization plan after 18 months; current laws enable
judges to reserve this right for management for longer periods.
Buying out Delphi workers would require a one-time payment
from GM of up to $2.5 billion, says Himanshu Patel, an analyst at
JPMorgan Securities Inc. That's cheaper for GM than a Delphi
bankruptcy, Patel says.
Buying out long-time workers would allow both companies to
save money, Miller says. Delphi could hire a new workforce at a
$14-an-hour pay scale similar to other parts companies and, in
turn, charge GM less for parts.

`Their Call'

Vice Chairman John Devine told financial analysts on Aug. 30
that GM would do what's best for its shareholders. ``We don't know
what the outcome is for Delphi -- that's their call,'' Devine
said.
The UAW has so far refused to accept Miller's initial
demands. At an Aug. 24 meeting, UAW Vice President Richard
Shoemaker said the contract changes Miller wants are so severe
that the union might be better off letting Delphi file for
bankruptcy, according to UAW Local 909.
His aides passed out a document that said the union could
still go on strike even after a Delphi bankruptcy.
Delphi shares traded at $3.53 on Sept. 21, down 61 percent
for the year compared to a 0.1 percent decline in the Standard &
Poor's 500 Index. The company's 6.5 percent bonds maturing in
August 2013 sold for 64 cents on the dollar on Sept. 21, compared
to 98.89 cents on Dec. 31, 2004.

`Strong Negotiator'

``The message coming out -- that without concessions from the
UAW or GM or both, the company could file for bankruptcy -- has
made the market less certain that Delphi can remain solvent,''
says Sasha Kamper, who helps manage $86 billion, including Delphi
bonds, at Principal Global Investors in Des Moines, Iowa.
Some investors are optimistic.
``Miller's obviously a very strong negotiator,'' says Patrick
Nolan, an analyst at TIAA-CREF Investment Management in New York.
``He's dealt with restructurings before, and he benefits from
having a fresh outlook by being an outsider at Delphi.'' TIAA-CREF
doubled its Delphi holding to 24.9 million shares in the second
quarter.
``They've got some legacy businesses that are just awful,''
says Douglas Dethy, managing director of New York-based DC Capital
Partners LLC. ``If they can get that solved, the rest of the
company can really prosper.'' Dethy bought 1 million Delphi shares
in the second quarter.

Relaxed and Accessible

Miller, who stands 6 feet 4 inches (193 centimeters) tall, is
bald and wears rimless eyeglasses, prides himself on maintaining a
relaxed and accessible demeanor. During a media reception in
August, he resisted efforts by a public relations aide to limit
questions and promised he won't stop talking to reporters.
``I've never seen Steve lose his temper,'' says Gerald
Rosenfeld, 58, CEO of Rothschild Group's North American bank
business, who worked with Miller on the Chrysler restructuring
while at Salomon Brothers AG and is his banker at Delphi. ``He's
one of the most straightforward guys I've ever encountered in big
bank deals.''
Miller earned a bachelor's degree in economics from Stanford
University in 1963. He received a law degree from Harvard
University in 1966 and returned to Stanford for a master of
business administration degree in 1968.
The only thing he liked about law school, he says, was
meeting a neighbor named Maggie. She was an administrative
assistant at an architectural company; she and Miller were married
in 1966.

Model Railroad

The entire 2,000-square-foot (186-square-meter) basement of
their Sunriver, Oregon, home is devoted to a model railroad. She
paints replicas of houses, trees and people, and he stains
railroad ties so they appear weathered.
Miller says his Delphi tenure could last three years. Until
then, he says, he and his wife are living in an apartment in
suburban Detroit and don't expect to visit Sunriver.
After earning his MBA, Miller joined the Ford finance staff
as an analyst. He worked in Australia, Mexico, the U.S. and
Venezuela, where Greenwald was president of Ford's operating unit.
When Ford President Lee Iacocca left for Chrysler in 1978, he
recruited Greenwald, who in turn lured Miller. ``Every day, we'd
face one or two things that, if we didn't fix them, would cause
Chrysler to die,'' Greenwald says. ``We developed a quiet
confidence that no matter what the world threw at us, we could fix
it, that there was no speed beyond which we couldn't move.''
One of the things the world threw at them in 1979 was a $1.5
billion federal loan guarantee that required Chrysler to extract
$1.8 billion in concessions from unions, suppliers and bankers.

Chrysler Bankruptcy

A recession was cutting Detroit-area employment by 40
percent, to 47,200 in 1980. Miller's job was to convince 400 banks
to restructure $4.5 billion in debt. To avoid endless haggling, he
insisted on the same terms from all 400.
On April 1, 1980, he stood before two dozen bankers in New
York and announced Chrysler had just declared bankruptcy,
Greenwald says. He went on to say he was playing an April Fool's
Day joke and explained to distraught bankers from Asia and Europe
the U.S. custom of fooling family members and friends on April 1.
``It really helped to get things moving because for a moment
they had to stare into the abyss,'' Greenwald says.
Chrysler's recovery was so complete that complacency set in.
Starting in 1985, Iacocca spent $735 million to buy Gulfstream
Aerospace Corp., $1.8 billion to buy back shares and $1.5 billion
for a new research center.
Meanwhile, spending on new products lagged. In 1989, car
buyers shunned the Chrysler Imperial, which was billed as a luxury
flagship and turned out to be a derivative of a 10-year-old
compact design with a vinyl top and leather seats. By 1991, Miller
needed a $1.75 billion credit line to keep Chrysler operating.

Iacocca

By then, Miller was vice chairman and had acknowledged his
desire to succeed Iacocca. According to Bloomberg News columnist
Doron Levin's book ``Behind the Wheel at Chrysler'' (Harcourt
Brace, 1995), after Iacocca found out about a letter that Miller
had sent to outside directors criticizing him, he forced Miller
to retire.
Miller won't comment, other than to say he's grateful to
Iacocca for teaching him how to restructure companies. Iacocca,
through a spokesman, declined to comment.
Miller's first stop after Chrysler was at New York-based
investment banking firm James D. Wolfensohn & Co., where he
advised Olympia & York Developments, owned by Toronto's
Reichmann family.
A recession, which had forced Olympia & York to open its
Canary Wharf development in London with only 22 percent
occupancy, propelled the company into bankruptcy in 1992 and
hobbled it with $20 billion in debt. Miller worked as an adviser
at the company for a year, long enough for most of Olympia &
York's assets to be distributed to creditors.

Morrison Knudsen

In 1995, Miller became CEO of Boise, Idaho-based Morrison
Knudsen, which 60 years earlier had built the Hoover Dam. Miller's
predecessor, William Agee, lost $1 million on each railroad car he
built to diversify the company's revenue.
Within 14 months, Miller had reached an agreement with
creditors to swap debt for equity. He then sold the company to
Washington Construction Group Inc. for $380 million.
Miller next joined Federal-Mogul, a Southfield, Michigan-
based maker of engine bearings and seals, as acting CEO in
September 1996. The company was recovering from a failed attempt
to sell auto parts worldwide to retail customers, not just
automakers.
Richard Snell, the CEO whom Miller recruited as his
replacement, attempted to use volume to overcome low margins in
auto parts.

Asbestos Lawsuits

In 1998, Snell paid $6 billion to acquire T&N Plc, a
Manchester, England-based maker of seals and gaskets, and Cooper
Industries Ltd.'s Cooper Automotive unit.
Those acquisitions increased Federal-Mogul's exposure to
asbestos lawsuits, which helped force the company into bankruptcy
in 2001.
To Miller's credit, according to the University of Michigan's
Meyers, he didn't walk away. He returned to Federal-Mogul two more
times as chairman and recruited two more CEOs.
In October 1997, Miller became acting CEO of Oak Brook,
Illinois-based Waste Management, the largest U.S. trash hauler.
The SEC was then investigating the company's accounting methods
during a global acquisition spree.
Four months after arriving, Miller announced a charge against
assets of $1.5 billion. In March 1998, he sold Waste Management to
USA Waste Services Inc. for $21.2 billion.
After leaving Waste Management, Miller spent three months as
president of Reliance Group Holdings, the 16th-largest U.S.
business insurer, which had suffered unexpected losses on its
construction, auto and environmental policies.

Speedy Turnaround

Anticipating a speedy turnaround, investors drove up the
company's stock price as much as 11 percent on Nov. 23, 1999, when
Miller's appointment was announced. He didn't disappoint.
He took a $100 million charge and reached an out-of-court
settlement with several companies, including Sun Life Assurance
Company of Canada, which claimed it had been misled when
participating in a failed workers' compensation insurance pool.
He then sold the surety bond business to Citigroup Inc.'s
Travelers Property Casualty Inc. for $550 million.
Miller's next job was CEO of Bethlehem Steel, the No. 5 U.S.
steelmaker. He arrived in September 2001, and Bethlehem filed for
bankruptcy three weeks later.
Bethlehem's handicap, Miller says, was that 13,000 workers
couldn't support 100,000 retirees and dependents. He won court
approval to terminate the pension plan and turn responsibility for
payments to workers over to the federal government.

`The Human Toll'

``It was not a pleasant experience because of the human toll
it took,'' Miller says. ``The fact is, the legacy costs had
overtaken the company.''
Miller also established a buyout fund that cut his union
workforce by one-third to 8,000 without involuntary layoffs. He
improved efficiency by cutting job classifications inside
Bethlehem's mills from 32 to five, and he trimmed the management
bureaucracy from seven layers to three. Miller never missed a
scheduled shipment of steel.
In February 2003, Miller sold Bethlehem to Wilbur Ross's
International Steel Group for $1.5 billion. Miller's cost cuts had
given Bethlehem a chance to survive on its own and thereby gave
him negotiating leverage with ISG, Ross says.
``It's a clear example of someone who is sophisticated both
at bankruptcy and at mergers and acquisitions,'' he says.
United Steelworkers Vice President Tom Conway says of Miller,
``I didn't leave the experience with particularly ill feelings
toward Steve, other than that he didn't come here to run a steel
mill. He came here to work it out of bankruptcy and land it
somewhere else, and that's what he did.''

United Airlines

Not long after he sold Bethlehem, Miller joined the board of
United Airlines parent UAL. He's helped UAL develop a plan to
emerge from bankruptcy by Feb. 1 if creditors and a Chicago judge
agree.
During three years in bankruptcy, UAL negotiated annual labor-
cost savings worth almost $4 billion.
If Miller sticks to his usual methods, he'll carve up Delphi
and sell the high-technology businesses to the highest bidder,
Meyers says. Whatever the scenario, Miller's current company will
have a new look, Miller says.
``I can't tell you if it will be in court or out of court,''
he says. ``The only thing I am sure of is that there will be a
very new and different Delphi.''
It's also clear that Miller will hand over the title of CEO
as soon as he can. When he came to Delphi, Miller agreed to a $3
million signing bonus, a $1.5 million annual salary and an
additional $4 million payment if he meets performance targets.

$1 Million Bonus

On the day after Miller's appointment, Delphi said President
Rodney O'Neal, 52, would receive a $1 million bonus if he's not
named as Miller's successor. Richard Shoemaker, the UAW bargainer,
declined to discuss Delphi.
Ross, for one, says he hopes the crisis at Delphi captures
the attention of federal lawmakers. He says taxpayers and not
individual employers should pay for health care in the U.S., as in
other industrialized countries, even if private companies deliver
it.
Placing this crippling burden on companies, Ross says, is a
vestige of a bygone era when the U.S. domestic market was so big
that corporate and government leaders didn't think much about
global competition.
Miller says requiring individual companies to pay for health
care also hurts workers, since it makes them overly dependent on
their employer for security in their old age.
He says he travels to Washington periodically to help develop
legislation, to be unveiled in 2006, to relieve U.S. manufacturers
of crushing post-retirement costs. He won't provide specifics,
arguing that he's part of a drama that's bigger than Detroit.

Source: Bloomberg.com

Fibonacci

Cliffs Notes: Doesn't matter how many new SUV's that the general brings out that get 20mpg. They are fuzzed on the cost side.

heyitsme

27$/hr to assemble an oil filter, where do I sign. I then go to the store and buy it for 5$, its like a GM employee discount all over again.

heyitsme

Not sure what you mean, GM has a $5k pre-tax profit on each vehicle.

dallison

isnt ethanol even more flamable than gas????

Moog-Type-S

Is there ever any good news from GM?

Fibonacci

Maybe on their large SUV's, but not on each vehicle they manufacture. What does the General make on a Saturn Ion? Nothing, they lose money...yada, yada.