Washington, D.C. – General Motors has submitted a plan to use U.S. federal bridge loans to create a leaner, more competitive company that it said will be profitable and self-sustaining for the long term.
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; and further consolidation in manufacturing operations.
GM is requesting term loans of up to US$12 billion to provide adequate liquidity levels through December 31, 2009 and anticipates an initial draw of US$4 billion in December 2008. In addition to the bridge loans, the automaker is requesting a US$6 billion line of credit to provide liquidity should a severe market downturn persist. The company’s intent is to begin repaying the loans as early as 2011.
To help expedite these actions and protect taxpayers, GM said it is also seeking the creation of a federal oversight board to oversee the loans and restructuring plan.
GM made the following points in its plan:
- While remaining a full-line manufacturer, GM will substantially change its product mix over the next four years and predominantly launch high-mileage, energy-efficient cars and crossovers. It has scheduled the Volt extended-range hybrid for production in 2010 and is planning other vehicles using the drivetrain; the company will also make more than half of its vehicles flex-fuel-capable by 2012, offer 15 hybrid models, and continue development of hydrogen fuel cell technology.
- During the 2009-2012 plan window, GM will invest approximately US$2.9 billion in alternative fuels and advanced propulsion technologies, which offer fuel economy improvements ranging from 12 to 120 per cent compared with conventional gasoline engines, which will also create “green” jobs in the U.S. and help suppliers and dealers transform the U.S. economy.
- In the U.S., GM will focus its product development and marketing efforts on four core brands of 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, including possible sale; GM will immediately undertake a global strategic review of the Saab brand; and will accelerate discussions with Saturn retailers, consistent with their unique relationship, to explore alternatives for the Saturn brand.
- GM will accelerate its current efforts to reduce manufacturing and structural costs. With recently negotiated wage rates, expected workforce turnover, planned assembly plant consolidations, further productivity improvements and additional changes, GM expects that its wages and benefits for both current workers and new hires will be fully competitive with Toyota by 2012.
- Under the plan, GM would significantly reduce the debt currently carried on its balance sheet, and plans to engage current lenders, bond holders and its unions to negotiate the needed changes while preserving the status of existing trade creditors and honouring all outstanding warranty obligations to both dealers and consumers.
- The plan calls for “shared sacrifice”, including further reduction in the number of executives and total compensation paid to senior leadership, with the chairman and CEO reducing his salary to US$1 per year, and with common stock dividend suspended during the life of the loans.
The company said that it is seeking a term bridge loan facility from the U.S. government for US$12 billion to covering operating requirements under a baseline forecast of 12 million vehicle sales in the U.S. for 2009, and expects to repay the loan fully by 2012 under the baseline industry assumptions. GM said that once it has completed the restructuring actions laid out in the plan, it will be able to operate profitably at industry volumes between 12.5 and 13 million vehicles, substantially below the 17 million industry levels averaged over the last nine years.
