With GM's stock trading near an all time low and its bonds rated as junk, the company reported losses of more than $10 billion last year. Unless it stops hemorrhaging money, it will have to be towed into bankruptcy court — a move with consequences that could cascade through the American economy, threatening up to 1 million jobs and changing the dreams of American workers.
Correspondent Steve Kroft reports.
General Motors is not just another company. For almost a century, it was emblematic of American industrial dominance, with a car for every customer and a brand for every strata of society.
Back when Pontiacs were as sexy as Sinatra and Cadillac the synonym for luxury, GM made half the cars in the United States. A job on one of its assembly lines was ticket into the middle class. But that was before the first oil shock, and the Japanese imports. Today, General Motors is losing $24 million a day — and all bets are off.
"This is not a phantom crisis or a fake crisis. This is a real crisis," says David Cole, is chairman of the Center for Automotive Research, a non-profit consulting firm in Ann Arbor Mich.
Cole is widely considered one of the industry's top analysts. He believes that Detroit is now facing what the steel industry and the big airlines have already been through: high labor costs that make it almost impossible to compete.
"Every one of the Big Three faces a problem right now of about $2,000 to $2,500 per vehicle produced cost disadvantage. If that plays out over time, they're all dead," says Cole. "It's change or die. Everything is driven by a profitable business. If you can't be profitable, you can't be in business. That is, I think, recognition that everybody is aware of."
It has certainly not escaped the attention of General Motors chairman Rick Wagoner, who 60 Minutes met at the Detroit Auto show. Wagner may have the toughest job in America: running a corporation many analysts believe has become, too big, too bloated and too slow to compete with more nimble foreign competitors.
Asked how General Motors got to the point where it is now, Wagoner told Kroft. "We have a long history, almost 100 years. We have a lot of employees. We have a lot of retirees, a lot of dependents. … Promises were made about benefits to those people that weren't very expensive when they were made. And it's really given us some financial challenges."
One of them is that most of the people on GM's payroll are no longer making cars. Every month, GM sends out nearly half a million pension checks to former workers, many of whom retired in their 50s after 30 years of service and live in communities where GM plants closed long ago.
Then there is the ever-rising cost of health care. GM has one of the most generous plans in America and provides it to 1.1 million people — retirees, workers and their dependents — at a cost of $6 billion a year. That's more than any other company in America.
Gary Chaison, a professor of industrial relations at Clark University, has done the math. "It comes to about $1,400 a car now," he explains. "That's what the health care premiums of the workers who make that car is. OK?"
Chaison says the health care costs are higher than the glass and steel used to make the vehicle. "Much more than any other part. What you're doing when you're buying a car is you're spending a lot of money for the health care benefits of workers who are making that car," he says.
It's a cost most of GM's foreign competitors don't have because their workers are usually covered by some form of government health insurance in their own countries. Wagoner says it's one of the promises GM made to workers made in good times that it can barely afford in bad.
Asked if he thinks those promises could be kept, Wagoner says, "We feel a responsibility to the people that those promises were made to. We also have a responsibility to insure that our business is successful in the future."
That future looks so bleak that the United Auto Workers, the union that represents GM's hourly workers, agreed last year to give back some hard-won concessions, which included a $1 an hour cost-of-living raise for active workers. The concessions also required retirees to pay up to several hundred dollars a year towards medical insurance that had always been free. UAW president Ron Gettelfinger says it was painful but necessary.
Gettelfinger admits getting the retirees to pay money toward something they'd been getting for free was a tough sell. "Sure it was hard to sell. First of all it was hard for us to convince ourselves that we needed to do something. It was not the easy decision to make but it was a right decision to make in the long term. Because our concern is the long-term viability of our membership both active and retired when it comes to their benefits or to their wage levels," he tells Kroft.