Highlights of GM's new restructuring plan

[doh]

http://www.reuters.com/article/marke...0080715?rpc=44

July 15 (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) on Tuesday
laid out a broad restructuring to boost cash by $15 billion
through 2009 and return its operations to profitability.

Following are the highlights of the automaker's
announcement:

* Planning assumptions: GM estimates industrywide U.S. auto
sales of 14 million in both 2008 and 2009, GM U.S. auto market
share of 21 percent, and average oil price of $130 to $150 per
barrel by 2009.

* Internal operating changes and other actions expected to
generate $10 billion cash improvement by the end of 2009.

* White-collar job cuts in United States and Canada in 2008
through buyouts, early retirement offers and attrition.

* Suspends dividends on common stock, effective
immediately, which is expected to improve liquidity by $800
million through 2009.

* Expects to raise $4 billion to $7 billion through asset
sales and financing activities; initially targeting at least $2
billion to $3 billion of financing.

* Says has gross unencumbered assets of over $20 billion,
which could support a significant secured debt offering, or
multiple offerings. Assets include foreign subsidiaries,
brands, stake in lender GMAC.

* Reviewing global assets for possible sale or
monetization, expected to generate $2 billion to $4 billion.

* Health care coverage for U.S. white-collar retirees over
65 to be eliminated, effective Jan. 1, 2009. Affected retirees
and surviving spouses to receive a pension increase to help
offset health care costs.

* To defer $1.7 billion of payments scheduled to be made
over 2008 and 2009 for the establishment of a new United Auto
Workers union health care expenses trust.

* No new salary increases for U.S. and Canadian
white-collar employees for the rest of 2008 and 2009.

* No annual discretionary cash bonuses for the company's
executive group in 2008.

* Benefit changes, white-collar job cuts and other related
savings to result in an estimated reduction in cash costs of
more than 20 percent, or $1.5 billion, in 2009.

* Structural cost saving of $2.5 billion expected in North
America through cuts in truck capacity and related component,
stamping and powertrain capacity in response to lower U.S.
industry volume.

* Truck capacity expected to be reduced by 300,000 vehicles
by the end of 2009.

* To reduce and consolidate sales and marketing budgets,
but will protect new products and brand advertising.

* Engineering spending in 2008 and 2009 will be held at
2006-2007 levels.

* Capital expenditures now estimated to total $7 billion in
2009 versus prior plans for $8.5 billion.

* Annual capital expenditures expected to run at $7 billion
to $7.5 billion beyond 2009, excluding China.

* Delaying next-generation large pickup and SUV program, as
well as V-8 engine development.

* Spending for non-product programs to be significantly
reduced; funding to be increased for development of alternative
propulsion and fuel economy technologies and small-displacement
engines.

* To improve working capital by $2 billion in North America
and Europe through reduction of raw material, work-in-progress
and finished goods inventory levels as well as lean inventory
practices at parts warehouses.

* To report a significant 2008 second-quarter loss, hurt by
settlement with parts maker American Axle and local union
strikes in North America as well as continued weakness in the
U.S. auto market and consumer shift toward smaller cars.

[RamJet502]

I wonder if 15 billion dollars would help GM engineer a hydrogen fuel cell line of engines? I know the money won't be used for that, but it should be.

[mgescuro]

Originally Posted by doh

* Planning assumptions: GM estimates industrywide U.S. auto
sales of 14 million in both 2008 and 2009, GM U.S. auto market
share of 21 percent, and average oil price of $130 to $150 per
barrel by 2009.

The price of oil is optimistic. 21% market share is also optimistic.

Originally Posted by doh

* Internal operating changes and other actions expected to
generate $10 billion cash improvement by the end of 2009.

Like what?

Originally Posted by doh

* White-collar job cuts in United States and Canada in 2008
through buyouts, early retirement offers and attrition.

OK. How about a hiring freeze and consolidation of processes. Make people wear different hats. Get more work out of the white collars.

Originally Posted by doh

* Suspends dividends on common stock, effective
immediately, which is expected to improve liquidity by $800
million through 2009.

Took them long enough.

Originally Posted by doh

* Expects to raise $4 billion to $7 billion through asset
sales and financing activities; initially targeting at least $2
billion to $3 billion of financing.

Yeah... shouldn't have bought the RenCenter now, huh!!!???

Originally Posted by doh

* Says has gross unencumbered assets of over $20 billion,
which could support a significant secured debt offering, or
multiple offerings. Assets include foreign subsidiaries,
brands, stake in lender GMAC.

* Reviewing global assets for possible sale or
monetization, expected to generate $2 billion to $4 billion.

Interesting. Sale of Saab? Holden?

Originally Posted by doh

* Health care coverage for U.S. white-collar retirees over
65 to be eliminated, effective Jan. 1, 2009. Affected retirees
and surviving spouses to receive a pension increase to help
offset health care costs.

Interesting.

Originally Posted by doh

* To defer $1.7 billion of payments scheduled to be made
over 2008 and 2009 for the establishment of a new United Auto
Workers union health care expenses trust.

I saw that one coming.

Originally Posted by doh

* No new salary increases for U.S. and Canadian
white-collar employees for the rest of 2008 and 2009.

I saw that one coming too.

Originally Posted by doh

* No annual discretionary cash bonuses for the company's
executive group in 2008.

Should have included 2009 too.

Originally Posted by doh

* Benefit changes, white-collar job cuts and other related
savings to result in an estimated reduction in cash costs of
more than 20 percent, or $1.5 billion, in 2009.

That's a given.

Originally Posted by doh

* Structural cost saving of $2.5 billion expected in North
America through cuts in truck capacity and related component,
stamping and powertrain capacity in response to lower U.S.
industry volume.

Yeah... but you still ahve to pay the union for not doing anything.

Originally Posted by doh

* Truck capacity expected to be reduced by 300,000 vehicles
by the end of 2009.

Not enough reduction.

Originally Posted by doh

* To reduce and consolidate sales and marketing budgets,
but will protect new products and brand advertising.

Yeah... we'll see about that...

Originally Posted by doh

* Engineering spending in 2008 and 2009 will be held at
2006-2007 levels.

An unfortunate necesity.

Originally Posted by doh

* Capital expenditures now estimated to total $7 billion in
2009 versus prior plans for $8.5 billion.

Need to lower that further. How about halting all business trips, instead rely on technology like Telepresence.

Originally Posted by doh

* Annual capital expenditures expected to run at $7 billion
to $7.5 billion beyond 2009, excluding China.

Interesting.

Originally Posted by doh

* Delaying next-generation large pickup and SUV program, as
well as V-8 engine development.

Should be delayed 1 full model cycle, with appropriate MCE's. V8 on the other hand can be purchased for Cadillac from a 3rd party.

Originally Posted by doh

* Spending for non-product programs to be significantly
reduced; funding to be increased for development of alternative
propulsion and fuel economy technologies and small-displacement
engines.

I'll believe it when I see it.

Originally Posted by doh

* To improve working capital by $2 billion in North America
and Europe through reduction of raw material, work-in-progress
and finished goods inventory levels as well as lean inventory
practices at parts warehouses.

If GM had put the lean inventory practices into place back when they launched Saturn -- AS THEY WERE SUPPOSED TO -- perhaps they'd have learned a thing or two by now.
It's unbelievable that this wasn't reduced to begin with!!?? Who runs GM's operations centers???? Dammit. This is a textbook business school application right here!!!

Originally Posted by doh

* To report a significant 2008 second-quarter loss, hurt by
settlement with parts maker American Axle and local union
strikes in North America as well as continued weakness in the
U.S. auto market and consumer shift toward smaller cars.

If union strikes cripple the industry and companies that have a greater net effect on the economy, the BREAK THE UNION.

[ksr]

With as accurately as GM has read the market and consumer tastes over the past 30 years, oil will probably end up at $50/barrel and people will be wanting SUVs in huge numbers, just as GM shutters it's last SUV plant and unveils mini cars.

[emh]

Originally Posted by mgescuro

The price of oil is optimistic. 21% market share is also optimistic.

Yes -- this essentially assumes no change from today. Plus I'm surprised they are forcasting based on a market share estimate rather than a sales volume estimate.

Like what?

Likely everything listed in the article other than asset sales and financing, and possibly dividend suspension. Otherwise the sum of everything listed will way exceed the $15b stated total.

Took them long enough.

No kidding!

Interesting. Sale of Saab? Holden?

Saab should be considered for sale. Hope it doesn't come down to Opel/Vauxhall or Holden.

Should be delayed 1 full model cycle, with appropriate MCE's. V8 on the other hand can be purchased for Cadillac from a 3rd party.

I think an unspecified delay is fine. Based on market conditions, that could well become a full model cycle delay. No need to commit to that or say so publicly at this point.

If union strikes cripple the industry and companies that have a greater net effect on the economy, the BREAK THE UNION.

That's not up to GM. If that is to happen, it has to come from a regulatory or political front. Neither of which will happen because of the votes involved.

[Nasty_SS]

Originally Posted by mgescuro

The price of oil is optimistic. 21% market share is also optimistic.


Like what?


OK. How about a hiring freeze and consolidation of processes. Make people wear different hats. Get more work out of the white collars.


Took them long enough.


Yeah... shouldn't have bought the RenCenter now, huh!!!???


Interesting. Sale of Saab? Holden?


Interesting.


I saw that one coming.


I saw that one coming too.


Should have included 2009 too.


That's a given.


Yeah... but you still ahve to pay the union for not doing anything.


Not enough reduction.


Yeah... we'll see about that...


An unfortunate necesity.


Need to lower that further. How about halting all business trips, instead rely on technology like Telepresence.


Interesting.


Should be delayed 1 full model cycle, with appropriate MCE's. V8 on the other hand can be purchased for Cadillac from a 3rd party.


I'll believe it when I see it.


If GM had put the lean inventory practices into place back when they launched Saturn -- AS THEY WERE SUPPOSED TO -- perhaps they'd have learned a thing or two by now.
It's unbelievable that this wasn't reduced to begin with!!?? Who runs GM's operations centers???? Dammit. This is a textbook business school application right here!!!



If union strikes cripple the industry and companies that have a greater net effect on the economy, the BREAK THE UNION.

Break the union ... screw you ....When you become a productive member of society...you can have some input...writing this crap is not a job you even worked a good hard day ?.....do u even drive a GM car? looking at your posting ...saab....mercedes...jag... and saab dont count.... they should unload that blood sucker .you like to work for 10 bucks an hour ....dont think so ....but if this is your job ...it should be 7 an hour....im sure you are paid alot more then your worth........

[GM-10]

Originally Posted by mgescuro

This is a textbook ...

No - This is a Monday morning quarterback.

[Ambalanche]

Originally Posted by doh

[

* Engineering spending in 2008 and 2009 will be held at
2006-2007 levels.

* Capital expenditures now estimated to total $7 billion in
2009 versus prior plans for $8.5 billion.

So this sounds to me like R&D is going to suffer..... Beating Toyondassan just got a little harder....

[windvale]

Originally Posted by Nasty_SS

writing this crap is not a job you even worked a good hard day

Well said ! Actually, what does that even mean ?

[GM-10]

Originally Posted by Nasty_SS

Break the union ... screw you ....When you become a productive member of society...you can have some input...writing this crap is not a job you even worked a good hard day ?.....do u even drive a GM car? looking at your posting ...saab....mercedes...jag... and saab dont count.... they should unload that blood sucker .you like to work for 10 bucks an hour ....dont think so ....but if this is your job ...it should be 7 an hour....im sure you are paid alot more then your worth........

You know what I'm tired of:

[1] The Union Morons who helped RUIN GM.
[2] Overly simplistic know it all answer givers like Mgescuro and Buickman.

In that order.

[TriShield]

Boy, haven't heard any of this from GM before.

It won't be long now!

[CaptainDan]

Originally Posted by mgescuro

.....Yeah... shouldn't have bought the RenCenter now, huh!!!???.....

You've GOT to be kidding! Purchasing the RenCen was the real estate coup of the century! Bringing the old General Motors Building up to the twentienth century (let alone the twenty first century) would have cost GM ten times the price of buying and updating the RenCen. Buying the RenCen saved a lot of money.

[wescoent]

Originally Posted by Nasty_SS

Break the union ... screw you ....When you become a productive member of society...you can have some input...writing this crap is not a job you even worked a good hard day ?.....do u even drive a GM car? looking at your posting ...saab....mercedes...jag... and saab dont count.... they should unload that blood sucker .you like to work for 10 bucks an hour ....dont think so ....but if this is your job ...it should be 7 an hour....im sure you are paid alot more then your worth........

You know, some of us use GMI as a recreational break during work... this isn't our JOBS.

[GM-10]

Originally Posted by CaptainDan

You've GOT to be kidding! Purchasing the RenCen was the real estate coup of the century! Bringing the old General Motors Building up to the twentienth century (let alone the twenty first century) would have cost GM ten times the price of buying and updating the RenCen. Buying the RenCen saved a lot of money.

Don't you dare question "The Answer Man."

[mgescuro]

Originally Posted by Nasty_SS

Break the union ... screw you ....When you become a productive member of society...you can have some input...writing this crap is not a job you even worked a good hard day ?.....do u even drive a GM car? looking at your posting ...saab....mercedes...jag... and saab dont count.... they should unload that blood sucker .you like to work for 10 bucks an hour ....dont think so ....but if this is your job ...it should be 7 an hour....im sure you are paid alot more then your worth........

I stand by "Break the Union," if the union proves to be the ultimate obstacle to fiscal health of a company or institution.
I've driven GM cars my whole life. The Mercedes is inherited. The Jag was a family car i took over. And I got rid of my Pontiac G6 because it was the worse thing to come out of Detroit since the Gremlin.
I have no patience for poorly put together cars, and the G6 started falling apart about 9 months into ownership.

I work 60+ hour weeks with no overtime. I earn my 6-figure salary unlike most union members.