Detroit told to change gear to stop skid

As Asian carmakers tighten their grip on future growth in world production, limping giant General Motors has come under a withering attack from an activist investor who said Detroit's traditional ways of doing things needed to change.

The actions came during the North American International Auto Show, the world's premier showcase for the industry, hosted for decades in the home of the US "Big Three" producers.

But this years's show was held against a darkening and bleak financial outlook for US carmakers amid rising costs, shrinking market shares, mountainous costs for wages, health and pension commitments, and gigantic debt.

GM lost nearly US$4 billion ($5.77 billion) in the first three quarters of last year and will slash 30,000 jobs and close 12 plants in North America. Rival Ford is expected to announce its own round of plant closing and job losses on January 23. Both companies have had their credit ratings slashed to junk.

On Tuesday, in what amounted to a manifesto for shrinking US carmakers, former industry executive and corporate turnaround specialist Jerome York said the whole US industry needed to look at the stakes and work together.

"The reality is that all constituencies - the companies themselves, their investors, their unions and employees, and indeed the communities in which they live and work - are in this together and should therefore work together towards the best collective solution," York said.

Seeking to drive home a sense of urgency, York called on GM to offer fewer and better products and to consider getting rid of brands such as Hummer - its line of huge sport utility vehicles - and Saab, the Swedish nameplate that he called a "pretty consistent money loser".

He urged GM to halve its US$2 annual dividend, which costs the company US$1.1 billion a year, slash compensation for its directors and senior managers, and cut wages top to bottom, to get out of "crisis mode".

Calling for "equality of sacrifice" between labour and management at GM, York cited recent analyst reports about what could happen with wages, health care and pensions at the company if it actually went bankrupt.

"It's pretty ugly," said York, who was instrumental in previous turnarounds at Chrysler and IBM.

York's criticisms echoed many analysts in the last year. But his voice has the financial muscle of his boss, financier Kirk Kerkorian, whose Tracinda Corp holds almost 8 per cent of GM stock and is the single largest individual shareholder.

"Frankly, there is a lot that he had to say that I agree with," said GM's newly appointed chief financial officer Fritz Henderson said. "To be honest, I am in crisis mode."

This week, GM cut prices on most of its new 2006 vehicles to wean customers from discount financing and rebates, which had boosted sales last year but fed financial losses.

"It's their last shot," said Peter DeLorenzo, publisher of a closely watched industry Web site, Autoextremist.

"They're in a twilight zone now ... This price-value stuff has to fly because after this they really don't have anything left other than another massive rebate campaign."

- REUTERS