General Motors : LABOR DAY OF RECKONING

It was no coincidence that when GM executives pulled their financial guidance for the rest of this year, they pointed to the uncertainty of getting relief from the company's unions. Wagoner has to decide whether he's willing to settle for halfway measures that will only delay an inevitable confrontation when the UAW contract expires in two years, or if he's willing to risk a labor war to get big savings sooner.GM doesn't need to open the UAW contract to send workers off into retirement and close some plants. Its factory workers have an average age of 51, so many are close to the 30-year service point that qualifies for retirement. And union leaders might go along with a buyout program. The master UAW agreement says GM has to replace some of the retirees with new workers. But the union has long looked the other way as GM slashed jobs through retirement while hiring almost no new assemblers.Industry observers believe Wagoner is laying the groundwork to close a couple of factories and send thousands of workers off to early retirement. That might help, but it still only gets Wagoner about halfway to where GM needs to be. If he targets four of his 20 assembly plants, the company would be running fairly lean. David E. Cole, executive director of CAR, says GM could easily trim production by 1 million cars, or 20% of its capacity, and still have enough to serve the market. GM could save $2 billion per year in the long run by buying out 20,000 workers, estimates Sanford C. Bernstein & Co. analyst Brian A. Johnson. But it would pay $1.5 billion in severance costs to do so.That would allow GM to build fewer vehicles more efficiently, cut incentives, and pull back on low-priced sales to rental fleets. Plus, the company's remaining factories would be more productive and probably more profitable. "That would hit really bad this year," Cole says. "But it would yield returns." There are several candidates for plant closings: GM has two factories making its Chevrolet TrailBlazer, GMC Envoy, and Buick Rainier midsize SUVs; it could probably get away with one. Its next-generation minivans will likely be built at a plant in Lansing, Mich., which puts the current van plant in Doraville, Ga., on the hot seat. GM is already rumored to be considering the closure of one of its full-size pickup or SUV plants, such as one in Janesville, Wis., or Pontiac, Mich.