GM's Difficult Road Ahead

Steve Kroft Reports On Automaker's Troubles

(CBS) 
The consensus is that the union may have to give up a lot more, either before or during next year's contract negotiations, if General Motors is to avoid bankruptcy — an outcome that could allow the company to scrap its labor agreements, slash wages and pass off its pension obligations to the federal government.

"If you or I were given a choice between gold and silver, we'll take the gold every time. Gold is no longer an option. The choice that they're facing, literally, is between lead and silver. If they don't do the right things, they're gonna get lead," says Cole. "Silver is still terrific. I think that's where we're headed. The industry can afford silver, but they can no longer afford gold."

General Motors is still the largest automobile manufacturer in the world, and most experts will tell you it has never made better cars and trucks. But its market share has fallen to 24 percent, and it has too many plants and too many people for the number of cars it's selling. GM wants to shut down all or part of a dozen facilities and get rid of 30,000 workers by the end of 2008, but it's hamstrung by its contract with the UAW, which says it would still have to pay these workers under something called the "jobs bank."

"The job bank, that is people are paid to essentially full salary and aren't working — can't work. You can't afford literally hundreds of millions of dollars in wages to people that aren't working," says Cole. "So the way to deal with that is to buy 'em out of their job. And that's gonna be a big part of what's happening in just the next few months."

The process has already begun. The week before last, General Motors served up one of the biggest buyout packages in corporate history, offering 113,000 hourly employees anywhere $35,000 to $140,000 to walk away from their jobs or take early retirement. The buyout could cost GM up to $2 billion, so last week it sold off a chunk of one of its most profitable business, GMAC’s commercial mortgage division, to help pay for it. But the ultimate cost could be much greater for communities all over the Midwest.

Several generations of American workers put food on the table and kids through college working at GM factories like the one in Janesville, Wis., where a union job with General Motors was as close as you could get to guaranteed lifetime security.

It is hard work with lots of overtime —but in a good year they can make $100,000, with up to five weeks vacation. It’s a great job; problem is, it can be done in Mexico now for $3 an hour, and people here are nervous. Almost everyone in Janesville either works for GM or has a relative or family member that does.

"Everybody knows General Motors is the horse that pulls our cart," says Steve Flood.

It’s the favorite subject at the Eagle Inn, just down the street from the union hall, where Kroft shared a cup of coffee with retirees Flood and Claude Eakins and current UAW workers Ron Splan and Matt Symons, who make SUVs at the Janesville plant.

What would happen to Janesville if GM went into bankruptcy?

"We've all got our opinions. But it certainly wouldn't be a pretty picture," says Splan. "There's probably 20 industries in Janesville here that supply directly to the Janesville General Motors plants. So it would be devastating. I mean, there's no doubt what it'd do to Janesville: I mean, it'd be terrible."

Asked if he was willing to make more concessions, Flood said, "Sure, you bet. We're gonna make sure GM survives. What we do, I'm not sure. But I'm sure we'll be looking at it that, ya know, before we make any changes. But it's gotta be a shared, ya know."
"They know that we're all in the same boat," Splan added. "I mean, if it's got a hole in it, we're all, we're all sinkin'."

There are some who have actually suggested bankruptcy might be good for General Motors in the long run — that it would allow the company to reposition itself competitively in the global market. Wagoner isn’t one of them.

"Our view is that's a very bad idea," he says. "First of all, we don't think it's going to happen. We don't think it's a good strategy. And we think a lot of people would lose if we did that, ranging from shareholders to employees to dealers to suppliers. And it's my view that all this talk about bankruptcy is way over selling the risk side of the business."