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2006 NAIAS :: Reviews and Interviews
Jerry York speaks at the SAA Conference
PHOTO BY JASON RZUCIDLO / AMERICAJR.com
Jerry York is the keynote speaker during the SAA Conference.
Jerry York was the keynote speaker during the Society of Automotive Analysts (SAA) Conference at the Renaissance Center on Tuesday, January 10th. York is an associate of American billionaire Kirk Kerkorian.
Mr. York talked about several different topics. First, he touched on General Motors. Secondly, he talked about his successes when he worked at IBM and at Chrysler. Then, he summarized his entire plan of getting General Motors back in profitability.
York began talking about GM stock. He said that it was never worth more than $56/share until 1994. Kirk Kerkorian called Jerry York one day and said, "Have you seen that's going on? It took a deep dive." York replied, "I told him that GM was rolling in cash. It had plenty of cash to fix itself."
Mr. York said there are five things that GM has to do to become profitable. "Number one: Be realistic about market share. Number two: Call out product offerings. Make fewer, much more attractive products. Number three: GM needed a clean sheet. Number four: Make touch decisions. Number five: Time is of the essence."
On the same exact day of the speech at nearly the same time, GM announced they were going to cut the base price on many of their models. Jerry York responds, "GM deserves a lot more credit than received. It's a very, very significant first step. It's pretty clear that GM is making progress in that area."
He mentioned that GM needs to make plans in terms of their finances. They need to get goals and dates on which to meet them by. York adds, "GM needs to do more and they can do more. GM needs to put financial objectives on the table."
Jerry York talks about how he fixed Chrysler
By 1989, Chrysler was in trouble. He conducted a series of meetings to fix the company. He called out spending and shifted the focus to engineering four models. They used a platform team approach and sold non-core assets of the company.
Some of the key elements in fixing Chrysler included reducing the number of products, lowering the cost of suppliers, lowering health care costs. They looked at every element of business. There was $1.5 billion of unnecessary spending.
Jerry York said,"There were a number of executives that were driving three cars home. They add to serious money. It took $3 billion out of the business. There were a lot of people that didn't understand what we were doing."
From the time Chrysler was in trouble, the share price was $10. After Jerry York and his team fixed Chrysler, the stock went up to $42 per share.
Jerry York talks about how he fixed IBM
Both GM and IBM were dominating in their industries. IBM's case was different. Their competitors were domestic instead of being foreign. IBM's profit margins were gutted at the time. In 1990-92, they had $10.6 billion of regular tax flow coming in.
Mr. York adds, "They weren't doing enough to get ahead of the curve. We book $7 billion out of spending. Within 2 1/2 years, we systematically reduced cost structure. IBM worldwide employment declined by 30%. [They] provided severance packages."
There were three key points that Jerry York and his team focused on to fix IBM. First, they needed to grow their services businesses. Secondly, they had to redesign the mainframes. Finally, they had to capitalize on emerging trends.
Jerry York reports, "Tough decisions were made and results came fast. IBM stock bottomed at $110/share. Today [it is] $300/share. We used cross-functional team approaches and we broke through past practices."
Mr. York talks about how he plans on fixing GM
Delphi will have an important rule in the success of GM. Jerry said, "Delphi will be viewed as the tipping point where the auto industry got it's act together or failed." One of the reasons why American automakers are struggling is because of high cost than foreign competitors.
There are two paths that GM can take. They are at a fork in the road. The wrong fork is to leave everything as is. The right fork would include "capacity realignments adjusted. Old ways need to be put under the microscope."
In the last three quarters of 2005, General Motors reported a net loss of $3.8 billion worldwide. Most of the losses were recorded in North America. Their cash flow was at -$6.6 billion. In essence, GM was losing $24 million each day over the period.
Jerry York recently toured the 2006 North American International Auto Show. Two of his favorites were the Chevy Malibu and the all-new Saturn Aura.
Then, Jerry York started talking about the economy and the future of Delphi. He said, "The economy is looking ragged around the edges. Energy costs are still pretty high. What will be the cost of a Delphi labor settlement? It's going to burn some cash. $5-6 billion. 30,000 personnel will come out of the company. Sale of 1/2 of GMAC. Dividends will be cut in half."
He said that GM has too many product offerings. They need to offer fewer, better products. He likes GM's plan to consolidate Pontiac and GMC. He also suggested that GM should sell Saab and Hummer. York said, "Why does GM still own Saab? It's been a money loser."
GM also needs to disclose more information to the public. People should know what's going in within the company. Jerry York adds, "I think GM can do a lot for it's credibility if it disclosed more info even if rules don't require them to do so."
Jerry York's closing statements were very positive. He said, "We think GM is a very sound company. GM has made huge progress. This will show up as time goes on. We like that GM has a worldwide portfolio of business. We are very optimistic that a path exists for GM. [If] GM continues to take aggressive actions."
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