News From the Auto Industry

Even as GM is paying out unjustified dividends it is demanding huge price concessions from its suppliers and complaining about the huge healthcare burden it carries from having 2.5 retirees for every active worker. Since dividends should represent surplus cash, the dividend payment presents a wrong message to those who could help it regain its competitiveness. Suppliers have their own shareholders to consider and few of them are flush with cash these days. While the answer on GM’s healthcare expense is not to shift the burden onto the American taxpayer, but rather to renegotiate burden sharing with its retirees, that conversation can’t even begin while the company is distributing $1.6 billion each year to its shareholders. Relative to Toyota, which will displace GM as the world’s largest auto company in 2006 or 2007, GM has underspent on new products and on technology. Its recent announcement of a joint venture with Daimler Chrysler to develop hybrid technology is critically important and indicative of the fact that GM no longer has global leadership in technology.