GM: Investors play "3-way game of chicken to see who'll swerve first"

"The economy is STRONG, and gettin' STRONGER..." - George W. Bush

Who'll Blink Over GM?
Our Wall Street editor explains the turmoil in its stock.

By Allan Sloan
Newsweek

http://www.msnbc.msn.com/id/10117463/site/newsweek/

Talk about whiplash. Last Wednesday, General Motors stock touched lows not seen since the 1980s, and chief executive Rick Wagoner felt compelled to issue a statement to employees that the company has "absolutely no plan, strategy or intention" to file for bankruptcy. Early Thursday, GM hit another new low, then rose 17 percent in less than two days to end the week at $24.05, almost where it started.

Why the rough ride? It's not because of day-to-day changes in the company's fortunes. Rather, GM's market value has fallen so low that its shares have become chips for players (including hedge funds with arcane trading strategies) laying bets on the outcome of what can best be described as a three-way game of chicken—the game in which drivers race toward each other to see who'll swerve away first.

The players in this high-stakes game of nerves are GM; the bankrupt Delphi Corp., formerly GM's parts division, and the United Auto Workers, whose fortunes have eroded along with GM's. The UAW is threatening to strike if Delphi chief executive Steve Miller gets a bankruptcy judge to void its contract with the union and unilaterally impose cuts of more than 60 percent in wages and benefits. That would shut down GM's North American car operations, severely crippling the already-troubled company. But it would cripple the union, too, because many of the struck plants might never reopen. Miller, with seemingly the least to lose, will be seriously hurt if there's a catastrophic strike because he'd look like a corporate troll rather than his chosen role: The Man Who Saved Detroit.

Complicating matters is that GM guaranteed some pensions and benefits of UAW employees when it spun off Delphi in 1999. Miller is betting the UAW won't risk a strike and that GM, which can't afford one, will come up with enough money to make everything work. GM and the UAW each hope the other two veer off. The three played this game last month as Miller's deadline for a Delphi bankruptcy filing neared. No one blinked then, and bankruptcy followed.

Has he discussed voiding his own contract with Delphi? It's bound to be lavish, to the point of obscenity.

but i imagine something will happen that screws the workers and is described as being good for the company and country in the media.

There was a yelling match between Pat Buchanan and Jim Cramer (from CNBC's "Mad Money").

Buchanan basically said what we all know, which is the fact that 2/3 of the country's manufacturing jobs have bled out to China, Mexico, India...and they're not coming back. It's the result of the policies of the Republican party over the last decade.

Cramer kept saying that all of these companies "did what they had to do," and that some of them have done very well, but finally (and reluctantly, with shrugged shoulders and a smirk) conceded that "The investors have made out really well in the deal and the working class got screwed."

That's been one of the cornerstones of the Bush administration...as long as the investor class remains propped up, "the economy is strong and gettin' STRONGER." As long as someone outside of the U.S. is willing to do the job for ten cents on the dollar, the continued sacrifice of American workers is "necessary."



"What a great lookin' group of people...the "haves" and the "have mores." Some call you the ELITE...I call you my BASE."

give us treaties that aren't good for the country.
and corporations must pay billions ti influence policy the way they want.

no one who has served in washington as a rep or sen is ever to going cop that he/she sold out the country -- but they did -- and i would LOVE to see just one spill the beans.