GM Submits Business Plan to US Congress

[Kitdy]

More from Autoblog. They want 12 billion in loans and 6 in revolving credit which I don't know. They want to slash dealerships and workers as well as focus on core brands and sell Saab and Hummer and maybe axe Saturn. Press release below.

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.

[IBrake4Rainbows]

Much of what they are talking about doing makes sense.

But it's unlikely they will find Buyers for the companies they are looking to sell.

And furthermore, it's nearly $8billion more than they were asking for less than a Month ago.

[Ferrer]

Hummer is alomst unsaleable and probably has no future at all. Saab will be difficult and Saturn is too integrated with GM to make sense outside it.

[IBrake4Rainbows]

Exactly - the entire point of Saturn was to be Lower Chevrolet.

Without that parent tether, it's dead.

[blingbling]

Originally Posted by IBrake4Rainbows

the entire point of Saturn was to be Lower Chevrolet

can you prove this?

[IBrake4Rainbows]

GM began manufacturing Saturn cars in 1990, largely in response to the success of Japanese & German small-car imports in the United States, such as Nissan, Toyota, and Volkswagen

From Wikipedia.

Basically, it was a low-cost arm of GM that took inspiration from Overseas competitors.

GM eventually worked out it was easier importing vehicles from O/S to compete with vehicles....from O/S......

[NicFromLA]

All bullshit. They want twice as much as either Chrysler or Ford and have a crappier plan. My prediction: Opel is sold to a European or Japanese company, Ford buys Saab and combines it with Volvo, a wealthy individual or group of individuals buys the Corvette name and turns it into a stand alone company (think Saleen) and the rest is divided between Chrysler and Ford. Caddy exists now in name only anyway since the SUVs are rebadged Chevys and the sedans are rebadged Saabs.

A week ago I thought Chrysler would be the one to fail, but after hearing their 'plans' Chrysler's advantage is it's a smaller company and actually doesn't need as much cash to stay afloat. Plus Chrysler has the best design department.

[Kitdy]

Saturn gets 2 European cars and changes it's image and gets good reviews for the Astra and Aura (won NACOTY I believe) and could end up getting killed off. That is comical.

[Ferrer]

Originally Posted by Kitdy

Saturn gets 2 European cars and changes it's image and gets good reviews for the Astra and Aura (won NACOTY I believe) and could end up getting killed off. That is comical.

2 Euro cars? There's only one AFAIK, the Astra. The Aura isn't a Vectra, though it is related mechanically.

And they may be getting good reviews but it seems they aren't selling very well. And anyway they aren't doing anything that could be done with other brands in their portfolio. They key word here is overlap, which apart from all the reasons already mentioned previously, is killing them.

[IBrake4Rainbows]

Rebadging european vehicles & importing them won't save the US manufacturing, design or engineering aspects of GM corp.

Also, it's not so cheap to import them anymore......

[baddabang]

Originally Posted by blingbling

can you prove this?

This is easy to prove.

Look at a Cobalt. It's made from metal. Now look at an Ion. It's made of plastic.

[MRR]

Originally Posted by IBrake4Rainbows

Rebadging european vehicles & importing them won't save the US manufacturing, design or engineering aspects of GM corp.

Also, it's not so cheap to import them anymore......

Then revamp the factories to produce those cars here. The astra that saturn gets is also a very cut down version of the European astra (we get a crappy engine and none of the cool luxury options that the Europeans get).

I think GM should sell SAAB in much the same way Ford is looking to sell Volvo. Also the hummer division needs to either die or be sold (though who the hell would want to buy it?).

[LTSmash]

My plan stripped down as follows:

Save the most desirable auto company of the Big Three or merge. Get KKR, TPG, BSG and a few i-banks to sell off useless subsidiaries, plants, etc. Cut workforce OR most union benefits (one of them has to go). Keep the company private for a few years and vote in a board that knows what the hell they are doing. Then when consumer satisfaction and demand goes up make public again (just look at Goldman Sachs when they went public, it can work). Good marketing and hype can make the public have faith in the auto sector. If this works, it will create jobs and bring back a market demand.

However, my plan would have worked with no problem two years ago. What needs to be done today is for congress to stop bending backwards for everyone and get off this rant about overpaid CEO's, hedge funds, PE, and regulation; it's only making the problem linger. Stop trying to bail everyone out and let finance guru's do their thing. Go private, public, or go home; none of this government takeover stuff which just creates more restriction and jobs that pay less. And these media channels that don't know a thing about economics should quit voicing their world is about to end crap; people need the truth but not to ridiculous inflation....just watch Bloomberg or FB for some sanity.

EDIT: Don't get on me over specifics please, "plan stripped down as follows."

[Matra et Alpine]

LT, shame that this last year has taught us ...
1. Nobody wants to BUY any useless subsidiaries
2. Marketing and hype are the root cause of the problem, time to get decent cars at decent prices
3. Letting "finance gurus" do their thing got us here

[LTSmash]

Originally Posted by Matra et Alpine

LT, shame that this last year has taught us ...
1. Nobody wants to BUY any useless subsidiaries
2. Marketing and hype are the root cause of the problem, time to get decent cars at decent prices
3. Letting "finance gurus" do their thing got us here

1. I meant useless to the company (Ford, GM, Chrysler), not useless to a potential buyer. Unneeded would have been a better adjective.

2. That's because the board wasn't thinking straight "Vote in a board that knows what the hell they are doing."

3. I'm not sure the "finance guru's" were involved in the auto sector so much. Big Three have been the "don't buy or lets short em'" type for quite some time. In fact they haven’t played a part at all really because of their lack of long term growth in recent years.