Automotive News, Media & Press - GM Restructuring Plan to Congress Revealed

GM Submits Plan For Long-Term Viability To The U.S. Congress


Reaffirms GM's commitment to energy-saving vehicles and technologies
Outlines the need for Federal bridge loans and line of credit
Requests Federal board to oversee loans, assist with restructuring
Aggressive plan details GM actions to support long-term success
WASHINGTON – General Motors Corp. today submitted a plan to use Federal bridge loans to create a leaner, more competitive company, one that is profitable and self-sustaining for the long term.

The plan, submitted in response to Congressional hearings in November, includes a detailed blueprint for a successful, sustainable General Motors. Building on a product renaissance and comprehensive restructuring that has been under way for several years, the plan calls for:


Increased production of fuel-efficient vehicles and energy-saving technologies;
Rationalization of brands, models and retail outlets;
Reduced wage and benefit costs, including further reductions in executive compensation;
Significant capital structure restructuring;
Further consolidation in manufacturing operations.
GM is requesting term loans of up to $12 billion to provide adequate liquidity levels through December 31, 2009. GM anticipates an initial draw of $4 billion in December 2008. In addition to the bridge loans, the company is requesting a $6 billion line of credit to provide liquidity should a severe market downturn persist. GM's intent is to begin to repay the loans as soon as 2011.

Any draws would be conditioned on achieving specific restructuring requirements in the plan. To help expedite these actions and protect the taxpayers, GM is also seeking the creation of a Federal oversight board to oversee the loans and restructuring plan.

GM is requesting the bridge loans and credit line because of a sharp industry-wide decline in vehicle sales. This decline, due in large part to tight credit and record-low consumer confidence, has led to a corresponding drop in dealer orders that is adversely impacting GM's first-quarter production schedules, revenue forecasts, and liquidity outlook. Federal assistance would enable GM to weather a credit crisis that has driven U.S. industry sales to their lowest per-capita level in half a century, and help the company emerge fully competitive with all manufacturers operating in the U.S.

The complete GM plan is available online: General Motors Corporation Restructuring Plan for Long-Term Viability. Following are highlights from the plan.

Product Portfolio and Fuel Efficiency – GM has made significant progress in revamping its product lineup, with new GM cars like the Chevy Malibu, Cadillac CTS, Saturn Aura and Opel/Vauxhall Insignia earning car of the year awards.While remaining a full-line manufacturer, GM will substantially change its product mix over the next four years, and launch predominately high mileage, energy-efficient cars and crossovers.

In addition, the Chevy Volt, which can travel up to 40 miles on electricity alone, is scheduled for production in 2010, and GM is planning other vehicles using Volt's extended-range electric drivetrain. By 2012, more than half of GM vehicles will be flex-fuel capable, and the company will offer 15 hybrid models. GM will continue development of hydrogen fuel cell technology, which, when commercially deployed, will reduce automotive emissions to just water vapor.

During the 2009-12 plan window, GM will invest approximately $2.9 billion in alternative fuels and advanced propulsion technologies, which offer fuel economy improvements ranging from 12 percent to 120 percent, compared with conventional gas engines. As a result, we expect GM to become a significant creator of green jobs in the United States, as well helping suppliers and dealers transform the U.S. economy.

Market and Retail Operations – In the U.S., GM will focus its product development and marketing efforts on four core brands – Chevrolet, Cadillac, Buick and GMC. Pontiac will be a specialty brand with reduced product offerings within the Buick-Pontiac-GMC channel. Hummer has recently been put under strategic review, which includes the possible sale of the brand, and GM will immediately undertake a global strategic review of the Saab brand. As part of the plan, the company also will accelerate discussions with the Saturn retailers, consistent with their unique relationship, to explore alternatives for the Saturn brand.

Manufacturing and Structural Costs – GM will accelerate its current efforts to reduce manufacturing and structural costs, building on significant progress made over the past several years. GM currently has the most productive assembly plants in 11 of the 20 product segments measured by the Harbour Report, and it is a global leader in workplace safety. With the recently negotiated wage rates, turnover expected in our workforce, planned assembly plant consolidations, further productivity improvements in the plan, and additional changes to be negotiated, GM's wages and benefits for both current workers and new hires will be fully competitive with Toyota by 2012.

Balance Sheet Restructuring – Under the plan, GM would significantly reduce the debt currently carried on its balance sheet. GM plans to engage current lenders, bond holders and its unions to negotiate the needed changes. GM's plan would preserve the status of existing trade creditors and honor all outstanding warranty obligations to both dealers and consumers, in the U.S. and globally.

Compensation and Dividends – The plan calls for shared sacrifice, including further reduction in the number of executives and total compensation paid to senior leadership. For example, the chairman and CEO will reduce his salary to $1 per year. The plan also requires further changes in existing labor agreements, including job security provisions, paid time-off, and post-retirement health-care obligations. The common stock dividend will remain suspended during the life of the loans.

Temporary Federal Bridge Loans – GM is seeking a term bridge loan facility from the Federal government of $12 billion to cover operating requirements under a baseline forecast of 12 million U.S. industry vehicle sales for 2009. In addition, GM is seeking a revolving credit facility of $6 billion that could be drawn should severe industry conditions continue, resulting in sales of 10.5 million total vehicles in 2009. This bridge loan is expected to be fully repaid by 2012 under the baseline industry assumptions. Also, warrants issued as part of the loans would allow taxpayers to benefit from growth in the company's share price that might result from successful completion of the plan.

Once GM has completed the restructuring actions laid out in the plan, the company will be able to operate profitably at industry volumes between 12.5 and 13 million vehicles. This is substantially below the 17 million industry levels averaged over the last nine years, so it is considered to be a reasonably conservative assumption for gauging liquidity needs.

Federal Oversight Board – Given the importance and urgency of this restructuring for GM, other domestic manufacturers and the U.S. economy as a whole, the company supports the formation of a Federal oversight board. The board would help facilitate restructuring negotiations with a range of stakeholders.

GM's Commitment to Success

General Motors and its management are committed to the success of the plan summarized in the Congressional submission. The company's responsibility to its customers, shareholders, employees, retirees, dealers and suppliers is well recognized, as is its century-long commitment to our nation.

GM has never failed to meet a Congressional mandate in the important areas of fuel efficiency and vehicle emissions. We are among the leaders today in fuel efficiency, and set the industry standard for green manufacturing methods. We are committed to meeting the new fuel economy requirements of the 2007 Energy Independence and Security Act. The company's role in creating green technology and high-paying jobs of the future will increase substantially as a result of implementing the plan.

GM is proud of its century of contributions to the growth of our nation, and the company looks forward to making an equally meaningful contribution over the next century.

But does it really go far enough?

And could that mean Pontiac becomes a performance oriented specialty brand???


oh happy days.

fixed

Reduced wage and benefit costs, including further MASSIVE reductions in executive compensation;

Why have a GMC brand? Most trucks are sold as Chev & GMC.

And could that mean Pontiac becomes a performance oriented specialty brand???


oh happy days.

I don't know, it seems to be worded kind of funny. It looks like it could remain as the same multiplatform brand with nothing really exclusive to it.

yawn nothing special there

Sounds like Saturn is toast!!!!!!

Why have a GMC brand? Most trucks are sold as Chev & GMC.While I agree, there are some extremely loyal truck buyers out there. Doesn't make sense but there are GMC Sierra buyers out there that would not be caught dead in a Chevrolet Silverado LOL. :huh: :D

Are they fucking with us? That is barely a change. They need to get serious. Cut brands, tell the UAW to fuck itself, and TACAMO.

W

What happens in 2011 and they still aren't turning a profit?

While I agree, there are some extremely loyal truck buyers out there. Doesn't make sense but there are GMC Sierra buyers out there that would not be caught dead in a Chevrolet Silverado LOL. :huh: :D

yeah same thing with the Silverado guys that wouldnt be caught dead in a Sierra:D I prefer the Sierra tho:pimp:

I think it would be dumb to kill off Saturn. Most of the cars under that name brand are already fuel efficient and aimed at a specific audience.

hmm i didnt see anywhere where it said they were going to ditch the UAW...so i guess there's really no big change and they're still fucked.

What happens in 2011 and they still aren't turning a profit?

Another bailout of course $$$$$$$$$

I think it would be dumb to kill off Saturn. Most of the cars under that name brand are already fuel efficient and aimed at a specific audience.

the reason they will kill the Saturn is because it doesnt sell.Being fuel effiecient doesnt make it a seller with the public, it also has to look good and perform good at a low price....obviously people dont feel that way or else they wouldnt be such poor sellers.

All they have done with Saturn is make it an Oldsmobile without the heritage. Pontiac as a specialty division could be interesting but not profitable, I wouldn't expect it to make it. Hummer will die a quick and violent death if it doesn't sell. SAAB will be purchased by Swedish investors if it is placed on the market or maybe the Swedish government will take it under its wing. I doubt it will go without a fight. As far as the unions I will save my opinions of that but if they are smart they will play ball with GM or thier demise will be timed by an egg timer. Execs of course have to take the cuts but it won't amount to much in the grand scheme of things.

Hummer will NOT sell..... no one to buy it.... no one wants it :(

Same goes for any GM domestic product divisions. (Pontiac,Saturn,Buick,GMC)

Saab might be sold with the right buyer.

The Saturn brand might be killed, and all of the Saturn products will get restyled and called Chevys.

The Saturn brand might be killed, and all of the Saturn products will get restyled and called Chevys.

They are already killing the Solstice for any future models.

Might as well merge and axe the redundant vehicles.

I like my saturn, its almost 16 years old now, original motor with 250k+ miles, gets 40 mpg. The problem is the media has brain washed the potential buyers that you have to by an import to get a good vehicle. I had a 93 Integra that was a POS and that was 9 years ago. There is no way that Acura is still running like this saturn is.

I have a 92 integra with 265K on it and I have had to do less to it than my wife's 99 grand am w/ 65k that we got rid of because of all the problems it had. We bought a Trailblazer instead, but we knew there can be problems with them as well.

Each car is different as far as how the owner takes care of it, but up until the last few years GM's cars just were not built as well as they could have been. Forgetting the media, people buy from experience. Some people have had such bad experiences with american cars they will not go back. They gave them a chance once, but won't give them another. The legacy of GM from the 50's and 60's made a lot of people stay loyal, but the legacy of poor quality and problems keep buyers away.

Why GM Is Doomed

December 2, 2008, 7:59 pm

http://s.wsj.net/media/NewmarkE_col_blogicon08.jpg

If you’re a U.S. taxpayer you ought to read GM’s “Restructuring Plan for Long-Term Viability.” By the end of next year, you’ll own a good chunk of this company, so you might as well familiarize yourself with what’s going on there.

On first read, you’ll think that’s too rash a judgment. The document is well-reasoned and thoughtfully crafted. There are lots of numbers “proving” GM’s commitment to restructuring.

But at its core, it’s propaganda aimed directly at warming the hearts of Congress.

It is not a viable business plan.

Think of the document more as a political tool — and it makes perfect sense. After all, it is Congress — not GM’s board of directors — that have the power to okay GM’s staggering $18 billion request.

As you might expect, GM’s tone is very, very patriotic. And it’s conciliatory — no surprise given how poorly November’s bailout hearings went.

In the intro, GM magnanimously acknowledges it has made mistakes in the past. There’s a special section detailing the shutdown of its corporate aircraft operations, with the odd, guilt-inducing tidbit that it “unfortunately impact[s] approximately 50 hourly and salaried employees.”

And the appendix has a special chart detailing that CEO Rick Wagoner and President Fritz Henderson didn’t actually receive the millions claimed by the media.

About a tenth of the document is dedicated to GM’s newly-won, but apparently profound, concern with fuel efficiency and advanced propulsion development.

The Chevy Volt which delivers “up to 40 miles on a single electric charge” — will apparently be the next Model T. “Volt represents a fundamental reinvention of the American automobile industry…No other company has made such a commitment to the American people.”

As for the meat and potatoes of the actual proposed restructuring, GM gives a good effort. It projects the U.S. auto industry supporting 12 million new cars in 2009 and 13.5 million in 2010. Not unreasonable. And GM makes the right noises about cost reductions with “wages and benefits fully competitive with Toyota by 2012.”

But the restructuring plan comes up short on the most fundamental question. Will this company actually make money? Just look at the details — or what details are lacking.

GM says it plans to focus on only four brands. So why does the number of models only drop from 48 to 40?

GM has 6,600 dealers, which it says it will cut to 4,700 by 2012. Honda has 1,300 dealers. Even Ford has only 4,100 — which it will cut further.

And nowhere in the document does GM lay out, year by year, its own projected market share. This is perhaps the most critical part of any business plan. The kind of thing you learn in the first day of business school.

Turn to Exhibit B-1 — and you find something interesting. It is only in an appendix entry — and not stated explicitly. GM appears to have changed its market share assumption for 2009 GM U.S. volume from 20.6% a year ago to 22.5% today.

In this environment, it seems strange that GM is actually increasing its market share assumptions. And car business is all about volumes.

That points to the real flaw in the GM restructuring plan. The U.S. car industry has been a credit junkie that now has to go cold turkey.

In 2007, GMAC financed about half of GM’s retail car sales, many to customers with weak credit. Today GMAC can’t finance to customers with credit scores under 700. In fact, today GMAC funds only 6% of GM’s retail car sales. No wonder GM sales have fallen off a cliff.

Will that change over the next year?

Ask yourself how long it will take housing to hit a bottom and you’ll understand why the GM restructuring plan ain’t gonna cut it.

Oh, it will work in Washington this week. But by next year, the U.S. taxpayer will be left holding the bag.

http://blogs.wsj.com/deals/2008/12/02/mean-street-why-gm-is-doomed/

The Saturn brand might be killed, and all of the Saturn products will get restyled and called Chevys.

Like they did to Geo in the 90s

Are they fucking with us? That is barely a change. They need to get serious. Cut brands, tell the UAW to fuck itself, and TACAMO.

W

+1 They need to move out of Detroit and completely get the Unions out of the equation. Talk about overpaid.

A Haunting Voice From the Past

AS GENERAL MOTORS CONFRONTS ITS VERY SURVIVAL -- and its management asks: "How did we get here?" -- it might do well to reflect on the observations of a man who was brought in to the company 25 years ago with a mandate to shake things up.

Elmer W. Johnson was the rare outsider who cracked the upper echelon of GM's hidebound management ranks. In 1983, the corporate lawyer joined the company as general counsel and director, with the hope of one day becoming the first interloper to lead it. He left five years later, after becoming increasingly isolated and being passed over to succeed Roger Smith as CEO. Johnson, who on leaving GM returned to his role as a corporate-governance specialist and partner at a Chicago law firm, and who still later was president of the Aspen Institute think tank, died this year.

Six months before his departure, Johnson penned a brutally frank appraisal of what he perceived to be potentially crippling threats to GM. At the time, General Motors was facing a substantial decline in vehicle demand, the prospect of substantial production overcapacity, job-security issues raised by its 1987 labor pact, loss of market share and a bloated cost structure. Ford had earned more than GM for the first time in 62 years. Johnson recommended actions "to enable us to grab hold of the reins of this organization and make the vision pay off." He warned in his Jan. 21, 1988, memo to GM's executive committee that the "consequences of deferring action on these measures are too grave to contemplate."

The fundamental problem, as Johnson saw it: GM's inability to execute on its vision of building the best cars and trucks and offering superior value in its many markets.

Although the company had bought EDS and Hughes, it was slow to integrate their technology and engineering capabilities, and eventually both were sold. A joint venture between GM and Toyota, the New United Motor Manufacturing Inc., Nummi, became a role model for state-of-the-art vehicle production, and yet GM to this day still hasn't fully applied the lessons from the venture.

While GM professed the need for a new global strategy and threw resources at it, a North American-centric approach put its goals at risk. Here, as he does repeatedly in the memo, Johnson drew on the organizational genius of legendary GM chief Alfred Sloan Jr., chastising management for "just now beginning to recover the lost wisdom of Sloan's concept of 'niche' product marketing," which he believed was essential in the global era -- and appears especially important today.

Rhetoric and jargon were substituted for true organizational and cultural change at General Motors, Johnson charged, blaming a clubby, insular and entrenched bureaucracy. He criticized the lack of "bottom-line responsibility and accountability" and the absence of skills demanded of "well-rounded" business executives to the point where the company became balkanized. He said that a failure to encourage open and honest discussion and fear of reporting bad news contributed to "paralyzing the operating people and rendering them risk-averse." GM's practice of forcing its youngest and brightest technical staffers into the ranks of management to further their careers also extracted a heavy price in terms of design and innovation.

Roger Smith staked his reputation on still-loss-ridden Saturn as GM's answer to Toyota's Camry and Honda's Accord. GM's market share fell from 46% when he took the top job in 1981 to 36% when he retired in 1990. Robert Stempel, another lifelong GM employee, succeeded Smith. Two years later, Stempel was ousted as the company flirted with bankruptcy.

http://s.wsj.net/public/resources/documents/BA_gm_memo.pdf

Read the above, someone 25 years ago within GM realized what all of the problems the company had would eventually lead to and nobody listened to him. They were never addressed.

And here we are today.

What happens in 2011 and they still aren't turning a profit?You do mean if, right?
Let's not put the cart before the horse just yet please. ;)






I like my saturn, its almost 16 years old now, original motor with 250k+ miles, gets 40 mpg. The problem is the media has brain washed the potential buyers that you have to by an import to get a good vehicle.Bingo! :werd: :nod:

Read the above, someone 25 years ago within GM realized what all of the problems the company had would eventually lead to and nobody listened to him. They were never addressed.

And here we are today.

This happens too often due to stubborn people in positions of power who blindly believe that "this can't happen on my watch." Weren't people warning about the housing bubble years ago also?

After reading the "restructuring" plans I'm not at all convinced it will work. It's seems more political than anything just to please congress. I find it pretty sad that a company has to appeal to congress to stay afloat. Good luck anyways...