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Alexander Haig
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2009-04-27
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Updated Viability Plan Speeds, Deepens Restructuring of U.S. Operations

GM Accelerates its Reinvention as a Leaner, More Viable Company



DETROIT -- General Motors (NYSE: GM) today presented an updated Viability Plan that will speed the reinvention of GM's U.S. operations into a leaner, more customer-focused, and more cost-competitive automaker.
The Viability 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.
Revised Viability Plan goes further and faster
The Viability Plan announced today builds on the February 17 Viability Plan submitted to the U.S. Treasury. http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewpressreldetail.do?domain=2&docid=52168. The revised Plan accelerates the timeline for a number of important actions and makes deeper cuts in several key areas of GM's operations, with the objective to make us a leaner, faster, and more customer-focused organization going forward.

Significant changes include:
  • A focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC - with fewer nameplates and a more competitive level of marketing support per brand.
  • A more aggressive restructuring of GM's U.S. dealer organization to better focus dealer resources for improved sales and customer service.
  • Improved U.S. capacity utilization through accelerated idling and closures of powertrain, stamping, and assembly plants.
  • Lower structural costs, which GM North America (GMNA) projects will enable it to breakeven (on an adjusted EBIT basis) 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 sales 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, GM 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."
Fewer U.S. brands, nameplates, and dealers
As part of the revised Viability Plan and the need to move faster and further, GM in the U.S. will focus its resources on four core brands, Chevrolet, Cadillac, Buick and GMC. The Pontiac brand will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010, a reduction of 29 percent from 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries. This four-brand strategy will enable GM to better focus its new product development programs and provide more competitive levels of market support.
The revised plan moves up the resolution of Saab, Saturn, and Hummer to the end of 2009, at the latest. Updates on these brands will be provided as these initiatives progress.
Working with its dealers, GM anticipates reducing its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent. This is a further reduction of 500 dealers, and four years sooner, than in the February 17 Plan. The goal is to accomplish this reduction in an orderly, cost-effective, and customer-focused way. This reduction in U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. More details on these initiatives will be provided in May.
Sales volume and market share projections
The Viability Plan anticipates improved financial results despite more conservative U.S. sales volume expectations going forward. The lower volume expectations are the result of managing the business with fewer nameplates and dealers, leaner inventories, and reduced market share. To address the inventory issue, GM on April 23 announced U.S. production schedule reductions of approximately 190,000 vehicles during the second and early third quarters of 2009.
The Viability 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 percent share in 2009, with share stabilizing in the 18.4 to 18.9 percent range in subsequent years.
"We have 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," said Henderson. "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."
Lower structural costs, lower breakeven point
The Viability Plan also lowers GMNA's breakeven volume to a U.S. annual industry volume of 10 million total vehicles, based on the pricing and share assumptions in the plan. This lower breakeven point (at an adjusted EBIT level) better positions GM to generate positive cash flow and earn an adequate return on capital over the course of a normal business cycle, a requirement set forth by the U.S. Treasury in its March 30 viability plan assessment.

GM will lower its breakeven point by cutting its structural costs faster and deeper than had previously been planned:

  • [*]Manufacturing:
    Consistent with the mandate to accelerate restructuring, we plan to reduce the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, a reduction of 28 percent, and to 31 by 2012. This would reflect the acceleration of six plant idling/closures from the February 17 plan, and one additional plant idling. Throughout this transition, GM will continue to implement its flexible global manufacturing strategy (GMS), which allows multiple body styles and architectures to be built in one plant. This enables GM to use its capital more efficiently, increase capacity utilization, and respond more quickly to market shifts.
    [*]Employment:
    U.S. hourly employment levels are projected to be reduced from about 61,000 in 2008 to 40,000 in 2010, a 34 percent reduction, and level off at about 38,000 starting in 2011. This further planned reduction of an additional 7,000 to 8,000 employees from the February 17 Plan is primarily the result of the previously discussed operational efficiencies, nameplate reductions, and plant closings. GM also anticipates a further decline in salaried and executive employment as it continues to assess its structure and execute the Viability Plan. More details will be announced as soon as they are finalized with the various stakeholders.
    [*]Labor costs:
    The Viability Plan assumes a reduction of U.S. hourly labor costs from $7.6 billion in 2008 to $5 billion in 2010, a 34 percent reduction. GM will continue to work with its UAW partners to accomplish this through a reduction in total U.S. hourly employment as well as through modifications in the collective bargaining agreement.
 

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Alexander Haig
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Discussion Starter #2
...continued...

As a result of these and other actions, GMNA's structural costs are projected to decline 25 percent, from $30.8 billion in 2008 to $23.2 billion in 2010, a further decline of $1.8 billion by 2010 versus the February 17 Plan.

Strengthening GM's balance sheet
Another key element of GM's restructuring will be taking the necessary actions to strengthen its balance sheet. GM today took an important step in improving its balance sheet by launching a bond exchange offer for approximately $27 billion of its unsecured public debt. If successful, the bond exchange would result in the conversion of a large majority of this debt to equity.
"A stronger balance sheet would free the company to invest in the products and technologies of the future," Henderson said. "It will also help provide stability and security to our customers, our dealers, our employees, and our suppliers."
Another important part of improving the balance sheet will be the ongoing discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association (VEBA), and with the U.S. Treasury regarding possible conversion of its debt to equity. The current bond exchange offer is conditioned on the converting to equity of at least 50 percent of GM's outstanding U.S. Treasury debt at June 1, 2009, and at least 50 percent of GM's future financial obligations to the new VEBA. GM expects a debt reduction of at least $20 billion between the two actions.
In total, the U.S. Treasury debt conversion, VEBA modification and bond exchange could result in at least $44 billion in debt reduction.
Throughout the Plan, GM will continue to make significant investment in future products and new technologies, with an investment of $5.4 billion in 2009, and investments ranging from $5.3 to $6.7 billion from 2010 to 2014. Very importantly, development and testing of the Chevy Volt extended-range electric car remains on track for start of production by the end of 2010 and arrival in Chevrolet dealer showrooms soon thereafter.
"The Viability Plan reflects the direction of President Obama and the U.S. Treasury that GM should go further and faster on our restructuring," Henderson said. "We appreciate their support and direction. This stronger, leaner business model will enable GM to keep doing what it does best - provide great new cars, trucks and crossovers to our customers, and continue to develop new advanced propulsion technologies that are vital for our country's economy and environment."

http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewpressreldetail.do?domain=827&docid=53947
 

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Longtime Member
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Absolute crap !!!
 

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Capital City G8
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WTF, ya know they could have flushed Hummer and left it military only, or even Buick. I mean who, besides 75 year olds, buy Buicks these days?
 

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Alexander Haig
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Discussion Starter #8
No word on what happens to the G8? I assume it will be reincarnated as part of another brand?
I'm guessing chevy will have a lumina again or a new impala
Do not count on it. The RWD Impala was cancelled last year. My next car might be a Fiat/Opel. Why couldn't they at least sell teh brand to, oh, I don't know, maybe another car brand that shares the twin-kidney grill and whose 3 and 5 series the G8 has been pounding on.
 

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I'm guessing chevy will have a lumina again or a new impala. Is there any word on when they might make an announcment that?
Please stop saying Lumina. If the G8/Holden comes as a Chevy it MUST be an Impala. I hope to God the "Lumina" name is never resurrected!
 

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I plan to watch for G8 news very carefully. I wanted to wait until next spring to get a 2010 G8 GXP, but now I'm not even sure there will be one for 2010. I sure hope it doesn't come to that. It pisses me off that I have to sell my house to complete my divorce, or I'd go get one right now! I guess I'll have to do whatever I can to get one of the last of them. A sad sad day indeed.
 

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yeah lumina sucks - they should replace impala w/ G8, and bring back the malibu SS
 

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I've been a GM guy my whole life- I've owned over 22 of them (and I'm 33). I am now officially done. They killed my Grand National, Ruined my Impala SS (and forced all taxis and police to go to Ford) , killed my Camaro, killed my Trans Am, killed my Typhoon, now killed my G8.

Re-start the Camaro after the mustang is a success (again), and overprice the car (it will die again- I guarantee). Keep buick when all your domestic buick customers will be dead within the next ten years. That makes sense.

**** you, die you pieces of ****. I hope you go under- you're too stupid to be in business.
 

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It did hurt a lot!
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I wonder if GM will honor the Pontiac Warranty at the dealerships?
Ok thats just a down right silly question. They have no choice but to honor the warranty legally. They are getting rid of a brand. Pontiac isn't a company it's a brand under GM NA. Thw warranty is and has always been through GM not Pontiac.
 

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Sad sad day...

Any word on what happens with current inventory? They going to offer more intense rebates or deals?
 

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yeah lumina sucks - they should replace impala w/ G8, and bring back the malibu SS

Here is the thing. Chevy is where the G8 would fit in best, and probably sell best as an Impala. Since Ford canceled the Crown Vic, the Impala has been the prefered car for police and cab companies. Chevy needs a car to sell to police deptartments and cab companies. The G8 as an import is not that car. So unless they sell it alongside another car or start building it here, I don't see it going to Chevy. I also do not see it fitting in at Buick
 

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Ok thats just a down right silly question. They have no choice but to honor the warranty legally. They are getting rid of a brand. Pontiac isn't a company it's a brand under GM NA. Thw warranty is and has always been through GM not Pontiac.
Agreed...However I wonder who will be honoring the warranty. I have a GMC yet I can't take it for service at the local Chevy dealer as they refuse to service GMC vehicles. So I wonder what brand will service the Pontiac vehicles. Just a thought...
 

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Ok thats just a down right silly question. They have no choice but to honor the warranty legally. They are getting rid of a brand. Pontiac isn't a company it's a brand under GM NA. Thw warranty is and has always been through GM not Pontiac.
Give him/her a break. It was hims/hers 2nd post... :rolleyes:
 

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'08 LR GT #772
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Agreed...However I wonder who will be honoring the warranty. I have a GMC yet I can't take it for service at the local Chevy dealer as they refuse to service GMC vehicles. So I wonder what brand will service the Pontiac vehicles. Just a thought...
Look at what GM did when they eliminated Oldsmobile: any GM dealer could service Oldsmobiles under warranty. I image Pontiac would be the same.
 
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