Commentary: Detroit Back to Its Old-School Tactics
March 11, 2008

By Bill Visnic

Despite stock prices and market shares nosediving toward near-historic lows, Detroit scions General Motors Corp. and Ford Motor Co. once again are doling out bonus cash to blue- and white-collar workers alike — but the implied justification that “turnaround” goals are being met is, in the grandest tradition of car-town back-slapping, a bit self-serving.

In the past weeks, Ford announced it will distribute $1,000 bonuses to its 98,000-odd workers in the U.S. and Canada, along with bonuses of undisclosed amounts being presented to higher-level white-collar workers.

The rationale: people are working hard and goals are being met. The auto business is nothing if not cyclical, and we’ve definitely heard this before.

GM said it will bring back to pre-2005 levels the salary of Chairman and CEO Rick Wagoner, now slated to bring home a base of about $2.2 million, and more if the ever-present and undisclosed “internal targets” are met. Wagoner and several other high-ranking GM executives have for a few years served under the provisions of ceremonial pay cuts to share the pain of a turnaround plan that is just now showing signs of a reversal of fortune for the world’s largest auto makers.

Nonetheless, GM lost money last year and has hemorrhaged more than $12 billion since 2005. The company’s most notable achievement in that time has been the shedding of some 34,000 workers (and the attendant billions in wages and benefits) in accordance with a decades-long surrender of market share.

Those savings haven’t convinced investors the General has reversed course.

This week GM’s stock price tumbled under $21. Even factoring in the admittedly jittery market, if one throws out a brief period in late 2005 and early 2006, it’s been 20 years since GM stock has been this low.

Such is the case at Ford. When its stock closed at $5.60 Monday, it hadn’t been as low since late 1991, when the stock cascaded to near $4.50. Ford’s stock price exceeded $35 in 1999, more than six times its current value.

If Ford and GM’s tactics are stabs at restoring the confidence of consumers, investors and its own workers, it’s going to take more than tossing around $1,000 bonuses and plumping up the CEO’s pay packet. Any turnarounds will or won’t be borne out in the sales charts — and so far, the prospects aren’t particularly encouraging, with a 2008 U.S. vehicle market expected to be off 10 percent or more from last year, gasoline prices reaching record highs and Ford and GM’s model ranges still too over-represented by gas-lapping SUVs and pickups.

Even some of Detroit’s high-profile initiatives to hike up the cool factor and grow out its Midwestern hair are being abandoned now that money and market share are in increasingly short supply.

Volvo Cars, the linchpin of Ford’s failed Premier Automotive Group experiment, is scrambling back to the security of its longtime New Jersey HQ from PAG’s Irvine, Calif., redoubt — where it was presumed personnel would get cool in the way only Californians can be and the targeted clientele would more readily accept Volvo’s, Jaguar’s and Land Rover’s metro-hip credentials. Where Jag and Rover will end up when India’s Tata Group completes its purchase of the business is anybody’s guess, but it’s a good bet it won’t be Irvine.

And Chrysler LLC is cutting the strings with its nearly 20-year-old Pacifica Advance Product Design Center in Carlsbad, Calif. No great loss there, unless one figures the studio that germinated the Chrysler 300 — essentially the only thing in two decades worth buying from Chrysler — is expendable.

The aggressively obtuse company muttered something about a “global strategy moving forward,” “leveraging resources worldwide” and “consolidating operations to achieve global balance.”

And all this time we thought Detroit’s expansion to California was about balance.

The only part of Chrysler’s conglomero-gibberish that makes any sense is the “consolidating operations” part. What’s going on at GM, Ford and Chrysler isn't really complex, and is so old-school Detroit: paying out bonuses with one hand and closing down plants with the other.

Photo by General Motors

Ford President and CEO Alan Mulally, left, greets GM Chairman and CEO Rick Wagoner at the podium during introductions at the Detroit auto show's Black Tie Charity Preview in January.

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