CHANDLER – Just weeks before a deadline that could send it into bankruptcy, General Motors is entertaining 500 of its biggest customers at a luxury spa and golf course in Arizona.
GM, which has borrowed $15.4 billion from the U.S. government in the past six months, shipped in 150 cars and trucks to the event this week at the Sheraton Wild Horse Pass Resort & Spa, and paid for airfare and hotel lodging for 90 percent of the guests.
The affair is scaled back from previous years, says GM spokesman Terry Rhadigan. Guests have to pay for their own golf outings, he says, and most of the days are packed with informational sessions on GM’s 2010 product line. The guests are GM’s fleet and corporate customers, which accounted for 27.6 percent of GM’s business in 2008. Fleet customers can buy dozens of vehicles at a time.
“Our approach this year has been noticeably austere,” he says. “We obviously had the option to cancel the event or move it … but … do we want to just let our competitors move in and take this important business from us?” Business with fleet customers is “highly profitable,” he says. They often order next year’s models in June.
GM is operating on a taxpayer-funded lifeline, having taken $15.4 billion in government loans. It has said it needs up to $30 billion. It faces a June 1 deadline to slash debt and sign new contracts with its labor union, or the government has said it won’t provide any more money.
A small number of the customers attending the event were government employees who paid their own way, Rhadigan says.
Helio Fred Garcia, a professor of crisis communications at New York University, says GM’s fleet meeting isn’t the same as events by other companies that have been criticized for sponsoring lavish entertainment while taking taxpayers’ dollars.
“If GM is going to survive … it has to maintain sales in a competitive marketplace,” Garcia says.
President Obama has called for “shared sacrifice” among all of GM’s stakeholders.
“I would hope that GM management would spend our financial dollars wisely, and in a manner that would be certainly appropriate in the taxpayer’s minds,” says Jack Dickinson, president of GM retiree group OverTheHillCarPeople.com. White-collar retirees lost health care benefits at the start of 2009. “I would hope that our management has the foresight to stay away from things that would project a negative image with the public.”
GM, Chrysler and Ford executives were harshly criticized last fall for flying on private jets to Washington to ask for government aid. Leslie Paige of Citizens Against Government Waste says it’s clear GM didn’t learn from that.
“GM has a tin ear to these things,” she says. “There shouldn’t be any wining and dining right now. They took taxpayer money. If you’re going to do that, you need to make some very public displays that you get that the taxpayers are part owners of the company now.”
Tom Donaldson, a professor at the Wharton School at the University of Pennsylvania, says GM and other companies accepting government aid should be working hard to stay under the radar.
“Even legitimate functions that help sales, that create partnerships, that are not over the top and luxury, they are almost out of bounds from the public standpoint,” Donaldson says.
GM says the Treasury wasn’t consulted on the event, nor would it ask for permission. The Treasury has said it doesn’t want to interfere with GM’s day-to-day operations.