After carefully considering the potential benefits of a GM – Nissan – Renault alliance, auto industry analysts have concluded that the deal makes about as much sense as Finnegan’s Wake.  Well duh.  Anyone even vaguely familiar with GM’s current crisis knows there’s only one thing the General needs right now: vehicles that people want to buy, at a price that makes the company a profit.  This they don’t have.  And guess what?  Nissan – Renault can't give it to them.  Even if Nissan and GM and Renault could work together (a completely preposterous concept), you’d see a second gen Chevrolet Camaro long before you’d see a hit product.  No, there’s something else in play here…

To understand why this weird-ass multinational deal has progressed to the point where GM CEO Rabid Rick Wagoner and Nissan – Renault boss Carlos “The Jackal” Ghosn are headed for a Bastille Day chin wag, it's important not to "over think" it.  The main players' motivations run the gamut from self-preservation all the way to greed, and back.  To wit: the whole thing was started by a man who's lost a billion dollars on GM's shares.  I don't know about you, but if I'd dropped a bil on a bunch of losers who refuse to institute radical change or even set targets towards profitability, I'd want to A) protect my investment from Chapter 11 and B) kick some ass. 

From that perspective, convincing Nissan – Renault to buy up 20% of GM’s stock makes perfect sense. TTAC’s sources reveal that GM’s cash position is slipping well below $10b every month– perilously close to the $5b pad it needs to stay in business.  Inventories are still up, and sales are still down.  Kerkorian’s game of footsie with the foreigners would add $3b to GM’s kitty.  That could be enough money to keep GM afloat until the end of the year, when cash from the sale of its GMAC finance unit finally arrives. At that point, GM would enter another one of those endlessly reoccurring “false dawns.”  Kirkorian could sell off his stock at a profit and die in peace. 

Analysts don’t see cash as a factor.  They believe Kirk’s play was designed to replace Rabid Rick with the Jackal.  It's an equally plausible scenario.  Despite the fact that Rabid Rick's administration has been an unmitigated disaster, GM's CEO has displayed a unique talent for self-preservation.  His message– slim the structure, stay the course– appeals to all of those GM's constituencies who have a vested interest in maintaining the status quo.  Which is, of course, everyone other than Kirk Kerkorian.

To remove Wagoner, Kirk had to offer The Powers That Be a suitable alternative.  You want a turnaround?  Let's hire the only man on planet Earth who's already done the deed.  The stock market responded to the possibility of Monsieur Cost Cutter taking the reins at GM with predictable enthusiasm.  GM's Board of Bystanders reacted with equal predictability.  After a due diligence conference call with Nissan – Renault execs, GM’s conclave of corporate co-conspirators charged Rick Wagoner with the task of further exploring a GM – Nissan – Renault alliance.  The appointment assured a less than positive recommendation on the plan and a competitive entry in The Most Bizarre Business Meeting of the Year award.  

GM’s Board quite rightly perceived Nissan – Renault as rapacious raiders, and sent their main man to defend GM against the barbarians at the gate.  Never mind cover talk about corporate synergy.  Nissan – Renault doesn't need GM's production facilities, technology, parts, platforms, dealers or office space.  This is all about Carlos Ghosn desire to add another pelt to his collection.  Wagoner's mob knows it, and they don't like it one bit.  When Rabid Rick meets the The Jackal, one can imagine that it will be a pissing match the likes of which this industry hasn't seen since its earliest days.  And then everyone will get back to work, as Kerkorian tries to find another stick that he can use to beat-up GM.

Only this deal has already inflicted tremendous damage on GM.  TTAC's Deep Throat told me he took his car in for repairs over the weekend.  The guy behind the counter asked if he'd heard that Nissan and Renault were buying GM.  Remember when President Bush announced he wouldn't be bailing-out GM?  Same thing: a clear message to America that The General is on the skids.  Whether or not the Jackal replaces Rabid Rick, the mere possibility of a deal with Johnny Foreigner shakes already rocky public confidence in the world's largest automaker.  The tipping point– where lowered sales makes people less likely to buy a GM product– just got closer.  Like it or not, when next quarter's disastrous results are revealed, The Quiet Lion will be heard.

Relax.  The news that GM stockholder Kirk Kerkorian has been playing footsie with Renault/Nissan doesn’t represent some kind of paradigm shift for GM or global capitalism.  When assessing Kirk’s secret plan— selling a minority share in GM to the Franco-Japanese automotive alliance— remember whose interests The Quiet Lion serves: his own.  This is not about GM.  It’s about Captain Kirk’s spectacularly bad investment in the world’s largest automaker.  But don’t take my word for it.  "Sometimes the news in itself is already the purpose," DaimlerChrysler's CEO announced upon hearing the news.  In other words, multinational automotive conglomerator Dieter Zetsche thinks Kerkorian is just talking up GM’s stock price.

Lest we forget, the octogenarian investor has lost about a billion dollars since he started buying up GM stock.  (I don’t care how many billions you’ve got stashed in Swiss bank accounts and offshore trusts, one less thousand million has GOT to hurt.)  Anyway, mission accomplished.  Despite the fact that GM-friendly Wall Street analysts have just celebrated GM getting smaller, the investment community is, let’s face it, a size queen.  The news that Captain Kirk has been busy whoring GM to dubious foreigner carmakers— I mean discussing the possibility of GM entering into a mutually beneficial strategic alliance– sent GM’s stock price soaring.  On Friday (always a good day to hit the market with a surprise), GM shares closed at $29.79 up $2.35.  

On the other hand, if Wall Street catches wind that Kerkorian is unloading a chunk of his 9.9% GM shareholding, the company’s stock price will swan dive.  So it’s not entirely impossible that Kirk’s play is what it seems: an attempt to save GM’s bacon.  And yet, on the face of it, a GM – Renault/Nissan hook-up makes no sense.  Even The Detroit News’ resident optimist sees no benefits to the deal.  “GM has spent the past 15 years pushing to achieve what the megadeal would purport to achieve," Daniel Howes wrote yesterday. "Economies of scale in purchasing, common manufacturing and product development processes, global leadership in developing world markets.  These megadeals seldom — if ever — deliver the ‘synergies’ their highly paid outside architects say they will.”  

Of course, there is one important benefit to Captain Kirk’s bold moves: cash.  If you take a close look at what’s been proposed, Kirk wants Nissan/Renault to partner up, then “seal the alliance” by buying 20% of GM’s common stock for $3b.  Three billion dollars doesn’t seem like a lot of money in the GM scheme of things.  It’s almost a billion less than GM CEO Rabid Rick Wagoner recently spent paying 37k union workers not to work.  But it’s not chump change either— especially when you consider the fact that GM is running on fumes.  Remember the extension of GM’s accounts payable and the new secured line of credit?  Cerberus does.  

The [fire] sale of The General’s GMAC finance unit to Cerberus Capital Management is the last bit of family silver The General has left to flog.  And it’s only two credit downgrades away from implosion.  Without GMAC cash, the show’s over.  In fact, it may already be too late.  GM’s vehicle sales are in the doldrums, there’s no Hail Mary in the pipeline, market share (dealer income) has gone south and a bunch of humongous downsizing bills are coming due.  Not to mention the possibility of an August strike at GM’s mission critical ex-subsidiary, bankrupt parts supplier Delphi (yes that).  Avoiding Delphi's cyanide pill may require another billion or so from GM’s threadbare corporate pockets.    

If you doubt that GM could be so cash-starved that The Quiet Lion would be allowed to sell the company’s soul to Renault/Nissan, consider this.  TTAC commentator Finance Guy recently alerted us that GM is offering its zero percent new car financing deal to anyone with a pulse.  More specifically, FG has resurrected 10 dead deals.  No wonder: GMAC will now buy down on credit tiers A to E (prime to non-prime buyers).  Cutoff is around a 590 FICO.  Typically people in that range can’t get a new car without a substantial down payment.  Obviously, GM is opening the floodgates.  There’s one word for that: Mitsubishi.  The Japanese carmaker’s US fortunes foundered on the rocks of easy credit, as hundreds of thousands of come-on-down loans blew up in their face. 

In short, the idea that GM would contemplate joining a Renault/Nissan “alliance” is a sign of the General’s desperation, not its ability to seize an international opportunity (whither Fuji, Fiat and Suzuki).  Viewed from another angle, depending on what the Franco-Japanese contingent want for their money, you might even say that GM’s breakup has already begun.  In any case, it’s yet another one of the bizarre episodes we’ve been predicting for some time: the end of days at GM.   

Ron Tadross.  Say it softly and it’s almost like crying.  If you’re GM that is.  The Banc of America Securities analyst isn’t exactly what you’d call bullish on GM.  Unlike his evil twin, analyst John Murphy, Tadross sees GM heading for a cash burn flame-out.  "We believe GM management is glossing over the current and future cost of rightsizing the business," Tadross declared.  More to the point, he recommended that investors sell their GM stock, with a target that’s literally half of its current price.  In other words, when Merrill Lynch talks, nobody should listen.

Although the media types persist in calling GM plant closures and worker buyouts “rightsizing,” there is nothing “right” about the amount of debt GM is piling onto its bottom line.  GM reported today that 35k workers are heading for the exits.  The severance checks for these soon-to-be ex-employees will cost The General a net, after-tax charge of $3.8b.  At the same time, 12,600 Delphi workers are heading for the hills.  GM’s down for half, so that’ll add another $1b or so to the tab.  Remember: many of these workers will continue to receive pensions, only 4600 lose their health care benefits, and shuttering factories incurs some pretty heavy additional expenses.       

Clearly, GM CEO Rabid Rick Wagoner has decided that he can pay off tomorrow the costs of trimming production today.  Tadross doesn't share Rick's belief that GM's tomorrow never dies.  The analyst points to GM’s newly arranged $4.5b secured credit line as a sure sign that the company is cash-strapped– at a time when the demands on GM’s hoard are mounting like a tsunami nearing land.  Tadross predicts "serious cash burn" at the end of the year, as GM’s production drops an estimated eight percent and its “product pipeline peaks.”  In other words, GM can’t make money now, won’t make money later, and its bills are about to come due.

Rick Wagoner insists that the cuts have put GM on the right track.  In a statement issued today, The General’s General declared "These moves have given us a fast start toward achieving our stated objective of reducing GM's global structural cost from approximately 34 percent of revenue in 2005, to 25 percent of revenue by 2010, and setting us up to be successful for years to come."  That’s great news for people who forgot the old maxim that the secret to business is to take in more than you spend.  GM may end-up spending less, but it won’t mean anything unless it starts making more money.

GM’s earnings situation is both dire and deadly.  In a note to his clients, Deutsche Bank analyst Rod Lache estimated that every point of market share GM surrenders to its competitors equals roughly $1.3 billion in lost [pretax] earnings.  In May, the world’s largest automaker’s US market share fell three percentage points to 22.5%.  Using Lache’s calculations, if GM’s market share doesn’t recover, the world’s largest automaker is looking at $3.9b in lost income AND $3.8b for its worker buyouts.  No wonder they’ve announced a fire sale.

Wait; it’s worse than that.  It isn’t a fire sale.  Instead of launching an employee discount program to match Chrysler’s, instead of slapping cash on the hood, GM has decided to offer potential customers zero percent financing for 60 months.  The deal reflects GM’s desire to maintain its “value pricing," GM's attempt to bring its vehicles' manufacturer’s suggested retail price (MSRP) closer to the dealer’s invoice.  (Translation: the advertised price is closer to the actual sale price, and no funny business.)  But here’s the problem: because of falling demand for trucks and SUV’s, the vast majority of GM’s (and everyone else’s) truck and SUV buyers are thousands of dollars backwards on their loan.  They owe more on their vehicle than it’s worth.

Traditionally, GM dealers have used rebates to pay off the difference between what their potential customer owes on their old vehicle and what it’s worth in trade.  Now that there’s no cash on offer, now that there’s a smaller difference between MSRP and invoice, dealers won’t be able to bail out customers who are “underwater.”  Zero percent financing is wonderful (for those who qualify), but it maxes-out at 100% of a new car’s price.  So anyone who’s backwards on their current vehicle is going to have to reach into their own pocket to pay off most of their old debt.  No doubt dealers will call it a “deposit,” but the fact remains: a lot of customers will drive away in the same truck they drove in.

But zero percent allows Rabid Rick’s mob to maintain appearances.  See?  We stayed the course.  Once these ‘06’s are clear, once our new vehicles hit the dealer lots, once we’re right-sized, we’ll be back in the black.  Yes, well, there are an increasing number of well-informed GM watchers who believe that the black in question will be funeral attire. 

GM swears up, down and sideways that they will not stage a repeat of last summer’s Fire Sale for Everyone discount program. And yet inventories are up, sales are down and if they look sideways they can see their competitors printing up blowout banners. “Value Pricing” be damned. The General knows that every sale surrendered to Ford, Chrysler and Toyota eats into its already dwindling market share, rendering GM’s production cuts less and less effective. Besides, the cuts are expensive. GM needs dealer cash now. So it’s not a question of “if.” It’s a question of “what then?”

This is the GM death spiral: larger and larger production cuts in response to a smaller and smaller market share. When GM CEO Rabid Rick Wagoner stepped-up to the microphone a little over a year ago and announced he was going to cut 25k jobs, the media was aghast. American manufacturing is under attack! Our industrial base is shrinking! These days car hacks and Wall Street celebrate the fact that GM and Delphi workers are rushing for the exits by the tens of thousands. I guess someone stashed that old saw about “not being able to cut your way to profitability” in the wood shed and forgot about it. Well, at least until the next financial quarter’s [delayed] results prove that a corner turned can lead straight to a dead end.

Meanwhile and still, stabilizing the patient is Rabid Rick’s first priority; otherwise the amputations will be a success and the patient will die. A great deal of attention has been lavished on the financial details of GM’s union buyout plan. Little has been said of the timing. While GM’s 113k union members are busy weighing up the pros and cons of trading “secure” employment for cash money and [somewhat] reduced benefits, their factories are busy churning-out vehicles no one wants to buy. Rick’s mob can’t shut off the spigot. All The General can do is whatever it takes to keep the pipeline open.

And that means discounts. Of course, GM will not call the next big US incentive campaign an Employee Discount. For one thing, it won’t be long before they don’t have any employees left. But seriously folks, Rabid Rick has once again given himself enough wiggle room to accommodate Greg, Jeff, Murray, Anthony and their entire international fan base. In a recent interview, Wagoner said GM would stick to its policy of “simpler pricing.” In case you missed it, those are the new code words for what was previously called “value pricing.” It’s the difference between “here’s what you pay” and “here’s what you pay and we’re not offering any discounts.”

Because, of course, they already are. GM’s $1000 “free gas” promotion is already out there, attempting to lure Californians into gas-guzzling SUV’s. And it’s spread to Florida. How long before the gas cash come-on gets a national rollout? Free gas, 0% financing, rebates– whatever you call it, however you dole it out, the money comes off GM’s bottom line. But it’s Hobson’s choice: lose more market share or lose more money. Of course, GM could tell its dealers to hold the line on price, watch inventories swell, and do both. That’s not only the worst case scenario, it’s the least likely. And speaking of timing…

GM has just convinced its banks to lend it additional money to pay for its union buyouts, plant closures, Fire Sales, etc.  The loan is fully secured.  Hence, S&P has lowered its rating on GM’s unsecured debt to B- .  That puts GM perilously close to the point where Cerberus can walk away from the GMAC deal, denying The General the long-awaited cash infusion.  Equally important, GM now admits it will draw on this line of credit to meet liquidity needs.  The good news for camp followers: GM won’t go bust today.  The bad news: the noose is drawing tighter. 

And make no mistake, the UAW hasn't stepped off the scaffold.  While last week’s UAW convention in Las Vegas had analysts betting that the union bosses are in a conciliatory (a.k.a. “realistic”) mood, when was the last time the UAW made any concessions to the automobile industry? The recent “health care giveback” was actually a $3b union-administered fund. Buyouts are not a concession. If we believe that Delphi is serious about reducing its workers’ pay, if we believe GM can’t fund the difference, the union will have to make concessions. Past history says it ain’t gonna happen dot bomb.

That’s because past history is the only reliable guide to future behavior. When GM launched its Employee Discount for Everyone program last year, the company pronounced it a tremendous success– and waltzed straight into a sales drought and catastrophic financial losses. What’s changed since then? The levels of unsold inventory are higher.

My name is Robert, and I’m an obsessive. You may have noticed. You may have returned to an article on TTAC and clocked the fact that our writing evolves post-post. That’s down to me. If there’s a better way to say something, if there’s a single sentence with passive construction or a word that’s not pulling its weight, the text must die. If a reader spots a factual inaccuracy or logical inconsistency, it must be corrected. I’m not looking for credit; it’s just the way I’m wired. But if you want to know why GM deserves to die, why GM WILL die, there’s your answer. They lack obsession.

You’re car guys. You don’t need me to tell you this. You’ve encountered a GM product and seen, heard or felt cheap, lazy-ass design, engineering and manufacture. A rough-revving four, a removable seat that slices your skin, a button that feels nasty to the touch– some detail where you shake your head and think to yourself, if I was building a car, I wouldn't let that slide. I recently opened the trunk of an Impala SS and discovered an electrical cable hanging in air like a loose intestine from a hernia operation gone bad. The wire was wrapped in duct tape whose end was already starting to unfurl. As an owner, that would drive me nuts. As a builder, I’d spend my own money to put it right. It’s unforgivable. 

I’m serious. Don’t talk to me about building to a price. I’d rather not build the damn car than know that I’d participated in something so obviously crap. The next time you look at a modern GM product, take a mechanic and/or an engineer and have them show you the dozens of ways GM fails to go the distance. Even when they get it right, they get it wrong. The Chevrolet Corvette is an interior [and properly bonded roof] away from greatness. Why?

Suffice it to say, GM has too many brands, too many models, too many managers, too many dealers, too much union interference and a CEO who counts beans. GM apologists point to JD Power’s awards and tell the world that The General’s whips are good and getting better. Bullshit. Their cars, trucks and SUV’s are only “good” in isolation, or in comparison to the junk they produced ten years ago. Examine a comparable Toyota, and you’ll instantly understand that there's a reason GM has been losing market share for decades, and it ain't the media.

So now we hear that GM will live. That's the conclusion many pundits have reached since The General has finally fulfilled our prophesy and bailed out bankrupt parts supplier Delphi. Of course, Friday’s announcement that GM would pick-up the tab for extending the buyouts of Delphi's union workers, welcome 5k Delphinians back into its own operations and “top-up” the remaining workers' paychecks (so that Delphi can pay them less without paying them less) arrived without a price tag.

The Detroit News (DTN) reported the deal in full “historic agreement” mode (NB: the last time that happened, GM set up a $3b health care fund for the UAW and the DTN called it a “historic union health care giveback”). GM will supposedly pay 50% of the cost of the more extensive Delphi buyouts, which now include “up to $35,000 and full benefits to workers with at least 27 years on the job and cash buyouts, ranging from $70,000 to $140,000, to lower-seniority workers.” For some strange reason, GM, Delphi and The Detroit News all failed to a put a number on the new plan. Our best guess is about $1.2b, not including another $4b – $5b or so for pensions and health care benefits (for some but not all of Delphi's union refugees).

Delphi also revealed that it’s assuming (yes, assuming) that GM will provide a $50k payment per remaining worker, so Delphi can cut union pay from $27 to $22 to (eventually) $16.50 per hour. If 5k union workers remain, that arrangement would cost GM an additional $250m or so. If GM doesn’t stump-up the cash, Delphi still says it’ll play "how low can you go?" In that case, they're still talking $12.50 per hour– a number that has UAW strike written all over it. And even if GM stumps up 50 large per, will the UAW wear a $5 per hour reduction? Deep Throat says yes. I say no.

We both say it doesn't matter. Unless GM’s products sell for a profit sometime soon, the company can’t afford any of this. And they won’t sell at a profit, because, in the main, in detail and relative to the alternatives, they suck. To wit: a commentator on Autoblog named D recently said "I can throw a dart at a board covered in every new car offered by Honda, Mazda, Subaru, Toyota and I would be happy with whatever I get. Do the same with Ford and GM and the odds are I will be disappointed with some fleet car piece of junk." And there you have it.

When the Chairman and Chief Executive Officer of the world’s largest automaker tells his shareholders to think long-term, there’s only one word for it: sell. Yes, I know. The General got itself into this death spiral by thinking short-term: investing its precious resources in a dead genre guzzling, buying brands instead of investing in existing ones, pushing pushrods, rebadging anything that wasn’t nailed down, and so on and so on stretching back forty years. But Wagoner’s no corporate visionary. What he’s really saying is hang on boys and girls, a bunch of bad shit is about to go down.

Those of you who haven’t had their memories erased by GM’s MIB will recall that The General placed all its bets on the success of its high-profit GMT900 SUV’s. Despite a nice little takeoff, sales are flying low. The trucks are starting to pile-up at dealer lots– as is just about everything else save the Hummer H3 and Pontiac Solstice (which can’t pile up because GM still can’t figure out how to make them). In short, even Wagoner knows that it’s going to be a long hot summer. “We’ll need to be patient,” Wagoner said. “There will be some challenging months in total sales… But it will pay off in the long term.”

Wagoner’s “steady on boys” message was a tacit admission that GM's journey around the toilet bowl is gaining momentum. In May, GM’s turnover dipped 12.4%. The General’s market share shrank (again) to 22.5%. Viewed in isolation, these “results” are catastrophic. Compared to Toyota (+17%), Honda (+16%) and VW (+35.6%), it’s the Four Horsemen of the Apocalypse watering their mounts. "It was certainly a challenging month for us," GM's chief market analyst Paul Ballew admitted on Friday, with characteristic understatement.

With escalating gas prices cooling the market, sucking-up discretionary income and raising interest rates; with a rising tide of unsold GM vehicles, with nary a blockbuster in sight, with management reaffirming its decision to forgo a repeat of the Fire Sale for Everyone discount campaign, there’s no reason to believe GM sales are set for a major improvement anytime soon. "As the industry shifts to cars from trucks, that works to our disadvantage," Bellew stated. As GM’s lineup is bereft of the small, efficient cars fuelling its competition’s gains, what WILL work to GM’s advantage during these dark days?

Rabid Rick would have you believe it’s cost cutting. At the shareholder pep rally, Wagoner proudly proclaimed that GM is on track to trim $7 billion in “structural costs.” Yes, well, most of Wagoner’s “cuts” are nothing more than deferred payments. Recent union buyouts may look better than paying workers a salary and benefits not to work, but the savings aren’t as “real” as not paying them anything not to work. All those lump sums– including health care deals, plant depreciation costs and other “incidentals” (e.g. a multi-billion dollar pay-off to Delphi’s intransigent union workers)– have to come from somewhere, sometime.

While Rabid Rick says he’s “positioning GM for sustained profitability, not just short-term profits,” the only thing that can save GM from sliding into bankruptcy is… short term profits. So what’s Wagoner’s specific plan to generate life-sustaining revenue? "All brands are not created equal," Wagoner said, ignoring decades of cross-brand badge engineering. "We can turn that to our advantage." In other words, brands rule! (Who knew?) Referring to Pontiac and Buick, Wagoner said “we'll probably have fewer models under each brand and make them more focused brands."

Did anyone else notice the word “probably” in that sentence? Are we to conclude that Wagoner’s plans for these failing brands are still under development? Beyond that, Wagoner’s remark illustrates one of the most frightening aspects of his tenure at GM: an abject failure to put forth a large-scale strategy for a GM turnaround. Plant closings here, job cuts there, re-badged Opel Saturns, “value pricing,” flex fuel vehicles– there’s no overarching vision of what GM needs to become to survive and thrive. Wagoner’s constant use of the word “turnaround” tells you that his ideal is nothing more than a return to what was. It’s not even back to the future; it’s back to the past.

Clearly, Wagoner doesn’t “get it.” He doesn’t understand that The General needs something more than money to withstand the current shitstorm– a crisis he won’t even recognize in public. GM needs an idea. A bright, bold vision of a profitable future. GM shareholders may be toothless, but its “stakeholders”– suppliers, workers, dealers and customers– need that vision thing to believe that GM is better off out of bankruptcy than in. Without it, quite simply there’s nothing to be done. Wagoner’s inability to stand in front of the faithful and inspire them to aspire to reinvention condemns them all to failure.

Last week, Merrill Lynch analyst John Murphy counted GM and Delphi employees rushing for the exits, struck-up a chorus of happy days are here again and watched GM's stock play follow the lieder. A week later, Merrill's B-team report that sales of vehicles manufactured by [the artists formerly known as] The Big Three will "soften" in May. Higher gas prices are "likely to sway consumers toward smaller, more economical cars and CUVs and away from large SUVs.' And profit-munching incentives are set to re-rear their ugly heads. Issuing a buy recommendation in this environment is like urging displaced peasants to return to Chernobyl. Of course, if you happen to be selling Ukrainian real estate…

Ethics aside (clearly), it's the same old pattern. GM reveals a market share meltdown, a multi-billion dollar FIAT payoff, a disastrous financial quarter, another disastrous financial quarter, more market share meltdown, another disastrous financial quarter, etc. Micro-managed seconds later, spin is spun. GM CEO Rabid Rick Wagoner steps-up to the podium and announces a new plan or product designed to restore The General to a rosy glow: plant closures, new products, value pricing, etc. When the company doesn't drop dead on the spot, observers buy into management's mishegos and return to the reassuring fantasy that where there's a will, there's a GM.

Like earthquakes leading up to an eruption, the separation between GM's cause (bad news) and effect (spin city) is narrowing. Last October, GM announced its erstwhile "historic health care giveback" with the UAW on the same day it reported losing yet more multiple billions. These days, Wagoner's mob's got nothing in their good news quiver save bravado and a bought broker. We're getting assurances of a turnaround based on nothing more than downsizing, ahead of news of sinking sales, lost sales and narrowing profits. And the eventual, inevitable implosion over at Delphi.

Yesterday, Delphi announced its North American operations lost $192m. It's the parts maker's single largest monthly loss since filing for bankruptcy in October (excluding a write-off situation in December). The cause: Delphi's GM sales fell from $1b (March) to $761m (April). The General's desertion will return to haunt them. Delphi's loss reinforces their petition with federal judge Robert Drain to immediately void the company's union contracts, before Delphi reaches the point of no return. That point just got a lot closer. To review: void, strike, death. Only GM can save Delphi, and they can't afford it.

Meanwhile, GM's Plan B– outsourcing parts manufacture to non-unionized, low-wage Chinese factories– took the TTAC predicted hit. According to the China Daily newspaper, the democratically elected (just kidding) National Development and Reform Commission now stipulates that foreign automakers can no longer build a new factory until their "old" one reaches 80% of capacity. Oh, and all foreigner automakers now have to build Chinese brand cars as well, thank you very much. No word on parts production, but I reckon if a flange is needed by both a Chinese brand and, say, Pontiac, China wins.

Into this miasma of morphing morbidity comes Troy Clarke. Clarke has been promoted from President of GM's Asia Pacific region to President of GM's North American Operations. He assumes the title Wagoner bestowed upon himself last April, when excrement and GM's rotational ventilation equipment started colliding. 'While much work remains to be done," Wagoner's press release admitted with thunderous understatement. "We have reached several significant milestones in our turnaround plan over the past year… This is the right time to turn the region's day-to-day operations over to Troy.' I suppose the best bit about not having a clearly articulated turnaround plan is that you can claim you're right on-schedule without fear of contradiction. But I digress.

Apparently, The Detroit Free Press isn't on Merrill's mailing list. They report that Clarke takes over "at a time when Wagoner's cost cuts are starting to pay off, new full-size SUVs are selling well, and subsiding fears of a debilitating strike at parts maker Delphi Corp. have boosted GM's stock price." Yes, well, Clarke's the man who negotiated GM's '03 UAW contract (as Group Vice President of Manufacturing and Labor Relations). No surprise, then, that UAW boss Big Ron Gettelfinger welcomed the appointment. The '03 contract gave the unions everything they wanted: more pay, more benefits and the continuation of the infamous GM jobs bank. The friend of my enemies is… Troy Clarke.

And there you have it: SNAFU at GM. Oh, I forgot. GM is taking heat from liberals/environmentalists for offering gas cards to stimulate California sales of their gas-guzzling SUV's. Columnist Tom Friedman called GM 'a crack dealer looking to keep his addicts on a tight leash." GM Car Czar Bob Lutz responded by calling Friedman a borderline psychotic, but the New York Times writer simply offered a piercing glimpse into the obvious. Anyway, one way or another, GM is gonna get busted.

Why is GM's stock rallying to a six-month high? Delphi's Sword of Damocles still sways above The General's head. Their market share and sales continue sliding towards Hades, with Cerberus waiting to lock the gate behind them. Oh right, I remember. On Wednesday, Merrill Lynch analyst John Murphy upgraded GM's stock to "buy." He made the move in light of the fact that 20k GM employees have decided to take advantage of GM's worker buyout program. So a bunch of rats leave a sinking ship, someone says well done and the crew breaks out the champagne. This thing stinks.

Lest we forget, until February 7th, the Chairman and CEO of Merrill Lynch & Co., Inc. served on General Motors' Board of Bystanders. When Stan O'Neal resigned from GM, the exec cited time constraints and "limits on my ability to act as a GM director because of potential conflicts with matters in which Merrill Lynch is involved." This limitation didn't stop O'Neal's firm from buying 32m shares of FIAT stock for $1b while O'Neal was on GM's Board– immediately after GM wrote off the value of its FIAT stock for $2.1b. Be that as it is, there's clear evidence that Merrill and GM are deep into each other's pockets.

On June 1st, 2004, Merrill elected John Finnegan to their Board of Directors. Finnegan is the former Executive Vice President of General Motors Corporation and former Chairman and President of General Motors Acceptance Corporation (GMAC). On June 23rd, 2005, Merrill elected Armando Codina to their Board of Directors. Codina is a Florida real estate maven who's been on GM's Board of Directors since 2002. So, despite O'Neal's concern over conflicts of interest, Merrill's board is rife with ex and current GM'ers, and The General and Merrill still have interlocking directorships. Now, let's get to the nub of the matter….

Again, GM's stock price surge was triggered by John Murphy. In his report "Buy on buyouts and other options" the Merrill Lynch analyst flagged three keys to GM's turnaround– downsizing production, securing a new labor deal and reinvesting in product. 'There appear to be early signs of these steps being taken,' Murphy claimed. His primary justification and main piece of supporting evidence: the 20k take-up on GM's worker buyout plan. Murphy predicated the program would save The General about $2.3b in pretax cost and $1.8b in cash per year and… that's it. Buy!

OK, sure, Murphy's report cautions three times that "Risks include a low buyout rate [in case the workers suddenly change their mind], a Delphi strike, market share losses, rising gas prices, pricing, cyclical downturn, residual erosion, and dealer body risk." And Merrill's man pegs GM's "defensible market share" at a dealer-indefensible 19%. But hey, what's all that compared with the buyout plan's theoretical addition of $2.48 per share! In fact, once GM gets some relief from "negative sentiment" (are you talking to me?), their share price should rise to $37. Hang on; has TTAC's Death Watch being blowing smoke all this time?

Nope. While Murphy's analysis acknowledges the obvious hurdles, his conclusions ignore their implications. GM is not an earnings story but a cash flow story. GM's cash flow is negative and will remain so as they unwind plants, pay for worker buyouts and write-off all the other items on the debit side of the corporate ledger. Thus, earnings may appear positive, but there are underlying cash calls– both actual and potential– which require extreme funding. For example, any non-strike resolution of the Delphi debacle will require GM cash, and lots of it. And while we're at it, Murphy's calculations must assume that GM can cut costs to keep margins in line or better in light of declining sales.

Yes, there is that. The launch of GM's "gas price protection" promise in California indicates that income is slowing. Refreshed SUV's or no, GM has too much inventory on dealer lots going into the season of high gas prices. While it might be 100k units less than last year, GM's sales have also fallen. It's only a matter of time before The General is forced to do something, anything to move the metal. Whatever it is, it'll come straight off the bottom line.

OK; Merrill's man has both the means and the opportunity to inflate GM's stock price (ipso facto). What's the motivation? Pump and dump. The report could be a favor to The General and its management, designed to drum-up banking business and let share-owning employees come up for air. Or it could be a favor to Kirk Kerkorian, to drum-up banking business. Or it could be a way to generate business for the Merrill retail network. (GM's erstwhile recovery is an easy story to tell to naïve retail customers.) Or it could be all three. Remember: this is the same firm that paid an $80m fine for fraud relating to Enron's collapse, and more than $200m in penalties for systematically hyping stocks on behalf of their investment banking clients. No wonder S&P and BoA Securities still say sell. They tell the truth.

When Bob Lutz launched the new-ish Chevrolet Tahoe, GM's Car Czar claimed the SUV and its platform partners would sell to a core group of customers who need (or at least desperately want) the size, power and towing abilities of a traditional American truck. At the same time, Lutz acknowledged that overall SUV's sales were shrinking. Unfortunately, the press neglected to explore the corollary: GM's ability to maintain SUV profits depends on conquest sales from existing owners. Never mind the Dai-san (Toyota, Honda, Nissan) or the "Crisis" Corporation. There's only one way GM can generate life-sustaining lift from this profit-rich segment: hit the weak man. Ford is Job One.

In fact, GM and Ford are locked in a Detroit Death Match. Both companies' finances are in tatters. Their market shares are shrinking. Layoffs and closings are spreading throughout their respective empires. A Delphi strike threatens to shutter their assembly lines. Impossible pension and health care costs are eating into profits. They pay thousands of workers not to work. The unions can't or won't play ball. There's not enough money to invest in new products. Their dealer networks are bloated. Ailing brands are dragging them down, but they can't afford to cut the deadwood. It's like the old joke about the man fleeing a bear who nearly trips over his companion, who's putting on a pair of running shoes. "Are you crazy?" he yells. "You can't outrun a bear!" "I don't have to outrun the bear," his former friend replies. "I just have to outrun you."

Ever since The General's bankruptcy stopped being a paranoid fantasy, GM CEO Rick Wagoner has insisted that Chapter 11 is not on the horizon, or even in play. While GM could use Chapter 11 to cut pay, pensions, health care, brands and dealers, Wagoner claims the move would fatally damage GM customers' trust (such as it is). But, if Ford went to the wall first, broke the UAW's back in court and jettisoned its excess dealers, GM could demand the same treatment from the unions and the courts. GM would enjoy most of the benefits of "re-alignment" without damaging its reputation AND scoop-up market share from its prostrate rival.

Seen though this lens, it's possible that Rick Wagoner's otherwise inexplicable "steady as she goes" strategy reflects a deeper understanding that GM is fighting a war of attrition against its cross-town rival. If so, the sides are evenly matched. Ford has a better pickup, arguably a better car line and better foreign brands (all solid except for ailing, arthritic Jaguar). GM has better SUVs, a more robust luxury line and sheer size. At the end of the proverbial day, these two automaking giants are in such similar straits that Ford (and to some extent Chrysler) feels obliged to equal or better every GM incentive, discount and sales gimmick. Employee discounts, gas cards, zero per cent financing, cash back– the hits to the bottom line keep happening.

Of course, these incentive wars are a dangerous game of "chicken.' The endless discounting has not only damaged all hope of profitability, it's dragged GM and Ford deep into discount car company territory, shattering their once-proud reputations for high-quality products. What's more, the campaigns are only working relative to each other; while GM and Ford (and Chrysler) fight each other over scraps, Dai San continues their slow, inexorable increase in overall US market share. The rot may become so bad that neither company could find their way back– even after bankruptcy levels the playing field.

Besides, the "what's good for the goose is good for the gander" principle has no basis in law. Who's to say a Ford Chapter 11 would force the all-powerful labor unions to be more conciliatory towards GM when their contracts come up for renewal in '07? Why would the myriad of state courts involved in dealership agreements allow a solvent GM to dump its dealers just because a federal bankruptcy judge bestowed this advantage upon a stricken FoMoCo?

If Wagoner and his team are thinking Who Laughs Last, they may have it exactly backwards. The first domestic carmaker to file for bankruptcy could well be the first company to fully recover. Ford as much as admitted this when its quarterly statement listed GM's bankruptcy as a potential competitive threat. So why hasn't either company simply bitten the bullet and filed first? As always, it's about character. Rick Wagoner sees himself as GM's savior. He doesn't want to be the captain who went down with the ship. Billy Ford feels the same way. But events (and their own incompetence) are conspiring against them. Sooner or later, both men are bound to learn that pride goeth before a fall.

Rabid Rick Wagoner lacks self-esteem. Why else would GM's CEO submit himself to triple presidential humiliation? First, Bush tells GM to take a hike– even before Rick shows-up with his begging bowl. Then, despite the slight, the head of the world's largest automaker sets-up a meet with the Commander-in-Chief (presumably to engage in a vigorous debate about the definition of a "relevant" vehicle). Then Bush cancels the meeting. George heads for the border; Rick detours to Congress to promote corn juice– and reschedules the presidential pow-wow for June. To do what? How long does it take RR to take a hint?

The funny (peculiar) thing is that every time I run out of ways to make the case that GM's [lack of] leadership assures its oblivion, the company throws me a bone. On Wednesday, GM shit-canned– sorry, accepted the resignations of– Controller Paul Schmidt and Chief Accounting Officer Peter Bible. Given GM's recent decision to restate its earnings for the last FIVE YEARS; given the on-going Securities and Exchange Commission (SEC) investigation into GM's payments to its suppliers, its purchases of precious metals (of all things) and a New York Grand Jury alone knows what else; you'd think the double golden parachute exhibition was enough craven media manipulation for one day. But no, GM went and hired Jay Alix.

Jay Alix of AlixPartners is what Reuters called a "distressed company financial advisor." No, he's not an anxious number cruncher; Alix' firm helps companies into, through and, sometimes, out of bankruptcy. We're not talking about your local car dealership, Oriental rug dealer or electronics chain store. AlixPartners has applied its consultancy skills to some of America's largest corporate meltdowns: Kmart, auto-parts maker Dana, the trading firm Refco and… Enron. If that last name doesn't trigger some alarm bells, AlixPartners was also hired by WorldCom, whose $11b accounting scandal earned CEO Bernard Ebbers a 25-year jail sentence and his company the title 'world's largest bankruptcy.'

GM Chief flackmeister Gerry Dubrowski was quick to slam anyone presumptuous enough to make a common sense connection between AlixPartners' extensive Chapter 11 experience and GM's future plans: "We're hiring them for their expertise in the accounting transition… We're not hiring them for help in the turnaround effort for our North American operations.' If GM was looking for a company to help sort out their "aggressive accounting" problem, why didn't they opt for a large and reputable firm like KPMG? The literal-minded amongst you may also note that filing for bankruptcy isn't exactly the same as helping a turnaround effort.

Meanwhile, as GM reaches into its threadbare pockets to pay for a Chapter 11 expert not to use his bankruptcy expertise, The General has launched a guerilla war to stop people like us telling people like you that people like Wagoner are running the company into the ground. As revealed by The Detroit News, GM's so-called "Arlington project" will deploy some 50 GM flacklings throughout 16 US cities. It's part of what the News called "attempts to secure favorable news coverage." Even discounting the recent bribery attempt by a GM PR firm on former US Labor Secretary Robert Reich (to ensure positive coverage of GM's worker buyout plan), this program smells of cowardice, desperation and dirty tricks.

For one thing, "Arlington" refers to The McGinn Group's home base. For those of you without a scorecard, The McGinn Group is GM PR Chief Steve Harris' old company. Presumably, financial self-interest had nothing to do with his choice of partners for this under-the-radar PR campaign. Presumably, Harris simply wanted to work with people he could trust– to keep their mouths shut. Anyway, there's another shadow over the project: Harris chose the 16 cities because they're "dominated by local media rather than national outlets that have hammered GM in recent months for its sales and financial losses." In other words, they're soft targets.

So, this is the tenor of the times inside Wagoner's GM: do whatever it takes to maintain the status quo. If it means being subservient to the President, so be it. If it means cooking the books behind closed doors, let's retire the people who did the dirty work (with a nice payout and full pensions) and hire a bankruptcy expert (not to mention a former SEC chief) to help us plead out with the feds. If it means doing an end-run around the national press, let's send our agents to corrupt local media mavens. Instead of confronting GM's issues head-on, Wagoner's mob are taking the path of least resistance.

When GM's bankruptcy plays out, we may eventually know the truth about the final days of Rick Wagoner's regime. Right now, there's only one man who knows the full behind-the-scenes story, perhaps more comprehensively than Rick Wagoner himself. And Jay Alix is not talking.

Last year, GM unveiled a funky retro-styled vanlet called the HHR (Heritage High Roof). Although the HHR has generated some much-needed action on Chevrolet dealers' lots, the vehicle's character and genesis is an ominous sign that all is not well within GM's product development process. For one thing, the HHR is a bin-engineered clone of its competitor, the PT Cruiser, designed by the same man who penned the Chrysler. For another, there was a five-year gap between the PT and the Me-Too. In other words, when it comes to creating products for the US market, General Motors is dim, cheap and slow.

To be fair, GM's current vehicles are generally 80 to 90% as good as the class-leading benchmarks. TTAC readers might not choose a Pontiac Torrent over a Honda CR-V, but there's nothing wrong with the Pontiac that automatically disqualifies it from consideration. Right now, that is. A few years down the road, things start to get ugly. When it's time to update a product– not just adding new options and colors, making significant mechanical and cosmetic improvements– GM has been known to let a new vehicle slip seven years or longer between refreshes. In contrast, The General's foreign competition is fully committed to a five or six-year product cycle. As a result, GM's products are falling further and further behind, until they become obsolete. For example…

GM introduced its first J-car, the Chevrolet Cavalier, in March 1981. Eight years later, the Cavalier and its platform-sharing partners (Firenza, Skyhawk, Sunbird, etc.) received curvier styling and some mild mechanical tweaks. Meanwhile, the competition moved in. The third AND fourth generation Honda Civic beat the J-cars first redesign by a year. Six years after that, GM finally unleashed a J-car update. The following year, the sixth generation Civic arrived. Even with a year's head start, GM had managed to put out just two redesigns against Honda's five. Fleet sales and other discounts soon damaged the J-cars so badly GM abandoned the entire model-range. The new Cobalt enjoyed just one year's grace before another new Civic blew it into the weeds.

The story of GM's minivans is even more depressing. GM entered the market in the late 80s with an innovative design (pre-Saturn plastic panels) and fancy Italian styling. Unfortunately, the four-cylinder engines made their vehicles slow, the design made them weird (dust buster) and the architecture was too narrow. Five years after introduction, GM finally ditched the plastic panels and funky nose, and fitted a better engine. Seven years passed before GM's next "update": a literal nose job, without any significant engineering improvements. Buick and Saturn were added to the fold, offering GM customers four variations on a narrow minivan with ten-year-old mechanicals.

Before GM's first minivan update, Chrysler "jelly-beaned" their people mover and added another door. Once again, Chrysler's product began to dominate the sector. Between the later two GM updates, Honda introduced, and then updated, their superb Odyssey. Honda scooped the cream of the segment from Chrysler, Chrysler was forced down market and GM was relegated to the fringes. More instructively, Toyota arrived on the scene in 1990, flopped spectacularly, tried again after eight years with an all-new vehicle (the Sienna), tried again after five years of minor success (with another total redesign) and then, finally, gained traction in this highly-profitable segment.

Toyota's tenacity highlights another problem with GM's product updates. Unless a vehicle is very successful or very unsuccessful, The General tends to hold off on expensive redesigns. With GM's [overly] extensive distribution chain, an "adequate" vehicle can sell for years. Unfortunately, these ageing vehicles aren't very profitable. Equally important, the non-competitive products are highly unlikely to tempt their competitors' customers, denying GM the conquest sales they need to gain– or maintain– vital market share.

GM's updates also tend to be far less comprehensive than their competitors'. They'll change the shell and maybe the engine (usually for another old pushrod). Remember: an 80% refresh of an 80% car creates a car that's only 64% as good as its more advanced alternative. By contrast, Toyota and Honda are ready, willing and able to change anything up to and including an entire vehicle platform– and still manage to beat GM's update by one or two model cycles. The end result of GM's lethargy is a car in need of a complete re-build (and usually a new name).

Designing and improving cars is hugely expensive. Given The General's current cash crunch, there must be enormous pressure for product developers to cut corners wherever possible. As it is, the endless procession of eighty percent vehicles and too-late refreshes is sending GM's market share into terminal decline. Remember that the Chevrolet Cobalt and the Saturn Relay were designed when GM was flush. Imagine what will happen if they have to skimp.

As any good debt counselor will tell you, paying down your debt isn't enough. You need enough cash on hand to deal with ongoing expenses and extra funds for any major bills. Otherwise, you end-up scrambling to borrow more money and digging yourself into a deeper hole– until you can't. The same rules apply to General Motors. They need to pay their workers, dealers and suppliers on a regular basis, and they need extra money for large, one-time expenses (e.g. worker buyouts). Although GM claims to have enough money to stay the course, the truth is they are only one "exceptional expense" away from Chapter 11.

According to GM's recent quarterly statement, The General has $17.4b in cash, $1.4b in marketable securities and useable assets of $2.8b in their VEBA (Voluntary Employee Beneficiary Association) trust. That works out to $21.6 billion– an increase of around $1.2b from the prior quarter. The financial markets were heartened by the resulting black ink– even though the increase was more a reflection of accounting practices than a healthy increase in income. Despite this optimism, GM's situation is just as precarious as it was throughout '05; the Delphi dilemma remains dangerously unresolved.

The General's bean counters estimate that Delphi's Chapter 11 filing leaves GM with a contingent liability (a.k.a. a bill) between $5.5b and $12b. That's a pretty big range. It's also a curiously precise amount; why $5.5b? Why not $6b? The number reflects the amount of money GM has set aside to deal with their Delphi exposure. Why didn't GM set aside more money? According to the company's quarterly statement, "It is unlikely that a Chapter 11 process will result in both a termination of Delphi's pension plan and complete elimination of its OPEB (post-retirement health care and life insurance) plans."

There are two other possible reasons. First, GM doesn't want to provide an opening for Delphi and the bankruptcy court to raid GM's corporate larder. Second, they ain't got the dough. So, if GM has to shell out at an additional $6.5b to cover its Delphi liabilities, where will they get the money? According to GM, "If any [payments] are required under the benefit guarantees, GM would expect to make such payments from ongoing operating cash flow and financings…" In other words, GM asks us to believe it could finance any and all additional Delphi-related expenses above $200m per year out of its operating cash flow.

Discounting GM's health-care cost shift, GM earned $200m-plus this last quarter. Do the math: profit gone. If the worst case scenario occurs, if there's a mass retirement or layoff of pensioned Delphi workers, GM would be on the hook for far more than their estimate of $224m per year (the amount Delphi paid-out in fiscal year 2004). The $224m figure doesn't take into account the expenses GM would incur from the release of an additional 30,000 laid-off Delphi employees– each with benefits and pension liabilities. That would cost The General an estimated $2.1b per year.

Still, that leaves GM $21b and change to work with, right? Subtract $8b in operating expenses for the revolving fund (so they can continue to build cars), deduct $5.5 to $10b for the Delphi thing, remove $2b to $3b for debt payments (which look to be spiraling upwards after the Fed Reserve Board announced the up-tick in rates this week), take away $3b for the early retirements package, leave off the $3b – $4b in overseas funds (which GM can't bring over without tax repercussions) and you've got just enough money to pay for… well… nothing.

GM may soon find itself with zero cash reserves. In fact, there are some on this site who point to the recent sale of assets and change in GM's accounts payable policy (to 55 days) and suggest that the world's largest automaker is already running on fumes. In any case, there are plenty of ways GM could find itself with a big bill it simply can't afford: a sudden pull-out by the banks guaranteeing rental car sales, a Delphi strike, suppliers demanding cash up front, a continuing drop in SUV sales due to rising gas prices and more.

A careful reading of GM's quarterly report reveals that GM isn't sure that it can get any more money under its existing line of credit (which is currently being re-written as a secured line). If GM needs more cash… there might not be any. Meanwhile, GM can't afford to pay-off and shed excess dealers. It can't afford to invest heavily in new, domestically produced vehicles. It can't market its vehicles properly. If GM's income doesn't rise, it grows steadily, inevitably weaker. At some point, perhaps soon, one unforeseen bill may make Chapter 11 General Motors' best– if not only– option.

Growing up near Flint, everyone's dad worked for GM. Not all of our fathers brought home a GM paycheck, but we all lived on GM money. If your dad was a plumber, a shopkeeper or a mortgage broker, GM's wages paid the bills. If your dad was a dentist, GM's health plan paid his patients' bills. That's just how it was. GM was one of your parents, the UAW was the other. We had no idea we were destined to become orphans.

My dad taught shop at Flint Central High School. Since everyone's dad worked for GM, everyone took shop. It was the ideal time and place for teaching drafting, auto repair, woodworking, metallurgy, welding and other productive skills. People believed in those fields. People respected those talents. In the beginning, his classroom was a shrine to hard work and craftsmanship. His students knew they were opening the door to a comfortable life. By the time Dad retired in 1991 the promise had become an empty shell. The excitement and the discipline had simply drained away.

The GM era officially ended for my family in 1980. That was the year Dad brought home a new Volkswagen diesel, even though all his previous cars had been Detroit steel. Buying a Rabbit was the kind of radical move that could get you branded a traitor in Flint. Even so, it was a car town. People were intrigued by the German import. Their interest was a sign of things to come. You still find more American autos on the road in Michigan than you do in most other states, but their supremacy has faded even here.

Over the years, going into downtown Flint became vaguely sinister, like entering a foreign country. Despite what you might think, it's easy to ignore news reports proclaiming your hometown one of the most dangerous places in America. Eventually, though, the decay becomes so obvious that you can't deny it. And then you start noticing people's reaction when you tell them you grew up around Flint. They wince or grimace, and tell you they haven't been there in years. They're not surprised that you don't live there anymore.

Flint's emigrants took something with them: hope. Can you imagine what it's like for a guy to come off the assembly line after 15 years at $20 an hour and generous health care benefits, only to be told that his skills are useless and that he'll have to retrain for a $12 job? That the $12 job might not even be there? That he might have to leave behind the life he's always known and look for a job, any job, any place he can find it? Multiply that by thousands. It's as if someone repossessed our future, packed it up in the middle of the night, and left. As Bruce Springsteen wrote, "these jobs are going, boys, and they ain't comin' back."

And now GM may go bankrupt. Whether or not GM dodges that bullet, the damage is done. Forget about off-shoring. More jobs are lost to technology and automation than to cheap Chinese and Indian labor. The new plants build twice as many cars with half as many workers, and no protectionist scheme can change that. Even assembly line vets are beginning to accept that the unions can't keep the ship afloat with all hands on deck, and there's no way our collective strength can turn back the clock. It's every man, every family, for themselves.

With the number of victims growing daily, some still refuse to acknowledge the possibility that it's over. To allow that heresy to creep into their collective conscience is just too painful. GM was the rock our lives were built upon. It's too big to crumble, too hard to crack, too important to fail. It's impossible, isn't it? In fact, Flint has a front row seat to the shredding of America's socio-economic fabric. We're watching the working class culture that's lasted more than 100 years get violently upended, with little idea what – or who – can replace it. If we didn't have the leadership to salvage what we already had, where will we find the leadership to start again from scratch?

I remember Phil Donahue coming to Flint in 1990 to discuss the lay-offs and associated hardships documented by Michael Moore's "Roger and Me." Folks recognized that Flint was in a tough spot. They reacted to the film and the resulting attention with a mixture of anger, embarrassment and wounded pride. That was a long time ago now. Things are worse today than they were then. The anger's been replaced by resignation. GM, Ford, Electrolux, Steelcase– Michigan is supposed to be about making things. If GM does go down, you may as well rename the whole state, because it won't be Michigan anymore.

Now that General Motors is poised on the brink of disaster, the smallest setback could send the The General sliding into bankruptcy. What will be the straw that breaks The General's back? Most of the world has focused their attention on New York federal bankruptcy court. They're waiting to see if Judge Robert Drain voids bankrupt parts supplier Delphi's union contracts, and what effect that will have on GM. After all, there's so much to think about…

Will the United Auto Workers (UAW) react to the judge's ruling with an immediate strike at Delphi, starving GM of vital parts and driving The General into Chapter 11? Or is UAW boss Big Ron Gettelfinger secretly scheming to use the judge's decision to scare his members into accepting an otherwise unpalatable 15th hour compromise? Does Big Ron still have enough juice to make it so, given that he's up for reelection in June? Will a more radical union leader emerge and convince members of the rank and file to stage wildcat strikes? Will the larger number of Delphi retirees overrule their hotheaded "active" brothers and sisters to save their health care and pension payments?

Will GM CEO Rabid Rick Wagoner buy back Delphi's US operations at the 14th hour to assure a supply of mission critical parts until GM's foreign outsourcing is complete– and then jettison the whole shebang before the UAW contract negotiations in '07? Does GM even have the cash to pull it off? Will the judge's ruling plunge The General's credit rating below the minimum needed for the sale of their GMAC mortgage unit to Cerberus, killing the deal and removing the cash needed to buy-out Delphi? Or is Rabid Rick simply hoarding Delphi parts and outsourcing as fast as possible in the hope that he can withstand a late summer strike at Delphi? Have Rick and Ron secretly agreed to a worst case scenario short strike? Could Ron deliver?

Yes, well, the Delphi situation is only one of the storms gathering above GM's head. Lest we forget, the company's suppliers are none-too-happy with their terms of business; GM could not afford a 'run on the bank' scenario. And if the banks smell trouble and refuse to guarantee fleet sales… Meanwhile, management bet all its chips on the gas-guzzling GMT900 SUV's. Although early sales have been strong, the canary in the coal mine– pickup truck sales– is looking decidedly punk. April sales of the four-wheeled flat-bedded cash cows fell 5.9% compared to last year. Not to put too fine a point on it, every day that gasoline prices stay at or hovers around $3 a gallon is another bad day for GM– and we haven't hit the so-called "summer driving season" yet. If gas prices head northwards from here, if America starts downsizing its fleet in a big hurry, the company's market share will go into free fall. Again. Still.

And then, today, I received an email titled "Quick Question." The correspondent asked "Can you offer your opinion on how GM troubles/possible strike would affect a new Chevy owner? I am strongly considering buying a Suburban next month, but don't know if this would be a good idea." It would be easy to blame me for this communication, dismissing it as the inevitable result of TTAC's ongoing "attack" on GM. I wouldn't recommend it. This is the first time I've been asked that question. It represents the "third front" in GM's fight for survival: consumer confidence. If the Delphi situation is allowed to fester, it could be the tipping point that spills GM into oblivion– even without a strike.

Analysts constantly underestimate the importance of all the bad will GM and its dealers have amassed over the years. I've got hundreds of THOSE emails– from a stricken motorist who was assured by an OnStar representative that there wasn't a Chevy dealer in Dearborn Michigan, to a lifelong Cadillac owner whose dealer experience was so awful he promises never to buy another GM product as long as he lives. In fact, "should I buy a vehicle from a wounded company" is more like "why the Hell should I buy a vehicle from a wounded company?" I reckon the media buzz about GM's bankruptcy is already taking its toll on a company that can not afford to lose a single sale. The smallest bit of bad news could be the sound of butterfly wings beating, drumming up the chaos that spells GM's doom.

While The General's flackmeisters will scream bloody murder about self-fulfilling prophesies, current events are the fulfillment of a prophesy made over thirty-five years ago, when GM and its fellow domestics responded to higher quality foreign imports with arrogance, derision and scorn. They had their chance to change by their own free will. Now change will be thrust upon them. The Death Watch continues.

Before you can buy a firearm in Rhode Island, you have to finish a gun safety course. My instruction consisted of a pot-bellied ex-State Trooper telling war stories about ballistic incidents and accidents. It was a strangely effective education. Not only did I learn that you shouldn't shoot a crack addict with a .22 ('It just makes 'em mad'), but I also had Rule Number One drummed into my brain: if you draw your gun, use it. Which is why I'm sure that The United Auto Workers (UAW) is about to bring GM down.

On Thursday, UAW Vice President Richard Shoemaker told all locals unions covering bankrupt GM parts supplier Delphi to conduct strike authorization ballots by 14 May. The chances of the vote going against the union's request are about the same as Zimbabwe's electorate voting out Robert Mugabe. In other words, 24,000 union workers are about to chamber a round in their Delphi destroyer. The first bullet was loaded by 8500 members of The International Union of Electrical and Communications Workers, who authorized a Delphi strike back in February. The next four rounds will come from the United Steelworkers, the International Brotherhood of Electrical Workers, the International Association of Machinists and Aerospace Workers and the International Union of Operating Engineers.

Organized labor will de-holster this week, when federal bankruptcy Judge Robert Drain (yes really) accepts Delphi's motion to void its union contracts. As sure as Officer Krupke drew his weapon and plugged a hole in the aforementioned crackhead, the unions will strike. All the media punditry claiming that the prospect of mutually assured destruction would stay the union's hand will disappear. All those analysts who claimed that union management would do anything to avoid putting Armageddon on their resume will watch as union workers cheer these self-same officials on the picket lines. It won't be pretty, and it will be fatal, for someone…

The media has focused much of its recent energy on GM's worker buyout offer– as if this expense-trimming plan could somehow denude and neuter union intransigence towards Delphi's proposed salary and benefit reductions. GM's much-heralded early retirement package offered thirteen thousand Delphi workers a lump sum to get the Hell out of Dodge. The UAW reports that just 3620 Delphi workers have bailed. Although the payoff deadline has been extended to June 30th, it's perfectly clear this plan will have about as much effect on a strike vote as toothpick on a walnut. Not that any of the principals care. While all this has been going on, the UAW, GM and Delphi have all been preparing for war.

What happened to all that talk about GM assuming responsibility for the difference between what Delphi wants to pay its workers and what it currently pays its workers? Gone. Instead, GM's on-again, off-again "subsidy" on Delphi parts– delaying the supplier's contractual agreement to lower its parts prices in the first quarter of '06– is off again. At the same time, the General is stockpiling Delphi parts (including complete vehicles), reducing Delphi content and offering Delphi contracts to other suppliers (e.g. spark plugs now come from Denso, Honeywell and NGK). There is no question whatsoever that GM is racing to reduce its reliance on Delphi before the unions walk and its Tier One mission critical parts supplier's business hits triage.

Meanwhile, Delphi is readying itself to give the middle finger to both the UAW and GM. While GM accounts for roughly 60% of its total turnover, Delphi's US operations are the least profitable part of its business. If Delphi jettisons GM's less-then-enormously rewarding parts contracts, its US labor costs and all those damn lawyers' fees ($61m since filing), the supplier still has enough cash flow and foreign capacity– both actual and potential– to survive. Delphi's losses for March were half that of the previous month ($56m vs. $136m); it could be an indication that Delphi has already begun outsourcing its operations.

It's a domino deal. When the federal judge issues his ruling, the UAW and its fellow unions must strike. Surrendering salary or benefits would be tantamount to accepting the death of unionism. The unions may lose Delphi and GM, but they'll remain intact at Ford and DCX. When the UAW strike begins, Delphi must move its operations overseas. They can't survive with their current US cost structure. And when Delphi stops selling The General parts, GM must die.

The world's largest automaker won't be able to adapt under fire. GM's too Delphi dependent, their bureaucracy too slow and inefficient, their image too tarnished and their finances too precarious to cope. As my firearms instructor said when asked for the best course of action in an impossible scenario, "Gun or no gun, when you're done, you're done.'