GM's Delphi Gambit is Working

In chess, a gambit is the sacrifice of a pawn or piece to gain the initiative and attack. Delphi was until recently a part of GM, and the spinning off of Delphi in 1999 followed by it first going into bankruptcy can be seen as a gambit by GM to test Labor. As they say, Labor blinked, and has now offered a deal to cute wages and benefits, primarily by changing from a defined benefits program to a defined contribution. In a sense, this is karma, as Labor stiffed GM back in 1999 by a lengthy strike at Delphi, and GM blinked. Market reaction to GM's moves today is mixed. GM will still have to sell a controlling part of its cash cow, GMAC, in order to lower GMAC's costs of borrowing. This unwinding of the social compact will continue. The news today should inspire other old-line companies to begin their chess moves, while Labor is compliant.

Comments

[thebizofknowledge.com]

Labor is only compliant when it feels that jobs are at risk. When layoffs and other punitive measures are threatened, suddenly labor is willing to come to the table and negotiate. It all depends on who hold the power in the negotiations.