UK job worries as fears for General Motors grow

The head of Britain's largest manufacturing trade union has warned that General Motors is not "too big to fail" as concern over the future of the iconic American car manufacturer, which employs 5,000 workers in Britain, continues to grow.

By James Quinn, Wall Street CorrespondentLast Updated: 9:59AM GMT 12 Nov 2008

The Vauxhall motif on a vehicle Photo: AP
GM shares on Tuesday slumped to a 65-year low as analysts questioned the company's liquidity position after it admitted late last week that it may have run out of money by the end of the year.
One hedge fund manager even went so far as to say that GM should be allowed to fail, while an automotive analyst effectively said the company was worthless, placing a price target of zero on the company's shares.
Tony Woodley, joint general secretary of super-union Unite, believes that the collapse of GM, which operates under the Vauxhall brand in the UK, would be a "catastrophe" not just for the US and UK economies, but for the global automotive sector as a whole.
Mr Woodley, himself a former Vauxhall worker, told The Daily Telegraph that if GM were to enter Chapter 11 bankruptcy protection it would have an "immediate effect" on Vauxhall plants at Luton and Ellesmere Port and GM sites across Europe.
"I don't think anything is too big to fail. It's a question that it's too important both for historical and real corporate capital sense that GM must not be seen to fail in the States."
Mr Woodley added that in the same way that it was the right thing to keep financial institutions solvent by nationalisation, the US government should take a similar view regarding the major car manufacturers.
The trade union leader is spear-heading British efforts to ensure the US government injects money into GM and the other troubled US car manufacturers, and raised the subject with the new Business Secretary Lord Mandelson's during a meeting on Monday.
Mr Woodley was on Tuesday trying to contact United Auto Workers union head Ron Gettelfinger in the US, to discuss the situation and come up with some form of co-ordinated response.
In New York, GM's shares slumped below $3 for the first time since April 1943, but rallied slightly before closing down 44 cents at $2.92, as analysts continued to voice concerns about the company.
Mark Oline of credit agency Fitch, said that "strategic bankruptcy" was not an option for GM: "This is an issue of operating or not operating.''
Hedge fund manager Bill Ackman of Pershing Square said GM should be allowed to fail, and that the company should enact a pre-packaged bankruptcy.
His comments came as Deutsche Bank's Rod Lache placed a zero price target on GM's shares.
The future of GM and the rest of the car industry was one of the subjects discussed by President-elect Barack Obama and outgoing President George W Bush during their meeting at the White House on Monday, during which Mr Obama pleaded for urgent aid for the car manufacturers.
The conversation came as a letter was sent by Democratic leaders in the Congress to US Treasury Secretary Hank Paulson, asking him to provide money to the companies under the $700bn Troubled Assets Relief Programme. (TARP)
A GM spokesman said: "Bankruptcy is not an option for GM, as it creates more problems than it solves," before going on to stress that the company is involved in freeing up $20bn of capital through cost cutting measures and asset sales.
"GM has taken a host of self-help actions," the spokesman continued. "But additional support from the US government to aid the overall industry is essential, in whatever form it takes."