Detroit, Michigan – General Motors has presented an updated viability plan that includes closing some plants sooner than anticipated, restructuring its dealer network, and phasing out the Pontiac brand by the end of 2010.
The company said the plan will “speed the reinvention of GM’s U.S. operations into a leaner, more customer-focused, and more cost-competitive automaker.” The plan builds on the February 17 viability plan submitted to the U.S. Treasury, but accelerates the timeline for a number of actions and makes deeper cuts in several key areas of operations.
The plan is included in an exchange offer, whereby GM is offering certain bondholders shares of GM common stock and accrued interest in exchange for certain outstanding notes.
Significant changes include:
– A focus on four core brands in the U.S. of Chevrolet, Cadillac, Buick and GMC, with fewer nameplates and a more competitive level of marketing support per brand. The Pontiac brand will be phased out by the end of 2010, while the revised plan moves up the resolution of Saab, Saturn and Hummer to the end of 2009 at the latest. GM will offer a total of 34 nameplates in 2010, a reduction from the 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries.
– A more aggressive restructuring of GM’s U.S. dealer organization to better focus dealer resources for improved sales and customer service. The company anticipates reducing its U.S. dealer count to 3,605 by the end of 2010, down from 6,246 in 2008. This is a further reduction of 500 dealers, and four years sooner, than in the February 17 plan. GM said its goal is to accomplish this reduction in an orderly, cost-effective and customer-focused way. The reduction will allow for a more competitive dealer network and higher sales effectiveness in all markets.
– Accelerated idling and closures of powertrain, stamping and assembly plants. The company plans to reduce the total number of facilities in the U.S. from 47 in 2008 to 34 by the end of 2010, and to 31 by 2012. This is one additional plant idling from the February 17 plan. Throughout the transition, the company will continue to implement its flexible global manufacturing strategy, which allows multiple body styles and architectures to be built in one plant.
– U.S. hourly employment levels will be reduced from about 61,000 in 2008 to 40,000 in 2010, and level off at about 38,000 starting in 2011. This further planned reduction is 7,000 to 8,000 more jobs than in the February 17 plan. GM also anticipates a further decline in salaried and executive employees.
– Lower structural costs, which GM North America projects will enable it to break even at a U.S. total industry volume of approximately 10 million vehicles, based on the pricing and share assumptions in the plan. This rate is substantially below the 15 to 17 million annual vehicle sale rates recorded from 1995 through 2007.
“We are taking tough but necessary actions that are critical to GM’s long-term viability,” said Fritz Henderson, president and CEO. “Our responsibility is clear, to secure GM’s future, and we intend to succeed. At the same time, we also understand the impact these actions will have on our employees, dealers, unions, suppliers, shareholders, bondholders and communities, and we will do whatever we can to mitigate the effects on the extended GM team. We have a strong new product coming for our four core brands: the Chevrolet Camaro, Equinox, Cruze and Volt; Buick LaCrosse; GMC Terrain; and Cadillac SRX and CTS Sport Wagon and Coupe. A tighter focus by GM and its dealers will help give these products the capital investment, marketing and advertising support they need to be truly successful.”
The plan also reduces GM’s market share projections to adjust for the impact of the brand and dealer consolidation, as well as for the short-term impact of speculation regarding a GM bankruptcy. The plan assumes a 19.5 per cent share in 2009, with share stabilizing in the 18.4 to 18.9 per cent range in subsequent years.
Along with the plan announcement, GM launched a bond exchange offer for approximately $27 billion of its unsecured public debt. If successful, the bond exchange will result in the conversion of a large majority of this debt to equity. As well, GM is in ongoing discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association, and with the U.S. Treasury regarding possible conversion of its debt to equity. GM expects a debt reduction of at least US$20 billion between the two actions.