GM CEO Sees No End to Overcapacity
Wagoner Sees No Easing Of Industry Overcapacity; Health-Care Issue Ripens
By Neal E. Boudette And Stephen Power
March 8, 2007; Page A3
He declined to comment on recent reports that GM has had talks with DaimlerChrysler AG about buying the company's ailing Chrysler Group. Analysts have speculated that such a deal could help GM by taking a direct competitor out of the market.
In addition, Mr. Wagoner acknowledged that loans to
high-risk borrowers have hurt the auto maker's former financing unit,
GMAC. The slowing
GM last year sold a 51% stake in GMAC to Cerberus Capital Management LLC. A final value for GMAC is being negotiated to take into account the downturn in Rescap's business. GM has twice had to delay filing its 10-K financial statements that outline its earnings for the fourth quarter and 2006. Mr. Wagoner said the delay in part stems from the GMAC deal, which closed late last year.
"These are big complex businesses and when you do transactions at the end of the year it adds additional complexity," Mr. Wagoner said. GM also plans to restate financial reports over several years because of accounting issues related to certain tax matters.
Mr. Wagoner said reducing manufacturing capacity is very difficult in the auto industry. "It's hard to take capacity out. It's expensive. There are frequent union issues. There are government regulations," he said. "The auto industry has high barriers to entry and high barriers to exit."
GM, Chrysler and Ford Motor Co. are each in the
process of closing many
The Big Three auto makers have discounted prices
heavily in the past five years in a bid to boost sales volumes and keep
their plants filled. But the effort has pushed all three into heavy losses
Mr. Wagoner said he believes there is "a growing
national concern" about health care. "I think people are open, and
government officials are finally responding to what we've been telling
them for the last five years," he said. "The
He remains doubtful, however, that the government
will enact new laws that take over a major portion of health-care costs
from corporations. "From where we are today, for the
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