GM board reviews new turnaround plan for bailout

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GM board reviews new turnaround plan for bailout
Sun Nov 30, 2008 6:32pm EST
By Kevin Krolicki

DETROIT (Reuters) - The board of General Motors Corp met on Sunday to review a restructuring plan intended to cut costs and win support for up to $12 billion in emergency funding from the U.S. government, a person familiar with the deliberations said.

Along with rivals Ford Motor Co and Chrysler LLC, GM is rushing to complete the business plans demanded by Congress as a condition of considering a $25-billion rescue package for the embattled industry.

A GM spokesman said the automaker does not comment on board meetings as a matter of policy. "We are moving ahead toward delivering the plan," GM spokesman Tom Wilkinson said.

The GM board meeting came on the same day that United Auto Workers president Ron Gettelfinger signaled his union was prepared to offer further concessions in order to win support for the bailout provided management shared in the sacrifice.

"They need to establish that executive compensation is something that they're willing to curtail," Gettelfinger said in an interview on CNN. "They can also give the government an equity stake in the business.

The automakers met with skepticism from key lawmakers at hearings earlier in November and were widely criticized for flying to Washington in corporate jets.

House and Senate Democratic leaders, in a letter to GM, Ford and Chrysler executives, said the companies demanded that each submit a "credible restructuring plan" by Tuesday.

That is the same day that major automakers are expected to report bleak November sales results that show an only limited bounce from October when the consumer uncertainty and tight credit combined to send sales to 25-year lows.

Analysts see a chance for GM to stop burning cash if the industry recovers back above a sales rate of about 13 million vehicles and it succeeds with a stepped-up restructuring backed by federal funding in a deal that would involve steep concessions from creditors, executives and the UAW.

The union is under pressure to surrender protections that allow laid-off factory workers at the Detroit automakers to collect over 90 percent of their pay by shifting to a jobs bank. The union agreed to restrictions on the program

A potentially more important concession would be winning new terms for payments by GM and other automakers into a $48 billion trust fund scheduled to take over funding health care benefits for retired autoworkers from 2010.

The revised plan GM is set to submit to Congress is also expected to show cuts to executive pay. The automaker paid its top executives more than $40 million in 2007, even as its stock dropped 19 percent and it posted a loss of $39 billion.

In addition, the GM plan is expected to indicate that the company will ask some bond holders to accept equity and a limited cash payout to redeem the debt they hold.

That proposed debt swap is seen as crucial because GM has more than $44 billion in debt on its balance sheet, analysts have said.

The automaker burned through $6.9 billion in the past quarter and ended September with $16.2 billion. It needs a minimum of between $11 billion and $14 billion to operate and pay suppliers and has warned it could fall short of cash early next year without government help.

The revised plans from all three Detroit automakers are expected to focus on their investment in fuel-saving technology and alternatives like GM's battery-powered Chevrolet Volt.

Analysts expect the automakers to detail confidential product plans that show they have a game plan for meeting federal requirements for a 40-percent improvement in fleet-wide average fuel economy to 35 miles per gallon by 2020.

http://www.reuters.com/article/busin...rpc=23&sp=true

[Buickman]

there is a way.

Return to Greatness

[Aprime]

Originally Posted by Buickman

there is a way.

Return to Greatness

Although I love your solution I have no idea how well it would turn out in the present financial climate, one where no one can finance the purchase of a car.

By the way - I'm studying journalism and a friend a I are making some sort of blog-documentary for one of our classes and... Well, the subject is how it came to this for GM. I already got a word with the Prime Minister of Ontario (Dalton McGuinty - he was at my school to make an annoncement, I got no contacts yet :P) regarding the matter while he was at my school and I was wondering, as a somewhat high-level figure in the whole situation (you remember the whole finger pointing thing), could we interview you in a way or another some time this week? Basically to sum up your views, plans and so forth.

[Buickman]

Originally Posted by Aprime

Although I love your solution I have no idea how well it would turn out in the present financial climate, one where no one can finance the purchase of a car.

By the way - I'm studying journalism and a friend a I are making some sort of blog-documentary for one of our classes and... Well, the subject is how it came to this for GM. I already got a word with the Prime Minister of Ontario (Dalton McGuinty - he was at my school to make an annoncement, I got no contacts yet :P) regarding the matter while he was at my school and I was wondering, as a somewhat high-level figure in the whole situation (you remember the whole finger pointing thing), could we interview you in a way or another some time this week? Basically to sum up your views, plans and so forth.

sure.

[SilverZ]

Can you interview me? I'm an armchair quarterback too!

[dederer]

That would be an interesting report; I wonder how much consideration by GM was given to foreign Automakers entering the US market and their impact on sales. GM did a good job of upgrading their truck lines when Toyota made a credible effort with the Tundra redesign. I don't know how well they did with their cars. The Caviler/Cobalt entrant never seemed to meet expectations. The Malibu turned into a credible competitor after the Accord/Camry/Sonata was entrenched. The Impala appears like a good vehicle against the Avalon, we'll have to see what the next generation brings, If GM is around.

[ne_one]

Originally Posted by Aprime

By the way - I'm studying journalism and a friend a I are making some sort of blog-documentary for one of our classes and... Well, the subject is how it came to this for GM. I already got a word with the Prime Minister of Ontario (Dalton McGuinty - he was at my school to make an annoncement, I got no contacts yet :P) regarding the matter while he was at my school

You may want to address any inquiries at the provincial level to Premier Dalton McGuinty.

Prime Minister Stephen Harper will likely appreciate it... if he sticks around for a while.

[K Dawg ONE]

Originally Posted by ne_one

You may want to address any inquiries at the provincial level to Premier Dalton McGuinty.

Prime Minister Stephen Harper will likely appreciate it... if he sticks around for a while.

Yeah...PM McGuinty? How about 'Premier' McGuinty....lol

[johnny smallblock]

GM will show up and jump through the appropriate hoops. They will get their loan. As it should be.

[Gung_Ho]

Originally Posted by johnny smallblock

GM will show up and jump through the appropriate hoops.

That's not a very good metaphor to use when referring to GM employees. Can anyone picture those morbidly obese GM employees trying to jump and fit through hoops?

[yell-01vette]

[quote=Aprime;1578982]Although I love your solution I have no idea how well it would turn out in the present financial climate, one where no one can finance the purchase of a car.
[quote]

I'm an underwriter for a big Credit Union in St. Louis, and people can still get financing for a vehicle. People with decent to good credit, that is. And we still finance 115% of retail. Just b/c GMAC is in the tank doesn't mean Average Joe that pays his bills can't buy a car. The problem for GM is people have finally realized how bad they are getting hosed on SUVs and trucks that ACTUALLY DO depreciate by 10k the second you drive them off the lot, as opposed to the urban legend that has existed about that for some time. They don't make enough money selling economy cars due to their cost structure. They'll have to change that in order to survive.

They've perservered through the last 10-15 years by getting people into vehicles that aren't cost effective for the consumer, or really "worth" (eye of the beholder, I know) what they paid for them new. Its partly our greed and stupidity that has allowed the big three to carry on in this manner for the last decade when they should have been in trouble for awhile.

[Buickman]

Originally Posted by SilverZ

Can you interview me? I'm an armchair quarterback too!

you imagine yourself in the same league? calling you out on that one mister.

[Aprime]

Originally Posted by Buickman

you imagine yourself in the same league? calling you out on that one mister.

I'll have to agree on that - he's an insider, owns stock and a Buick dealership. Plus he's a known figure, especially for what he did this Summer... And he's got a plan that the executives are trying to block (so he says, but I'm buying it).

It will be published in French, just so you know. Let me know when you're free - I'll discuss what questions we should ask you tomorrow with my 'mate. Feel free to go overboard, however.

Our third source will be his father, which worked for a unionized supplier until he was layed off, he's gonna give the point of view of the CAW, basically (he'll possibly put us in touch with someone that's still active in the CAW, but this stuff is due in 10 days so we have to limit our coverage a bit. It's possible we keep the blog going even after we publish it, though).

[tgagneguam]

Originally Posted by SilverZ

Can you interview me? I'm an armchair quarterback too!

You don't have to agree with Buickman to understand that he's more than an armchair quarterback. He's adequately outlined his credentials in other threads, and he's apropos for Aprime's assignment.

[tgagneguam]

Fortunately, the government already provides assistance to companies that cannot manage themselves: bankruptcy. I'm not so sure why people feel obligated to place the burden of mismanaged corporate America on their backs while simlutaneously having to manage their own finances far more judiciously than Citigroup, GM, AIG, and G.S.E.'s like Freddie and Fannie ever have. If by some reason people do feel obligated to support these enterprises, then rather than suggesting taxpayers be placed on the line (probably because some pay little to nothing to Treasury in the balance come April 15), open your checkbook and buy into these companies. There's no better way to show your support!

And before anyone starts with the fearmongering, the engine of job growth in this country has been for quite some time small (i.e., less than 500 employees) businesses, which combined also employee more workers than large companies and local, state and federal governments combined. GM's collapse would certainly be tough for the economy to take, particularly in the middle of a recession, but I imagine that it would not be pure Armageddon like some claim it would be.