
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, October 12, 1993                   TAG: 9310120101
SECTION: BUSINESS                    PAGE: B-5   EDITION: METRO 
SOURCE: The Washington Post
DATELINE:                                 LENGTH: Medium

FOR GM, THE CHOICE IS TOUGH

General Motors Corp. and its outside directors will have to choose between Wall Street and the company's 267,000 union employees as it tries to reach agreement this week on a new labor contract with the United Auto Workers.

The UAW, having negotiated new, three-year labor agreements with the Ford Motor Co. and Chrysler Corp., is demanding that GM accept the contract pattern set by its domestic rivals.

But GM is under orders from its outside directors to win concessions that would give the world's largest automaker cost breaks to help it recover from billions of dollars of losses. GM has yet to earn a profit in this decade in its core North American auto operations.

These are the same outside directors who last year fired the company's top executives and put in place the current management team with instructions to eliminate plants and cut thousands of jobs to return the company to profitability. But unlike other major corporations that have undergone board-room revolutions, GM is a unionized company and must negotiate any changes with the UAW.

If the company listens to the demands of Wall Street to cut labor costs - demands echoed by its outside directors - it risks becoming another Caterpillar Inc., the target in 1991 of a strike and in-plant guerrilla warfare after it broke the UAW contract pattern in the agricultural implement industry.

Should GM management side with its employees, the long-range consequences could be equally disastrous. Wall Street could downgrade GM's debt rating, which would dramatically increase the cost of borrowing the hundreds of millions of dollars it needs to step up the pace of new vehicle development.

In better economic times, the UAW pattern would give GM a Hobson's choice - no choice at all. But times are not good for either GM or the union, and each side must make hard choices as both Ford and Chrysler are positioned with a wide range of new car and truck models that threaten to drop GM's market share even lower.

As of August, GM had a 30 percent U.S. market share for car and truck sales. That was a drop of 4 points from July, bringing GM to its lowest market share in recent history, according to the WEFA Group's latest auto-market analysis. Ford had a 24.8 percent share in August. Chrysler held 13.3 percent.

Late last week, GM President Jack Smith and his top lieutenants met with UAW President Owen Bieber and other union leaders and outlined in detail the company's financial situation. The message was unambiguous: The company cannot afford the contract pattern set at Ford and Chrysler.

by CNB