The cost-cutting moves General Motors made last week showed good faith and equality of sacrifice. Both will be important as GM restructures its North American operations. But no one should be deluded into thinking that GM has solved its problems.
So far, GM's board and top executives seem to be on the same page as Jerry York. GM added York to the board last week as a representative of investor Kirk Kerkorian, who owns about 9.9 percent of the company's stock.
Halving GM's dividend, cutting the pay of top executives and board members, restructuring the company's salaried pension plan and shaving health care benefits for white-collar retirees are in line with the plan York prescribed last month in a speech to the Society of Automotive Analysts.
Now, the UAW's leadership must get serious about what the union will bring to the table. The UAW did not cause GM's difficulties, but the UAW is part of the problem and, therefore, must be part of the solution.
So far, the union's leadership has been unwilling to reopen the contract with GM or consider granting concessions beyond trimming retiree health care benefits.
But it is 19 months until the current contract expires. Waiting until September 2007 to alleviate labor costs may be too late.
Besides, the Delphi Corp. bankruptcy is liable to bring matters to a head long before that, forcing GM, Delphi and the UAW to hammer out a plan to cut labor costs to save jobs. There must be equality of sacrifice.
Beyond cutting costs, GM must develop several big-volume, gotta-have products. The tried-and-true recipe for recovery is to cut costs to the bone, then make money like crazy with hot new vehicles. That's exactly how Ford Motor Co. used the Ford Explorer and Taurus to pull back from the brink in the 1980s.
The task is more daunting today. More competitors are selling more models in more niches. That means fewer products with enough volume to fill an assembly plant, let alone two or three plants.
Lower costs, shared sacrifice and knockout vehicles are the only way GM will recover in North America.