GM Death Watch

[TRS]

http://www.thetruthaboutcars.com/editorials.php

GM is up about 19% in the last couple of weeks, BUT fundamentals IMO have not changed.

http://www.thetruthaboutcars.com/editorials.php

[HenryTo]

Following is from the Gulf Times - the Persian Gulf, not the Gulf of Mexico, that is. This story tells you the actual action at the dealer level - which obviously is much more reliable than what GM is trying to spin. This story also makes perfect sense - GM SUV sales should have a bump up because of its new lineup but as long as gasoline prices are close to $3, they are still going to take a hit going forward.

When Texans fall out of love with their trucks, you know something is seriously wrong.
--------------------------------------------------------------------------------
Texans fall out of love with trucks, SUVs as gasoline soars
Published: Sunday, 21 May, 2006, 10:36 AM Doha Time

HOUSTON: Soaring gasoline prices are coming between Texans and their trucks. Trucks and sport-utility vehicles account for three of every four trade-ins at Gillman Honda and Gillman Mitsubishi in San Antonio, said Mike Basham, a used-car manager.

Customers want fuel-efficient cars instead, he said. “It’s staggering the impact this is having,’’ Basham said. “I’m not seeing any cars in trade.’’
Many residents are buying economy cars, including gasoline-electric hybrids, as gasoline approaches the record reached last year after Hurricane Katrina.

The shift in Texas, where pickup-truck ownership is the highest among the eight largest US states, may hurt the country’s automakers as well as dealers.

“If you look at trends with trucks, Texas sets the tone,’’ said Craig Eppling, a Dallas-based spokesman for General Motors Corp, the largest US automaker.

GM, Ford Motor Co and the Chrysler unit of DaimlerChrysler AG make a profit of $3,000 to $8,000 on each full-sized truck and SUV they sell, said Dennis Virag, president of Automotive Consulting Group Inc in Ann Arbor, Michigan. They are lucky to break even on economy cars, he said.

One in four Texas drivers owns a pickup, according to Census Bureau data from 2002. The state accounts for one in every seven sales of Ford’s F-Series pickups, the top-selling vehicle in the US

“It’s a large, heavily populated state, and consumers there like their trucks,’’ Virag said. “They like big trucks.’’

Texas is the second-largest state by area and population, with 268,581 square miles and 22.5mn people, according to US Census Bureau data.
The price of fuel is cutting into demand, said Jerry Reynolds, a former owner of Prestige Ford in Garland, Texas. “It’s on everybody’s mind,’’ he said in an interview on May 11, four days before selling his stake in the dealership.

Prestige was once the largest US retailer of F-150 pickups.

Gasoline at US pumps has jumped 32% since February 20 to an average of $2.947 a gallon in the week ended May 15, the US Energy Department says. The record was $3.069, set in September after Katrina flooded Gulf Coast refineries.

In the five months after Katrina struck, full-sized SUVs sat on Texas lots for an average of 132 to 147 days before they sold, according to the Power Information Network of researcher JD Power & Associates. The average climbed from 89 days early last year.

For all vehicles, the average has fallen to about 60 days from 70 early in the year.

GM’s Chevrolet, Ford and Chrysler’s Dodge had declines of 6.5% to 13% in Texas truck sales last year, RL Polk & Co data show. Across all nameplates, sales fell 4.3% even as total new-vehicle sales rose 1.5%.
Trucks and SUVs accounted for 61% of new-vehicle sales in Texas last year and through the first two months of 2006, down from 64% in 2004.
Smaller vehicles are on an upswing. Sales of Toyota Motor Corp’s Prius hybrid and Yaris subcompact helped lift sales at Fred Haas Toyota World in Spring, Texas, to a record in April, said Vic Vaughan, general manager.
The Prius, a mid-sized sedan, has more than tripled its market share in Texas since 2004 to 1.2%, according to the Polk data. The Yaris, a top seller in Europe that gets 40 miles (64km) per gallon on the highway, arrived in March at US dealerships.

“When you’re getting your nose bloodied at the gas pump the way Texans and Americans are right now, it makes it easier to debut a car as fuel-efficient as the Yaris,’’ Vaughan said.

Honda Motor Co added a small car, the Fit, to its US lineup in April.
“I just barely got a glimpse of one,’’ said David Kemp, Gillman Honda’s general manager. “I’ve gotten in 10 or 15, and they sold right when they hit.’’ Nor has he been able to keep Civic and Accord hybrids on the lot. “I don’t have enough of them and can’t get enough of them,’’ he said. “I don’t think anybody was ready for $3 gas.’’

Texans who still want a full-size pickup or SUV have choices among the current hybrids and others due soon. More buyers are likely to favour them as the technology is added to other vehicles and improves to yield fuel savings of 30% to 50%, Automotive Consulting’s Virag said.
GM sells hybrid versions of its Chevrolet Silverado and GMC Sierra pickups. Two-wheel-drive models get a reported 18 mpg in city driving and 21 mpg on the highway, above the 16 mpg and 20 mpg with gasoline engines.

Hybrid versions of GM’s Texas-made Chevrolet Tahoe and GMC Yukon SUVs are scheduled to debut in 2007, and the automaker promises a 25% increase in fuel efficiency.

Chrysler’s Dodge Durango, using the same technology, is due in 2008.
At the smaller end of the hybrid-SUV scale are the Ford Escape and Mercury Mariner. The Escape boasts 31 mpg on the highway, best in the US for an SUV.

GM introduced a redesigned Tahoe this year. The pickup’s sales suggest that larger vehicles still attract Texas buyers, said Michael Maroone, president of Fort Lauderdale, Florida-based AutoNation Inc, the nation’s largest auto retailer.

Not Helen Hales, a pharmacy technician in Willis, Texas. She swapped her Dodge Caravan for a Toyota Corolla, cutting her fuel use by almost half.
“There are times when I miss my van,’’ Hales said. “I have a grandchild, and we could spread out and do what we wanted, but now we can go farther.’’ – Bloomberg

[HenryTo]

The Truth About Cars website is also making a connection between AlixPartners and the world "bankruptcy."

http://www.thetruthaboutcars.com/content/1148142465484771235/index.php

Signs of huge desperation as confirmed by the Detroit News:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20060518/AUTO01/605180398/1148/BIZ

[HenryTo]

The members have spoken: 95% of all UAW members have authorized a strike at Delphi and folks are still now calling that a strike "is not likely" at Delphi? Utterly amazing:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20060517/AUTO01/605170337/1148

GM not only stockpiling parts, but have been working a lot of overtime to stockpile cars as well.

And from December, a negotiator stating that a strike "appears more likely than not" (officials at the UAW also confirmed recently that talks have not gone anywhere in the last few months):

http://www.detnews.com/apps/pbcs.dll/article?AID=/20051207/AUTO01/512070424/1148

This is another interesting "article" from December. There is a lot of tension right now:

http://www.pww.org/article/articleview/8230/1/298

Quote: But a JP Morgan investment broker was in attendance. Outing the infiltrator from the podium, Greg Shotwell proceeded to tell everyone how JP Morgan had given Delphi a $2 billion line of credit so it could purchase Motorola Electronics Division during the bankruptcy proceedings.

The anger rose as Shotwell stated that JP Morgan had tried to infiltrate all three rank-and-file meetings to date so they could keep an eye on how their investment was doing. The undercover investment broker was then chased from the room by the shouts of angry workers.

[HenryTo]

Check this out:

"GM said it has retained an outside financial advisory firm, AlixPartners, to assist the corporation with a broad range of accounting, financial reporting and related matters."

http://www.alixpartners.com/EN/NewsMedia/PressReleases/tabid/129/PressReleaseID/18/Display/Detail/Default.aspx

Then go to the menu, look under services, and see how many times the word "bankruptcy" and "litigation" is mentioned. A notable list of clients includes Dana, Silicon Graphics, Kmart, Worldcom, and Enron:

http://www.businessweek.com/magazine/content/02_38/b3800099.htm

[HenryTo]

Hello Prospero,

You are right that most companies use some kind of smoke and mirrors to juice up their quarterly results. The remaining question is: To how much of an extent has GM done this in the 1Q and can this continue?

1) The fact that it is so blatantly obvious (but which was only mentioned by the Motley Fool) suggests to me that there is no more room to juice up earnings. Companies usually try to hide these things if they can help it - to me, it is obvious that there is not much further things that GM can do for the 2Q.

2) From what I've been hearing, GM has shipped as much as possible they could to the dealers in the 1Q - thus booking early sales. Gas prices have so far refuse to go down. They're also hurting in Europe during April. The specter of another Fed Funds hike on June 28th hangs overhead, and this will continue to do damage not only to the consumer, but to GMAC's house and auto loan division as well.

And then, you also now have this as well, contrary to what everyone else is saying about the unions:

http://www.just-auto.com/article.aspx?id=87804

I read the full article on another site but I could no longer find the full article.

[Prospero]

I guess you're right Henry. One swallow certainly doens't make a summer, and GM has had a bad time for a while now.
On the other hand, the fact that the last quarter's improvement was aided by 'smoke and mirrors' seems fairly irrelevant to me. As I see it, most companies use smoke and mirrors all the time to ameliorate their results. Since that is the norm, it's not fair to deduct points when a particularly good quarter (relatively) is the product of tricky accounting. Having said that, I'm sure it's true that some quarters have abnormal accounting 'potential'.

More to the point, I suppose the people in charge at GM are well aware of the quality of their earnings, and are using whatever methods they can to buy time and liquidity to avoid bankruptcy.

[HenryTo]

The only good news that have come out of Detroit in recent months has been the consistent and amazing performance of the Pistons - but the Cavs just won game 5, and the Pistons is now just one game away from being eliminated in the playoffs. At the same time, Honda is now also going in for the kill. Following is courtesy of the WSJ:
-----------------------------------------------------------------------
Honda Steps Up
The Pressure on Detroit

Plans Call for New Facilities in North America
And Ramped-Up Production World-Wide
By JATHON SAPSFORD in Tokyo and STEPHEN POWER in Frankfurt
Staff Reporters of THE WALL STREET JOURNAL
May 18, 2006

Honda Motor CO. unveiled plans to build new North American facilities and ramp up production world-wide, highlighting the ambitious growth strategies of Asia-based auto makers while their Detroit-based competitors move to cut jobs and close plants in North America and Europe

Honda, the maker of the Civic and Accord model sedans, said its plans include new production facilities in the U.S., Japan and Canada, enabling the auto maker to tap strong global demand for Honda cars and motorcycles. It also said yesterday it will develop a new gasoline-electric hybrid car model.

President and Chief Executive Takeo Fukui said Honda planned to boost world-wide annual car sales to 4.5 million by the year 2010, up from 3.4 million in the fiscal year that ended March 31. About one-third of that anticipated growth, or 350,000 vehicles a year, will likely come from North America. "Considering changes in the level of demand, we have decided to expand capacity," Mr. Fukui said.

Separately, General Motors Corp. yesterday said it would eliminate roughly 900 jobs at its Ellesmere Port manufacturing plant in the United Kingdom, in the latest sign of the pressure on auto makers to slash costs in high-wage Western Europe.

The latest cutbacks at GM Europe come as the Detroit auto giant is pushing ahead with plans to cut more than 30,000 jobs in its unprofitable North American operations, which continue to lose market share to Asian and European rivals.

"Our industry simply cannot afford to stop continually improving productivity in its Western European car plants," GM Europe President Carl-Peter Forster said. "This is essential to compensate the higher cost base in Western Europe and to secure the future, given today's competitive environment."

The move is the latest painful cutback for GM's European operation, which hasn't posted an annual profit since 1999 and last year cut its European work force by roughly 12,000 people.

GM's cuts come despite efforts by Britain's ruling Labor party to stem the loss of manufacturing jobs.

The growth plans at Honda, Japan's No. 3 car maker by volume behind Toyota Motor Corp. and Nissan Motor Co., follow news earlier this month that Toyota will invest a record $14 billion in capital expenditure during the current fiscal year, through March 2007. That money will be spent on similar moves to develop new models and ramp up production, much of it in North America. Honda's capital expenditure for the current fiscal year will total roughly $5 billion.

Nissan, meanwhile, says it is readying a blitz of new products to hit the U.S. market this fall.

These moves contrast with plans at GM and Ford Motor Co. to eliminate a combined 60,000 jobs and close a number of factories. GM and Ford, of Dearborn, Mich., also are burdened with speculative, or junk, debt ratings that limit their financial flexibility at a time when their rivals are flush and able to spend billions on new factories and new models.

Negative Perceptions

Overall, the repeated news of strong growth plans at Japan's car makers, plus that of the travails of GM and Ford, tend to reinforce a perception among consumers that the momentum is with the Japanese.

"The car is the second-largest purchase for the average person" after a home, said Kurt Sanger, an analyst at brokerage Macquarie Securities in Tokyo. "If all you read about from certain companies is closing factories and bad balance sheets, and at the other ones all you read about are record sales and new factories, which ones do you have more confidence in?"

Mr. Fukui said Honda plans to spend $400 million to build a new assembly factory in the U.S. that will have the capacity to make an annual 200,000 vehicles after it comes on line in 2008. The move will expand the number of Honda assembly plants in North America to six from five, and increase production capacity to 1.6 million vehicles, up from the current level of 1.4 million.

Honda executives in the U.S. said the new car plant will be located in the Midwest but declined to elaborate. Company officials said they expect to announce the location sometime in July.

Honda will also spend $140 million on a new plant in Canada that will produce four-cylinder engines. In addition, Honda said it is considering more production capacity in China and will speed up its expansion plans in India. Meanwhile, the company will boost motorcycle production in markets from the Philippines to Pakistan.

Moving Targets

Such investments mean that any efforts by rival auto makers to match the Japanese expansion are an exercise in hitting a moving target.

"If you aim for where the Japanese are right now, and hope to get there in three years, the target is going to be long gone by then," said Christopher Richter, an auto analyst at CLSA Asia Pacific Markets in Tokyo.

Honda provided few details about the planned new hybrid, of which it hopes to sell about 100,000 units, but did say that it will be more affordable and smaller than the Civic and will likely provide industry-leading fuel economy when it hits the market in 2009.

The move underscores a growing focus on fuel-efficient models at a time when rising gas prices threaten the sales growth of at least some models of sport utility vehicles and pick-up trucks, both of which are staples of the U.S. auto industry.

John Mendel, a senior American Honda sales executive, said that more U.S. consumers are now "equating hybrid to high fuel economy, not to performance" in response to firm gasoline prices.

The company recently slowed production of a V6, performance-oriented hybrid version of the Accord car because of sluggish demand.

In addition to the new hybrid, Honda said it plans to launch over the next three years new diesel-engine-powered vehicles in North America. Honda provided few details but noted that it is looking to introduce four-cylinder diesel engines.

Honda said it will spend $640 million on a new plant in Japan that will be able to make 200,000 vehicles when it comes online in 2010. Honda also plans to build a new research and development center in Japan by 2009.

[HenryTo]

Prospero,

I was also troubled by the widespread prevalence of the bankruptcy story when GM was at $19 - but since the 1Q earnings report, many folks have now gone into the "GM is recovering" camp and so from a sentiment standpoint, the bear's argument isn't as shaky as before.

I can name many different reasons, but from a long-term standpoint, GM's operations from a relative standpoint have deterioriated for the last 30 years and show no signs of stopping. GM's troubles have been 30 years in the making - and no single quarter can fix this downward spiral. GM has shown some recovery in its Tahoe and Suburban sales, but that is to be expected given that they are revitalizing this line for the first time in seven years.

The latest "good quarter" required all kinds of magic tricks and smoke and mirrors from both Bob Lutz and the financial accounting folks (with some help from the SEC). Capital spending was cut to the bone, and loan loss reserves at GMAC was cut significantly (even as interest rates rise and even as revenues at GMAC continued to increase) in order to goose up earnings. For all intents and purposes, GM also "channel stuffed" their dealers - a tactic typically employed by manufacturers that are showing signs of desperation.

In the short-term, the survival of GM all depends on liquidity - and any bad news here (such as a less-than-expected 2Q earnings report, a strike at Delphi, an $80 oil price, or a consumer slowdown) will result in more rating cuts for GM debt - which could quickly tank the GM common. Is it any wonder why there were not many more bids for GMAC? And the fact that the banks are now potentially requiring collateral for a new $5.4 billion credit line is saying a lot - and I mean, A LOT.

The "GM is going to go bankrupt" folks are mostly in the 2007 or 2008 camp. I am slightly different. I think GM can even go bankrupt this year - especially if the consumer slowdown accelerates in the next few months.

[Prospero]

Henry, I enjoy reading your newsletters immensely because among other things, you're not a stopped clock. I know you're DJIA timing system is short now, but I also remember a few months back when you were bullish, correctly anticipating a rise past 11000.

You've clearly got much more market experience than me. On GM however, you seem absolutely convinced it's going down the tubes. To me that says either

a) Henry's view is normally so balanced that when he's this bearish it really must be going down.

b) The 'GM bankruptcy' story is so alluring even Henry is taken in. Let's go long!

What is the best single reason you can suggest for believing a) rather than b)?

(As it happens, I'm long GM right now. But I'm only interested in the short term - pretty much irrelevant to the debate.)

[HenryTo]

Wow - a Time Magazine article declaring that "GM is not dead yet." Translation: It is over for GM.

http://www.time.com/time/magazine/article/0,9171,1194041,00.html

[HenryTo]

Toyota to put the final nail in the coffin to GM here - upping capital spending this year from initial estimates of $12 billion to $14 billion. In the meantime, GM is only going to spend a lowly $8.7 billion - and they only spent $1.3 billion or so in the first quarter - meaning that they deliberately underspend during the first quarter in order to goose their earnings. Again, all smoke and mirrors.
----------------------------------------------------------------------------------
Toyota to Boost Spending,
Turning Up Heat on GM

By JATHON SAPSFORD
May 11, 2006; Page A3

(See Corrections & Amplifications item below.)

TOKYO -- Japan's Toyota Motor Corp., which is threatening to surpass General Motors Corp. as the world's largest car producer, plans to pull further ahead of its U.S. rival when measured by the amount of money it is pouring into new plants and equipment.

Japan's largest auto maker by volume, reporting a 39% rise in fiscal fourth-quarter net income Wednesday, said its current fiscal-year capital expenditure -- investment in product development, plants and equipment -- would reach 1.55 trillion yen, or roughly $14 billion. That would be a record and a slight increase from the 1.53 trillion yen spent the previous year, which Toyota had earlier said would be the peak.

The number was bigger than the $12 billion or so that the industry was expecting. President Katsuaki Watanabe described it as a response to "unexpectedly strong demand" for the company's cars. He noted that one of the toughest management challenges facing the company was to maintain its vaunted quality even as it ramps up production in Asia, Europe and North America.

Toyota, which produces such models as the Camry sedan, the Sienna minivan and the Lexus line of luxury cars, said its consolidated net profit for the three months ended March 31 was 404 billion yen. That compares with 291 billion yen recorded during the same period a year earlier. Revenue grew to 5.75 trillion yen, up from 4.88 trillion yen a year earlier.

For Toyota's full fiscal year, net profit increased 17% to 1.37 trillion yen. Operating profit for the fiscal year rose 12% to 1.87 trillion on a full-year revenue increase of 13% to 21.03 trillion yen.

Its spending plans illustrate the different fortunes of Asian-based auto makers and their Detroit rivals, even as they compete in similar markets. Toyota lacks the costs of pension and medical benefits borne by GM and Ford Motor Co. for union employees and retirees, a legacy of their previous labor agreements. In Japan, Toyota spends $97 per vehicle on employee health care, while the government covers retirees. That compared with $462 per vehicle for employees and $1,038 per vehicle for retirees for GM, according to consulting firm A.T. Kearney.

Toyota also has offered designs that have won over consumers, carry a perception of higher quality and are more fuel-efficient than many rivals' vehicles, giving the company some insulation against rising gasoline prices. The auto maker has begun making inroads in the profitable light-truck segments with models such as its Tundra and Tacoma pickups. Overall, its share of the key U.S. market has risen to about 14% so far this year from about 10% in 2000, while GM's share has fallen to about 24% from about 28% during the same period, according to Autodata Corp.

The continued high level of investment at Toyota is one of the most telling measures of the difference in resources that Toyota and GM bring to their global rivalry. Toyota is flush with cash and is expanding sales and production in countries all around the globe. GM, by contrast, while growing in some overseas markets like China, is suffering at home. The company restated its earnings after regulators allowed it to revise the way it accounted for a health-care deal with the United Auto Workers union, and now shows a profit for the first quarter of 2006. But GM has been unprofitable in its core automotive operations, closing plants, laying off workers and selling assets.

The $14 billion that Toyota plans to invest during its fiscal year through March 2007 compares with $8.7 billion that GM plans to spend during its current fiscal year through December. "We maintain a commitment to product development," GM said in its most recent annual report, "but our substantial legacy costs give us less available cash to invest relative to some of our competitors."

The difference in investment carries implications for the rivalry between the two car makers over who will hold the mantle of the world's largest car producer by volume. Toyota is increasing sales by roughly 500,000 a year and expects to sell 8.45 million vehicles during its current fiscal year. GM sold 9.2 million vehicles during 2005, up 200,000 from the previous year.

GM has said its world-wide sales rose 4.4% in the first quarter to 2.2 million vehicles, driven by a 16% increase in sales outside of North America. GM hasn't released a forecast for its current fiscal year. But despite its strong performance in China, few analysts think GM can grow enough to compensate for the share it is losing to Toyota and other Japanese rivals in its all-important home market, as well as match Toyota's growth abroad. Most analysts expect Toyota to surpass GM sometime during the next year or two as the world's largest car producer by volume.

Toyota's market capitalization, at about $200 billion, is already greater than those of GM and Ford combined. Toyota said Wednesday that it would ask its shareholders later this year for approval to buy back roughly 200 billion shares. The company also said it would boost its dividend for this fiscal year to 90 yen a share, up from 65 yen.

Toyota, releasing detailed full-year consolidated earnings forecasts for the first time, said that sales for its current fiscal year would rise 6%, to 22.3 trillion yen. But the company forecast a 4.5% decline in net profit to 1.31 trillion yen, because it expects a stronger yen during the year. A strong yen erodes the contribution of overseas sales to earnings, because profits earned in foreign currencies are worth less when converted into yen.

Toyota's consolidated global vehicle sales for the fiscal year ended March grew 7.6% to a record 7.97 million cars. Sales were little changed in Japan at 2.36 million, but rose 13% in North America to 2.56 million vehicles. Toyota's sales in Europe rose 4.5% to 1.02 million vehicles. Sales in Asia outside Japan rose 5.7% to 880,000 vehicles.

Write to Jathon Sapsford at jathon.sapsford@wsj.com


Corrections & Amplifications:

Toyota Motor Corp. plans to ask for shareholder approval to repurchase shares valued at roughly 200 billion yen, or about $1.8 billion. This article incorrectly stated that Toyota Motor plans to ask approval to repurchase roughly 200 billion shares.

[HenryTo]

The timing of these Delphi bonuses are definitely "unfortunate" - and will certainly not do anything to ease tensions between the company and the unions.

The latest revision of their quarterly earnings is nothing more than smokes and mirrors. If anything, this "strategy" may backfire in the near future - as all this talk about impending bankruptcy disappears - in which case, instead of backing down, the UAW may go ahead and strike. It is difficult to tell your members that GM will go bankrupt if you strike when the company just made a profit during the first quarter. Following article is courtesy of the WSJ:
----------------------------------------------------------------------------
Delphi Plans Salaried Bonuses
As Hourly Union Wages Are Cut

By JEFFREY MCCRACKEN
May 11, 2006

Auto-parts supplier Delphi Corp. disclosed in U.S. Bankruptcy Court that it will likely pay out $60 million in lump-sum, cash bonuses to its salaried employees and managers this summer at about the same time it plans to substantially cut wages of hourly workers.

Delphi's vice president of human resources, Kevin Butler, said that as many as 14,000 salaried workers are likely to get bonuses totaling $60 million if Delphi achieves certain financial-performance targets.

Without specifying amounts, Delphi testified on Tuesday that it posted $500 million more in operating income for the first quarter than it had projected.

Delphi, which previously sought court approval to pay out executive bonuses, didn't seek court approval for these salaried bonuses, arguing the court cleared them when it approved normal compensation and bonus programs upon Delphi's Chapter 11 filing in October.

Delphi's salaried workers received no bonuses from 2003 through 2005. Mr. Butler said these white-collar bonuses, along with $38 million in executive bonuses, would be handed out in July.

Delphi is asking the bankruptcy judge to terminate its labor contracts. If no deal can be reached with its unions, the Troy, Mich., company has said it will impose in early July wages of $12.50 an hour for its 34,000-employee union work force, down from an average wage around $26 an hour. The United Auto Workers union has threatened to strike if that happens.

"Obviously, the timing will be a concern to the unions, but the salaried workers have not received increases for the previous three years, while union members got cost-of-living adjustments and other increases," said Delphi spokesman Lindsay Williams.

During the first two days of testimony in Delphi's motion to void its union contracts, Judge Robert Drain at the U.S. Bankruptcy Court in Manhattan has been continually pushing the company and the unions to get back to the bargaining table and try to settle their issues outside court.

"I would strongly urge the parties to sit down and ask each other in a nonlitigation setting many of the questions you are asking now," said Judge Drain at the end of Tuesday's testimony.

Judge Drain has already scheduled two more days to hear the matter, May 24 and May 26, and told the parties to use next week to do more negotiation.

General Motors Corp. has a big stake in the case. Delphi financial adviser David Resnick said his estimate is that GM is liable for $8.6 billion to cover Delphi's postemployment benefit liability, a number that doesn't include the tab for pensions, early-retirement offers or other costs. Judge Drain has meanwhile pushed the Delphi unions, most of which haven't made counteroffers to Delphi's last proposals in late March, to do so.

"A union proceeds at its own peril if it doesn't respond" to labor proposals from a bankrupt company, he said late Tuesday. While the judge is urging both sides to negotiate, company and union officials familiar with talks between the UAW and Delphi say negotiations have bogged down since Delphi filed a motion to void its labor contracts on March 31.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com

[HenryTo]

What car consumers are doing online. Seems like all this talk about how $3 gas isn't affecting SUV buying trends is just plain BS - probably all bought and paid for by GM and the like. Following is data compiled by Cars.com on over 8 million visitors - which would definitely be much more accurate than any surveys out there:

http://info.detnews.com/autosblog/index.cfm?blogid=93

My guess is that you don't even need $4 gas to kill the latest SUV and truck lineup from GM.

[HenryTo]

The auto price wars promise to heat up over the next few months. And GM is going to have a hard time moving the inventories sitting on dealers' lots right now.
--------------------------------------------------------------------------------
Automakers could face re-run of price wars
Thursday May 4, 2:33 pm ET
By Jui Chakravorty

DETROIT (Reuters) - A repeat of the costly price wars U.S. automakers hoped to avoid this year appears more likely, according to analysts, as the traditional Big Three confront sagging sales and nagging worries about gas prices.

General Motors Corp. (NYSE:GM - News) in particular has vowed to stay clear of big discount programs this year in favor of a simpler pricing plan and a marketing campaign that stresses the relative value of its Chrevrolet brand. But aggressive incentives from competitors will force the No. 1 automaker to up the ante, analysts said on Wednesday and Thursday.

"We anticipate pricing to remain very competitive, with pricing pressure across the board," CSM Worldwide analyst Joe Barker said.

"We'll see virtually every auto company turn up the dial on incentives as we progress through the spring selling period and the summer sell-down period," Barker said. "Over the next three to four months is going to be a very good time to buy a vehicle."

Analysts and investors closely watch such discount programs, which cut into automakers' profitability.

DaimlerChrysler AG's (XETRA:DCXGN.DE - News) Chrysler, which has outspent competitors on incentives and discounts this year, announced zero-percent financing for a range of models this week, including its Dodge Ram truck line.

Ford Motor Co. (NYSE:F - News) is also offering interest-free loans for a period of five years on some of its SUVs, including the Explorer and Mountaineer, and some analysts said it would have to step up incentives on its market-leading pickup trucks as well.

GM said it will offer $1,000 toward the purchase of a new vehicle and also offer interest-free loans of up to six years on 2006 models of full-size SUVs such as the Chevrolet Tahoe and Suburban and the GMC Yukon.

GM buyers can also break purchase or lease contracts that expire before April 30, 2007.

The offers, which will run through July 5, come on the heels of a 7 percent drop in monthly sales at GM, a 3 percent decline at Ford and a 4 percent drop for Chrysler.

"All automakers, including GM, will be forced to incentivize more in the summer," Argus Research analyst Kevin Tynan said. "They have to clear their inventory before the summer shutdown and the new model year."

CASH ON THE HOOD

So far this year, GM's average incentive spending per unit has been $3,050, while Ford has spent $3,189 and Chrysler has spent $3,769, according to Autodata Corp.

By contrast, Toyota Motor Corp. (Tokyo:7203.T - News), which is on track to overtake GM as the world's largest automaker, only spent $978 per vehicle and Honda Motor Co. Ltd. (Tokyo:7267.T - News) spent $682 per unit.

With gas prices at $3 a gallon in many areas, some automakers are offering rebates in the form of free gasoline cards.

Morgan Stanley analyst Jonathan Steinmetz said he expects high gas prices to keep the automakers "playing the incentives game," especially for vehicles sensitive to gas prices.

GM is offering a $1,000 fuel card with any new 2006 or 2007 Chevrolet and GMC vehicles equipped with FlexFuel technology in the Chicago-Rockford and Minneapolis-St. Paul markets through July 31.

FlexFuel vehicles are capable of using E85, a fuel made of 85 percent ethanol and 15 percent gasoline.

"You'll see more of these creative-type discounts through the summer months, but you won't see any massive blowouts like last year," Argus Research analyst Kevin Tynan said.

Last summer, U.S. automakers unleashed a flurry of discount programs, led by GM's sweeping offer of employee pricing for everyone.

Analysts expect the biggest discounts to be in the full-size pickup trucks and the mid-size sport-utility segments.

"GM is spending very little in that category right now, and other players are spending a lot of dollars to move their products," Barker said. "Ford is spending in excess of $10,000 on the Lincoln Navigator. At some point, GM is going to have to offer some incentives, just to compete."

[HenryTo]

This is history in the making - the final demise of union power in the U.S. private sector (half of all union members work for the government). Following is courtesy of the WSJ:
------------------------------------------------------------------
UAW Asks Members to Vote
To Authorize Delphi Strike

By TERRY KOSDROSKY and JOHN D. STOLL
May 3, 2006 4:21 p.m.

DETROIT -- Delphi Corp.'s largest union, the United Auto Workers, is asking its members for a strike authorization vote as the company pursues a court motion to cancel its labor agreements.

The UAW has said before that a strike is likely if Delphi, which filed for bankruptcy protection in October, gets court approval and cancels its labor contracts. But UAW Vice President Richard Shoemaker told local union leaders on Wednesday to secure strike authorization by May 14.
"It is the vote by the membership to authorize senior leadership to strike if they see it as a necessary step," said UAW spokesman Paul Krell.
Mr. Shoemaker, who heads union negotiations with General Motors Corp. and Delphi, has said the UAW would call for a strike authorization vote when he deemed it necessary. "He obviously feels this is the right time to do it," Mr. Krell said.

The vote is the latest move in three-way negotiations involving Delphi, its unions and GM, Delphi's former parent and largest customer. A prolonged strike at Delphi likely would cripple production at GM and the auto maker has said solving the Delphi situation is among its top priorities. Another Delphi union, the IUE-CWA, already has authorized a strike in the event the company terminates its labor agreements.

One local union leader said the move is a formality and "doesn't mean we're going on strike and doesn't mean we're not going on strike." He said a strike authorization vote will easily pass.

Delphi on March 31 announced a sweeping reorganization plan that included closing or selling most of its North American plants and slashing as many as 30,000 union and salaried jobs. In combination, Delphi filed a motion for permission to cancel its union agreements for 34,000 blue-collar workers and 12,000 union retirees and to void more than $5 billion in contracts with GM.

The move angered the UAW, which had already agreed to major early retirement programs with Delphi and GM.

A hearing on the motion to cancel labor contracts is scheduled for May 9 and 10 in U.S. Bankruptcy Court in New York. A ruling is expected by early to mid-June.

Write to Terry Kosdrosky at terry.kosdrosky@dowjones.com <mailto:terry.kosdrosky@dowjones.com> and John D. Stoll at john.stoll@dowjones.net <mailto:john.stoll@dowjones.net>