Biggest Automaker Needs Big Changes

In an interview, United Auto Workers President Ron Gettelfinger and Richard Shoemaker, the UAW vice president in charge of GM relations, said they are willing to work within the confines of the existing labor contract to bring down some health care costs. But both said GM's problems have much less to do with labor costs than what they see as Asian currency manipulation, unfair tax advantages for foreign competitors and health care inflation that is fundamentally the federal government's responsibility.

"Total labor costs [at GM] are 15 to 20 percent," Shoemaker said. "How can anyone believe that that small a piece of the overall costs can be their fundamental problem? There's no rationale to that."

The real fight will come when the UAW's next contract must be negotiated in 2007, and union leaders were not signaling a great willingness to compromise.

"There is obviously a reluctance on the part of members to make changes that will be a detriment to their well-being," Shoemaker said. "I don't think we'll have an overwhelming show of support for anything which will negatively impact our benefits, and I don't think anybody should expect that."

In reality, GM will be able to only nibble at the margins of its labor cost issues, Meyers said. That means the company will have little choice but to retrench, accept that rival Toyota will soon overtake it as the world's No. 1, then get some products to sell, said Tom Libby, director of industry analysis at the Power Information Network, a J.D. Power and Associates affiliate.

All of those moves will take a major cultural shift within the company, said Peter Morici, an economist at the University of Maryland's Robert H. Smith School of Business. GM's design and production problems arise from a culture honed by decades of unrivaled dominance. Everything is done by committee, Morici said. No one is held responsible for failure, so no one has any authority.

"It's a culture of entitlement akin to the Postal Service," he said. "If the Postal Service made cars, it would be GM."

GM's executives are open about those shortcomings, especially about the offerings in the showrooms, which the anonymous GM official conceded were "at the low point of the product trough."

The Aztek represented all that is wrong with GM's design process, that official said. The concept car actually did something few GM designs do: arrive before a trend -- this time, the crossover SUV that combines the attributes of a truck and a passenger car. And GM had high hopes to sell 50,000 to 70,000 Azteks a year, establishing Pontiac on the cutting edge.

Then came production, the executive said. The penny-pinchers demanded that costs be kept low by putting the concept car on an existing minivan platform. That destroyed the original proportions and produced the vehicle's bizarre, pushed-up back end. But the designers kept telling themselves it was good enough.

"By the time it was done, it came out as this horrible, least-common-denominator vehicle where everyone said, 'How could you put that on the road?' " the official said.

Sales never reached the 30,000 level needed to make money on the Aztek, so it abruptly went out of production last year. The tongue-in-cheek hosts of National Public Radio's "Car Talk" named it the ugliest car of 2005. "It looks the way Montezuma's revenge feels," one listener quipped.

Wagoner said on Tuesday that GM would "step on the accelerator" and start developing products in studios throughout the world, especially in Europe. He promised "crisper production execution, shorter life cycles, better quality, lower cost" and a nearly $1 billion increase in capital expenditures this year, mostly for product development.

"First and foremost, we need to continue to raise the bar in the execution of our new products," he said.

But analysts are skeptical. Wagoner pointed to three pending launches as proof that GM has found its way from the dark days of the Aztek: the Hummer H3, not quite as hulking at its predecessors and priced at a cheaper $29,500; the sleek, two-seat Pontiac Solstice roadster; and the Chevrolet HHR, a new crossover SUV, priced to move at just under $16,000.

But George E. Hoffer, an economist at Virginia Commonwealth University and a GM consultant, suggested the three offerings only point out how far the company has to go. Sleek as the Solstice is, Mazda Motor Corp.'s Miata proved in the 1990s that a roadster will never sell enough units to carry a company. The new Hummer may be cheaper, but it feels like a vehicle that is overpriced at $30,000, he said, not to mention the headwind it will face with gas prices well over $2. And the HHR is basically a restyled Chrysler PT Cruiser, released a half-decade after the original, when that model is already in decline.

Another trumpeted new model, the Chevrolet Colorado pickup, released in 2003 to replace the mainstay Chevy S-10, just ranked dead last among 12 compact pickups reviewed in the July Consumer Reports magazine.

"There's no convincing the pundits," the GM official shrugged. "Until the vehicles go out there and are accepted by the market, we're just going to have to bite our lip."