David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., discusses General Motors' recent troubles.
ROBERT SIEGEL, host: Dr. David Cole is chairman of the Center for Automotive Research; it's a      non-profit group in Ann Arbor, Michigan.</s>ROBERT SIEGEL, host: Dr. Cole, these cutbacks at GM are going to create more retirees.  Can      the GM pension fund meet its obligations in the coming years?</s>Dr. DAVID COLE (Chair, Center for Automotive Research): I think the      pensions are really not the major problem here.  This has been booked;      money's been set aside for that.  What has really been a problem is the      excess capacity, the health-care costs.  Those are the more dominant      factors than pension.  But the number of people that they're taking out      is pretty much along the normal attrition curve anyway.  These are people      that they expected to leave, but what they're doing this now with is some      very discreet plant eliminations. But if you don't have capacity in line      with your market, you have a problem in this business.</s>ROBERT SIEGEL, host: Let's talk about health-care costs first.  When GM renegotiated      the health benefits its retirees receive, which I believe used to be free      essentially...</s>Dr. DAVID COLE (Chair, Center for Automotive Research): Essentially free.  It was a very, very low co-pay.</s>ROBERT SIEGEL, host: ...the columnist George Will wrote that GM was getting back into      the automaking business and out of the health-care business.</s>Dr. DAVID COLE (Chair, Center for Automotive Research): That's right.  Well...</s>ROBERT SIEGEL, host: Can GM continue to provide health-care coverage for a million      people and be a competitive auto company?</s>Dr. DAVID COLE (Chair, Center for Automotive Research): I don't think they can provide health care in the same model      that they had been historically.  You would guarantee somebody a level of      care forever.  We're moving rather quickly, I think, to a defined      contribution in the sense that, `Here's some money to use for health      care.  When it runs out, good luck.'  And that's really realistic and is      pretty much happening across the country today.</s>ROBERT SIEGEL, host: Now you spoke also of excess capacity.  Beyond cutting back      capacity, does GM have a plant to qualitatively change its operations, so      that it will regain some capacity or be more competitive in the future?</s>Dr. DAVID COLE (Chair, Center for Automotive Research): Well, actually GM, from an operational standpoint--and if you      look at product development, product quality, plant productivity--is      very, very much world class.  And what they are is kind of like an      Olympic swimmer that's trying to carry some lead weight while they swim      across the river, and that lead weight represents, for example, this year      almost $6 billion in health-care costs or excess capacity that is just      not being used.  And, at the same time, they're working very hard on the      revenue side, which is developing products that you can sell profitably      and people want to buy.  And that still is a continuing challenge for the      industry.</s>ROBERT SIEGEL, host: But before we leave the question of health costs, one could say      that GM accepted the liability to pay all this out in health-care costs      by winning some concessions on wages, so that, in effect, this is part of      the picture of compensation that it's negotiated.</s>Dr. DAVID COLE (Chair, Center for Automotive Research): Yeah, it was part of the total compensation.  And I think,      realistically, when this began was during the time of the oligopoly of      the Big Three, where you could kind of do anything you wanted and      ultimately pass those costs along to the consumer.</s>ROBERT SIEGEL, host: Should we look at these GM cuts and say the GM of the future      will simply employ fewer autoworkers, and the deal they get, in terms of      pension or health benefits, will simply not be as good as it used to be?</s>Dr. DAVID COLE (Chair, Center for Automotive Research): Absolutely right.</s>ROBERT SIEGEL, host: It's not conceivable that there could be some renaissance of the      company that would bring it back up--bring back 30, 50,000 jobs over the      next few years?</s>Dr. DAVID COLE (Chair, Center for Automotive Research): I think the basic--there are two phrases that I would use.      It's, `Change or die,' or, `Shrink to grow.'  `Shrink to grow' means that      you get to a profitable, sustainable basis, and then potentially you      could grow in the future.  But absent a shrinkage, where you have an      alignment between capacity and size of the market that you have, you're      in deep trouble.  And I think GM has to restructure as a matter of      necessity.  And absent, really, a fundamental restructuring to a new      business model, it would not likely survive.</s>ROBERT SIEGEL, host: Well, Dr. Cole, thanks a lot for talking with us today.</s>Dr. DAVID COLE (Chair, Center for Automotive Research): My pleasure to be with you.</s>ROBERT SIEGEL, host: That's Dr. David Cole speaking to us from Ann Arbor, Michigan.      He is the chairman of a non-profit group, the Center for Automotive      Research.