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General Motors bankruptcy: A slide to the inevitable?
Bankruptcy wolf in the GM backyard.
BY A CORRESPONDENT
March 15, 2006
 Fears of a General Motors (GM) bankruptcy turned more real than ever last week, when GM had to step in to broker talks between Delphi and the United Auto Workers. GM, which is itself teetering on the edge of a bankruptcy precipice, found itself having to bankroll the bankrupt Delphi, the largest auto parts supplier to GM. A labour strike at Delphi would cut off supplies to GM, and trigger a collapse of the crumbling American auto giant.
 In fact, talk of a General Motors bankruptcy gained such traction last year that CEO Rick Wagoner had to say that there were no plans to file for bankruptcy protection, However, what happened to Delphi, formerly a GM subsidiary, is fresh in the minds of those unwilling to rule out a similar fate for GM in the medum-term future.
A GM bankruptcy has been debated for long, ever since General Motors started steadily losing market share to Toyota and Honda in the North American market. In terms of figures, GM is still aead of Toyota, but it is just a matter of time before Detroit loses to Tokyo. Japanese giants have a major cost benefit while competing for the North American market, since they are not plagued by the legacy issues which GM face. Salary, healthcare and pension benefits at GM are the highest in the industry - a millstone around Wagoner's neck as he desperately tries to stay afloat. GM has been attempting to ward off bankruptcy by cutting salaries from top to bottom, capping retirement benefits and shutting down car plants. across the US.
However, what could pose immediate risk to GM's survival could be a sudden employee strike at Delphi, snapping supplies to GM and crippling its operations. Most GM's plants run on the just-in-time philosophy of inventory stocking, which can be fatal if work at Delphi grinds to a halt.
And hence GM's interest in avoiding a strike at Delphi. At last week's meeting, GM offered a complex buyout plan for Delphi employees. Also, a portion of Delphi's employees will move to General Motors. The latest round of talks with United Auto Workers (UAW) which virtually rules the American auto industry has not borne fruit. The UAW dismissed an earlier offer to reduce blue-collar salaries per hour from $27 to $12.5.
Even as GM continues to take an active interest in Delphi's affairs primarily to ward off bankruptcy wolves in its own backyard, it is on a drive to steer the giant back to level ground. General Motors is expected to announce harsher decisions on Tuesday, when it it has summoned a critical meeting with its own employees. The developments at the meeting could be an indicator of GM's resolve to stay out of bankruptcy, or signal an inevitable slide to the inevitable.
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