News From the Auto Industry

The outlook of GM and General Motors Acceptance Corp. is revised to negative from stable. Over the long range, the separation of Delphi could eliminate the competitive disadvantage of GM’s relatively high degree of vertical integration. However, the negative outlook reflects the significant challenges GM faces to effect the divestiture, while avoiding exacerbating its already-strained labor relations, and while realizing appropriate value for its investment in Delphi. In particular, considerable uncertainty exists regarding:

– The extent to which GM might have to provide ongoing operating and financial support to Delphi — for example, in the form of long-term supply contracts; and

For this reason, GM already has started working on ways to compensate for the growing cost of steel after 1995 by persuading more stampers to participate in its resale program and lowering its internal manufacturing costs. The company also now has fewer hands involved in the purchasing process by virtue of its centralization program (AMM, Aug. 1), and this is expected to make its buying activities more efficient and economical.