General Motors isn’t considering bankruptcy protection as a way to solve its financial troubles, the automaker’s chairman and CEO has said.
“As we look at the responsibilities we have to a broad range of constituents, as we look at what we need to do to make the business successful, as we look at our businesses around the world, we think there are significant costs to bankruptcy,” Rick Wagoner said in an interview with The Associated Press (AP). “We don’t think it’s a good option.”
Wagoner reportedly said he and other top executives will see their compensation cut by 40% or more this year, deflecting criticism from UAW president Ron Gettelfinger and others that executives aren’t making enough sacrifices.
Wagoner spoke to AP shortly after the automaker reported a $US1.6 billion third-quarter loss and announced a tentative agreement with the United Auto Workers to cut health care benefits for its US hourly workers and retirees. GM has lost more than $3 billion in the first nine months of this year because of falling US market share, production cuts, high labour costs and other factors.
The Associated Press said the bankruptcy question has been swirling around GM since its former parts supplier, Delphi Corp., filed for bankruptcy protection this month. GM could be liable for up to $12 billion in benefits for Delphi employees. The automaker has around $19 billion in cash.
While bankruptcy would allow GM to close plants and reduce union wages in court, Wagoner reportedly said GM’s turnaround requires far more than reduced labour costs. The company is trying to cut the cost of materials and vehicle development, move away from heavy incentive spending and build more enticing cars and trucks.
“The good news is, we know what we need to do to be successful in the business,” Wagoner told AP. “What we need to do is get products that people are excited about and price them the right way, supported by the right kind of cost structure, and I think in that sense it’s moving pretty good.”
Wagoner reportedly said unlike the airline industry, where some bankruptcy filings haven’t had a big effect on business, even speculating about bankruptcy hurts the vehicle business.
“When you’re buying a car it’s a very different thing,” Wagoner told AP. “It’s a massive financial commitment. You expect to own it for a long time, and (bankruptcy) is something that’s going to have an impact in the consumer’s mind.”