JIM LEHRER: And now back to the economy and to the troubles at General Motors, the third economic happening of the day. Gwen Ifill has that.
GWEN IFILL: General Motors posted its third straight year of losses today, announcing a record $38.7 billion shortfall for 2007. GM has offered yet another round of buyouts and early retirement offers to all of its remaining 74,000 unionized employees in the United States.
The programs would provide payments of as much as $62,500 for the most skilled workers eligible for retirement. United Auto Workers members with a decade or more of experience could also qualify for a one-time payment of $140,000, if they agree to quit and forego future benefits.
The offers are designed to cut costs by replacing higher-paid workers with lower-paid ones.
GM losses big, but not disastrous
GWEN IFILL: Now, for more on all this, we check in with Micheline Maynard, a business reporter with the New York Times who has chronicled the fortunes of the industry. She's the author of "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market."
Glad you could make it, Micheline.
MICHELINE MAYNARD, The New York Times: Thank you, Gwen.
GWEN IFILL: So every time we talk about this, especially about General Motors, it seems that we see more, more, more losses. What is behind all this?
MICHELINE MAYNARD: I think General Motors is facing a fundamental problem, which is that the American car market has changed. When General Motors was at its peak in 1960, it had almost 60 percent of the car market. Today, it has about 23 percent.
Back then, the Detroit auto makers had about 94 percent of the car market. Now they have about 50 percent of the car market. And so General Motors has just been on this downward path. They've been trying to control the decline, but they just don't seem to get their arms around it.
GWEN IFILL: We're talking about a $38.7 billion loss. How does a company begin to even operate efficiently with a loss like that?
MICHELINE MAYNARD: One of the things to understand about this loss is that it's largely on paper. About $36 billion of it is what they call a non-cash charge.
The reason that they had to take the charge is that they have these tax credits that they're allowed to keep if they think they're going to make money sometime down the road, then they could apply these tax credits to offset their liabilities.
But late last year, they essentially said, "Look, you know, we don't think there's a chance of major profits any time soon." That's why they had to take this kind of a charge.
They're big numbers, but even when you get under the numbers, they're still losing money in North America, and that's their major market. And that's really where they have to be successful, if they're ever going to be as much of a power as they once were.
GWEN IFILL: So they're still losing -- say, if you subtract that one-time write-off, $400 million in the last year, that's still not chump change.
MICHELINE MAYNARD: Right, and they're still losing pretty large amounts in North America. Now, their losses are lower. They lost about $6 billion in 2006, and they've lost about $1.5 billion last year.
But if you think about it, a company like Toyota made about $2 billion in North America during 2006 and probably will make a little bit more than that for 2007.
So you can make money in North America. You can do it selling a full line of vehicles. General Motors just hasn't been able to make the changes it needs to get to that point.
GM still using old business model
GWEN IFILL: What is Toyota doing that GM is not?
MICHELINE MAYNARD: One of the things that they do is they pretty much build the same lineup of cars all over the world. They build cars like the Corolla and the Camry, and they do the engineering once, so that the Corolla you buy in Europe, the Corolla you buy in California, and the one in Japan came out of the same budget.
GM and Ford, to a certain extent, are still using different -- they call these platforms to build their cars. So every time you have to redo something, whether it's for Buick or Oldsmobile -- Oldsmobile is gone, excuse me -- Buick or Chevrolet or another division, and then do it for Europe, and then somebody else, it just costs them a lot of money. They're not lean enough yet the way that Toyota is.
GWEN IFILL: When you talk about being lean, part of what they do to achieve that amount of leanness is buyouts and layoffs. Is that strategy working?
MICHELINE MAYNARD: Well, one of the things that happened last fall is that there's a new UAW contract. And in that contract for the first time, there's what's called a two-tier wage system. So newly hired auto workers at the Detroit companies will come in at about half the wages and at less generous benefits than the workers who are there now.
The car companies are betting that they offer these buyouts to these senior workers, these people leave, and then they backfill with these folks that are going to make $14 an hour, instead of $28 an hour.But I think the gamble is that they'll hire enough people to even fill those jobs. And if their market shares keep dropping, there's no guarantee that they'll even need the workers to fill in the spots of those who left.
Ripple from markets has wide impact
GWEN IFILL: We started the program tonight Ray Suarez talking to Treasury Secretary Paulson about the ripple effect of the housing decline. And the secretary said, yes, this is more than just about the subprime mortgage market.
Is this kind of slump, this kind of report from GM, more than just about GM's ability to balance the books? Does it have a ripple effect in the broader economy?
MICHELINE MAYNARD: Well, I think that it does, because you have to remember that, you know, if you use the old rule of thumb, there's about seven jobs that stem from every manufacturing job at a Detroit car maker. You have jobs at the parts suppliers. You know, if the plants aren't building cars, they don't need the parts.
You have jobs in the steel industry and the coal industry, as well. And you have the dealers and you have the people at the Starbucks across the street from the dealers.
So every time you hear about cuts, it affects a lot of people. It isn't quite like it was back in the '60s or the '70s, when the Detroit car makers were such a part of the American economy. But they're still very important to the American economy.
GWEN IFILL: If you're a worker, however, who's having trouble meeting your mortgage payments, and you're being given a choice between staying put, without any kind of job security, and taking a buyout, and not knowing if you have the skills to do something else, what is the rock and the hard place here for these workers? Where do they go?
MICHELINE MAYNARD: It's a very difficult choice, because a lot of these folks say -- they're in their 50s now -- they were hired at the time when you could get a job in plants right out of high school. When I was young, there were some kids that I grew up with that would get summer jobs in the car plants and then they never went onto college because they were getting paid so much money.
So if you fast-forward 20 or so years, that's these folks. They have training to work in auto plants. But you can't walk out of a car plant and make $28 an hour out in an hourly job. You'll probably make $15, if you're lucky.
So they've got to do a lot of personal calculations about what they think their futures will be. Are they able to live on the lower amounts of money that they earn as retirees? Can they get other kinds of jobs?And so there will probably be a lot of people doing a lot of calculations on their computers and on their legal pads over the next couple of weeks.
GM looking to expand, fast
GWEN IFILL: Do GM officials say, "OK, just give us another quarter and we're about to turn the corner"? Do they see a light of the end of the tunnel or an oncoming train?
MICHELINE MAYNARD: One of the things that GM has never said is when it will make money again in North America, and we've always asked that question, and they've never really given us an answer.
Now, one of the things that they're doing is they're trying to expand very quickly overseas. They've been investing a lot of money in China. They're expanding in Russia, down in Latin America.
And I think what they're betting is that if they can really rev up that engine, it can sort of make up for the stalling American car industry. I think the problem is that they could have been doing that faster and sooner. And they still have these heavy costs to overcome at home.
So if we see a really bumpy economy for, say, the next year or so, it's going to be really difficult for all of the Detroit companies.
GWEN IFILL: Micheline Maynard of the New York Times, thanks for making it through that snowstorm for us.
MICHELINE MAYNARD: Thank you. My pleasure, Gwen.