Wagoner and Lutz Outline GM's Latest Turnaround Plan
07-15-2008, 12:26 PM
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Wagoner and Lutz Outline GM's Latest Turnaround Plan Slammed by a deep decline in auto sales, General Motors Corp. Tuesday said it will cut salaried job costs, speed factory closings and suspend its dividend to weather the downturn.
The company said it also plans to add $15 billion in liquidity through 2009, even as it said that it has "ample liquidity" to meet its 2008 funding requirements. The additions to liquidity will be achieved through cost cuts, as well as asset sales and capital market activities.
Cost-cutting steps include cutting more salaried positions and eliminating health-care coverage for U.S. salaried retirees over 65 at the start of next year.
"We are responding aggressively to the challenges of today's U.S. auto market," GM Chairman and CEO Rick Wagoner said in a prepared statement. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles."
The announcements followed weeks of rising uncertainty for the No. 1 U.S. auto maker by vehicle sales. The company's stock price has plunged to lows last seen a half-century ago. GM's market capitalization has dwindled to $5.31 billion, about 60% lower than the value of the company at the beginning of the year.
GM and other auto makers have been hurt by a big drop in U.S. vehicle sales this year and a shift in consumer preferences away from trucks and sport-utility vehicles to small cars and other more fuel-efficient models.
GM is moving to reduce the company's heavy reliance on trucks for most of its sales in North America, and ramp up production of cars and other fuel-efficient vehicles as quickly as possible. GM was expected to announce it is eliminating thousands of salaried jobs; a large number could hit the groups that develop pickup trucks and SUVs.
Mr. Wagoner in June announced a plan to close four truck and SUV plants by 2010. In recent weeks, executives and the board discussed possible further steps, such as closing or downsizing engine, transmission and stamping plants that provided parts for trucks, people familiar with the matter said.
To raise more cash, the board has discussed issuing more equity and selling off the remaining 49% stake GM owns in GMAC LLC, these people said. GM could even consider separating its foreign subsidiaries into an isolated unit, and using that as collateral for additional financing or as a way to sell more equity, David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said last week. Mr. Cole is known to have close ties to GM.
GM had $24 billion as of March 31, but analysts expect that sum fell by as much as $5 billion in the second quarter alone. Mr. Wagoner has assured investors the company isn't interested in bankruptcy protection, and said the company has enough liquidity to operate for the next six months.
GM is approaching the market with "very conservative" estimates for its market share and industry sales, one person said. GM had 21.3% of the U.S. market in June, and sees total U.S. vehicle sales falling to about 15 million this year. GM entered the year expecting a 16-million-vehicle market, but demand hasn't been as strong as initially thought.
Mr. Wagoner has been working in recent years on expanding the company's presence in emerging markets and beefing up its technology arsenal to better battle Toyota Motor Corp. for industry leadership. The 55-year-old chief executive has won the backing of GM's board of directors, despite posting three consecutive years of massive financial losses and a considerable slide in U.S. market share. Three years ago, he installed a plan under which the company could save $9 billion in annual structural costs by curtailing the company's manufacturing base. He coupled that plan with a restructured United Auto Workers deal that should cut another $4 billion to $5 billion in costs.
People close to Mr. Wagoner say his latest revisions could allow GM to stay on track to meet an internal profit target set for 2010.
The company said it also plans to add $15 billion in liquidity through 2009, even as it said that it has "ample liquidity" to meet its 2008 funding requirements. The additions to liquidity will be achieved through cost cuts, as well as asset sales and capital market activities.
Cost-cutting steps include cutting more salaried positions and eliminating health-care coverage for U.S. salaried retirees over 65 at the start of next year.
"We are responding aggressively to the challenges of today's U.S. auto market," GM Chairman and CEO Rick Wagoner said in a prepared statement. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles."
The announcements followed weeks of rising uncertainty for the No. 1 U.S. auto maker by vehicle sales. The company's stock price has plunged to lows last seen a half-century ago. GM's market capitalization has dwindled to $5.31 billion, about 60% lower than the value of the company at the beginning of the year.
GM and other auto makers have been hurt by a big drop in U.S. vehicle sales this year and a shift in consumer preferences away from trucks and sport-utility vehicles to small cars and other more fuel-efficient models.
GM is moving to reduce the company's heavy reliance on trucks for most of its sales in North America, and ramp up production of cars and other fuel-efficient vehicles as quickly as possible. GM was expected to announce it is eliminating thousands of salaried jobs; a large number could hit the groups that develop pickup trucks and SUVs.
Mr. Wagoner in June announced a plan to close four truck and SUV plants by 2010. In recent weeks, executives and the board discussed possible further steps, such as closing or downsizing engine, transmission and stamping plants that provided parts for trucks, people familiar with the matter said.
To raise more cash, the board has discussed issuing more equity and selling off the remaining 49% stake GM owns in GMAC LLC, these people said. GM could even consider separating its foreign subsidiaries into an isolated unit, and using that as collateral for additional financing or as a way to sell more equity, David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said last week. Mr. Cole is known to have close ties to GM.
GM had $24 billion as of March 31, but analysts expect that sum fell by as much as $5 billion in the second quarter alone. Mr. Wagoner has assured investors the company isn't interested in bankruptcy protection, and said the company has enough liquidity to operate for the next six months.
GM is approaching the market with "very conservative" estimates for its market share and industry sales, one person said. GM had 21.3% of the U.S. market in June, and sees total U.S. vehicle sales falling to about 15 million this year. GM entered the year expecting a 16-million-vehicle market, but demand hasn't been as strong as initially thought.
Mr. Wagoner has been working in recent years on expanding the company's presence in emerging markets and beefing up its technology arsenal to better battle Toyota Motor Corp. for industry leadership. The 55-year-old chief executive has won the backing of GM's board of directors, despite posting three consecutive years of massive financial losses and a considerable slide in U.S. market share. Three years ago, he installed a plan under which the company could save $9 billion in annual structural costs by curtailing the company's manufacturing base. He coupled that plan with a restructured United Auto Workers deal that should cut another $4 billion to $5 billion in costs.
People close to Mr. Wagoner say his latest revisions could allow GM to stay on track to meet an internal profit target set for 2010.
- Reduce salaried employee expenses by 20 percent through retirements, voluntary separations, buyouts, and other separation initiatives
- Cut all salaried retiree health care after age 65, and use the over funded retirement fund to increase pension pay
- No raises through 2009
- Executive discretionary bonus elimination
- Reduce sales and marketing expenses through reductions in events, motorsports, and ad spending
- Cut truck production by 300k units by 2009
- Reduce product development budget for 2009 to $7b by delaying launches of next generation trucks and SUVs and cutting V8 development
- Increase spending on alternative powertrains
- Push back blue collar retirement VEBA payment from 2008 to 2010, saving $1.7b
- Eliminate stock dividend payouts effective immediately to save $800m
- Raise $4 billion to $7 billion through asset sales and financing using some $20 billion in assets as collateral
- Continue review of the Hummer brand
- The Chevrolet Cruze will begin production in the U.S. in 2010
- The Chevrolet Equinox will go into production in May of 2009, equipped with a direct-injected 2.3-liter four-cylinder engine.
- The Cadillac CTS coupe has been green lit and is coming in the summer of '09
- The Cadillac CTS wagon will be on the market in next spring.
- The next Cadillac SRX, inspired by the Provoq concept, will go on sale globally in 2009.
- The Buick Invicta will be released in the U.S. next spring.
- The Saab 9-4X is on its way in late 2009.
07-15-2008, 12:27 PM
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Lutz: No Beat for the U.S., smaller CUVs on the way, Insignia stalled
Posted Jul 15th 2008 11:53AM by Damon Lavrinc
General Motor's car czar, Bob Lutz, sat down with the little people of the blogosphere after GM's announcement that it would be reducing white collar expenditures by 20-percent, cutting truck production and eliminating retired health care for salaried workers over 65, all in an effort to boost its liquidity by $15 billion by the end of 2009.
Maximum Bob addressed questions about GM's entire brand portfolio, saying, "Pontiac will be nourished with products" and confirming that GM is in talks with financial institutions about HUMMER, and that, "If we could sell the brand, we'd be interested in doing that."
Predictably, much of the conversation centered on fuel efficiency and the General's plans to address the growing demand for miserly transport in the U.S. Lutz made it clear that "as fuel costs in the U.S. begin to resemble those in the rest of the world" it will be easier for GM to realign its products on a global scale.
So what about the Chevy Beat? The subcompact hatch is slated to arrive in Europe next year as the Spark, replacing the vehicle that shares the same name. However, GM didn't intend for the Beat (or Spark) to be offered in the U.S., so it doesn't meet federal safety and crash standards. It would take too much money and about two years to bring the Beat up to snuff for sales in the U.S., so Lutz conceded that it wouldn't be coming to the U.S. until the next generation arrives... whenever that is.
In more unfortunate news, the Chevrolet Cruze, set to debut in Paris and with sales beginning next year in Europe, won't be replacing the Cobalt in the U.S. anytime soon. Lutz maintains that the current Cobalt is "no where near the end of its life-cycle" and that it's "finally coming into its own" in the U.S. market. When the Cruze does debut, expect an interior that's a cross between the Cobalt and the Malibu, and powered by a turbocharged 1.4-liter four-pot that will get 40+ mpg.
When asked about Saturn, Lutz was insistent that GM "likes the brand," but is concerned that the franchise isn't generating enough volume. While earlier reports suggested that Saturn would short-cycle the Aura and replace it with the Opel/Vauxhall Insignia, Lutz says that it won't be coming forthright.
When the 2008/2009 show season ramps up, expect GM to debut several new compact crossovers that are significantly smaller than the Lambda CUVs currently on sale. Lutz wouldn't elaborate on what brands would be getting these new cute 'utes, but expect them to span GM's portfolio.
On a completely unrelated tangent, Lutz divulged a few tidbits about his personal rides, which include a Saturn Sky Redline, an Aura and four (count 'em, four) Segways. Go figure...
Posted Jul 15th 2008 11:53AM by Damon Lavrinc
General Motor's car czar, Bob Lutz, sat down with the little people of the blogosphere after GM's announcement that it would be reducing white collar expenditures by 20-percent, cutting truck production and eliminating retired health care for salaried workers over 65, all in an effort to boost its liquidity by $15 billion by the end of 2009.
Maximum Bob addressed questions about GM's entire brand portfolio, saying, "Pontiac will be nourished with products" and confirming that GM is in talks with financial institutions about HUMMER, and that, "If we could sell the brand, we'd be interested in doing that."
Predictably, much of the conversation centered on fuel efficiency and the General's plans to address the growing demand for miserly transport in the U.S. Lutz made it clear that "as fuel costs in the U.S. begin to resemble those in the rest of the world" it will be easier for GM to realign its products on a global scale.
So what about the Chevy Beat? The subcompact hatch is slated to arrive in Europe next year as the Spark, replacing the vehicle that shares the same name. However, GM didn't intend for the Beat (or Spark) to be offered in the U.S., so it doesn't meet federal safety and crash standards. It would take too much money and about two years to bring the Beat up to snuff for sales in the U.S., so Lutz conceded that it wouldn't be coming to the U.S. until the next generation arrives... whenever that is.
In more unfortunate news, the Chevrolet Cruze, set to debut in Paris and with sales beginning next year in Europe, won't be replacing the Cobalt in the U.S. anytime soon. Lutz maintains that the current Cobalt is "no where near the end of its life-cycle" and that it's "finally coming into its own" in the U.S. market. When the Cruze does debut, expect an interior that's a cross between the Cobalt and the Malibu, and powered by a turbocharged 1.4-liter four-pot that will get 40+ mpg.
When asked about Saturn, Lutz was insistent that GM "likes the brand," but is concerned that the franchise isn't generating enough volume. While earlier reports suggested that Saturn would short-cycle the Aura and replace it with the Opel/Vauxhall Insignia, Lutz says that it won't be coming forthright.
When the 2008/2009 show season ramps up, expect GM to debut several new compact crossovers that are significantly smaller than the Lambda CUVs currently on sale. Lutz wouldn't elaborate on what brands would be getting these new cute 'utes, but expect them to span GM's portfolio.
On a completely unrelated tangent, Lutz divulged a few tidbits about his personal rides, which include a Saturn Sky Redline, an Aura and four (count 'em, four) Segways. Go figure...
07-16-2008, 01:11 AM
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07-16-2008, 01:31 AM
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Well I'm glad the General is doing something. Drastic as it seems I believe the timing's right for these actions! Hopefully this will be able to help GM get back on it's financial feet!
07-16-2008, 05:32 AM
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the next few years will be interesting, and tough on the market, but its happened before, it will happen again. life goes on, and we'll still have some form of performance vehicle to drive.
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07-16-2008, 05:47 AM
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This is exactly what they needed IMO. As long as the new camaro comes back to carry on the heritage Im happy. If they cancel the new camaro however Im calling both Wagoner and Lutz major fuckups. The Camaro and the Corvette are the only cars that can GM has that can sell on name and heritage alone.
07-16-2008, 10:38 AM
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I doubt very much that he's a performance enthusiast, or if he is, that it has any impact on his job.
Pulling out of racing is a bad idea. I know it's expensive, but every time they pull out of racing, they fade from public view. Speed's "Setup", Rhys Millen's Drift Team, the GTO.R/GXP.R in ALMS, and all the Pontiac powered prototypes are about the best marketing one can have. Commercials and word of mouth are great, but nothing beats seeing Pontiac run with and beat BMW, Porsche and the like. It's the best counter argument to any import "performance enthusiast" (which is most of the country it would seem). To say nothing of the SCCA involvement via the Solstice (special packages and such).
Pontiac and Corvette needs to go and STAY racing. It helps ALL of GM. (C5/6R vs DBR9 is probably the greatest rivalry in racing)
07-16-2008, 10:40 AM
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07-16-2008, 10:42 AM
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They are already producing the powertrains and installing them on two cars. The GT500 isn't going away and there's rumors that the Challenger SRT8 will recieve a major power boost. GM would be foolish not to build an LSA Camaro at this point.
07-16-2008, 10:48 AM
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Pulling out of racing is a bad idea. I know it's expensive, but every time they pull out of racing, they fade from public view. Speed's "Setup", Rhys Millen's Drift Team, the GTO.R/GXP.R in ALMS, and all the Pontiac powered prototypes are about the best marketing one can have. Commercials and word of mouth are great, but nothing beats seeing Pontiac run with and beat BMW, Porsche and the like. It's the best counter argument to any import "performance enthusiast" (which is most of the country it would seem). To say nothing of the SCCA involvement via the Solstice (special packages and such).
Pontiac and Corvette needs to go and STAY racing. It helps ALL of GM. (C5/6R vs DBR9 is probably the greatest rivalry in racing)
Pontiac and Corvette needs to go and STAY racing. It helps ALL of GM. (C5/6R vs DBR9 is probably the greatest rivalry in racing)
07-16-2008, 11:29 AM
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Crossovers?? Wtf are crossovers!? Why won't they just get the damn picture and make some small family sedan gas economical cars, wtf is with these people and their need to sell SUV's or crossover's or larger vehicle's in general, what is wrong with a small simple gas economical sedan with extra options if the costumer prefers it...also looks like they are bringing all the best cars to europe saying they are too expensive to meet safety standards here...thanks a lot GM, bravo for the home team huh? Looks like europe will be getting the 40+mpg 1.4l turbo cruze, and what are we left with, f'ing crossovers? Tell me that's not another fancy name for SUV's...
Last edited by jimmy169; 07-16-2008 at 11:36 AM.
07-17-2008, 02:23 AM
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Crossovers?? Wtf are crossovers!? Why won't they just get the damn picture and make some small family sedan gas economical cars, wtf is with these people and their need to sell SUV's or crossover's or larger vehicle's in general, what is wrong with a small simple gas economical sedan with extra options if the costumer prefers it...
SUVs/crossovers ARE still relevant,
they just need to be a little more fuel efficient as well.
07-17-2008, 02:31 AM
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It's going to be more of a long term buy but this company is sticking around. I would buy it now at $11.50 and I would still buy it at $16.00.
I too am holding A LOT of shares right now.
07-17-2008, 02:49 AM
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They can't ignore crossovers, trucks, & SUVs...but they do need to figure out how to make them a lil less thirsty...and not expect to survive & profit from one type of vehicle. I see a tad bit of a problem though. I understand the need to cut expenses, but they hafta make sure they offer vehicles that people want to own and drive...or there will be much less revenue coming in.
No Beat eh? Hmm...well...that leaves me to go to another carmaker for a econobox car whose styling I like. No problems, GM's competitors have plenty of cars to choose from...and many that handle quite well.
Reduced V8 development...sorry to hear that. Doubtful that Ford will offer a V8 anytime soon that can match the lsx engines. If the new hemi eclipses the lsx series of engines...guess I'll start looking to Dodge for excitement.
Move up to pickups (which I will be buying within the next year) and a manual trans is not offered, certainly not with an upgraded engine. That means I gotta spend my deployment money to buy a used truck or something other than GM as I WILL be shifting my own gears. Reducing options is certainly a way to reduce development costs...but in this case they have guaranteed I will not be driving a new GM pickup.
I'm just one guy so technically this is anectdotal...but from where I sit it seems GM is doing everything they can to eliminate the possibility of me finding a new GM vehicle I want...aside from the Corvette or MAYBE the Solstice targa.
No Beat eh? Hmm...well...that leaves me to go to another carmaker for a econobox car whose styling I like. No problems, GM's competitors have plenty of cars to choose from...and many that handle quite well.
Reduced V8 development...sorry to hear that. Doubtful that Ford will offer a V8 anytime soon that can match the lsx engines. If the new hemi eclipses the lsx series of engines...guess I'll start looking to Dodge for excitement.
Move up to pickups (which I will be buying within the next year) and a manual trans is not offered, certainly not with an upgraded engine. That means I gotta spend my deployment money to buy a used truck or something other than GM as I WILL be shifting my own gears. Reducing options is certainly a way to reduce development costs...but in this case they have guaranteed I will not be driving a new GM pickup.
I'm just one guy so technically this is anectdotal...but from where I sit it seems GM is doing everything they can to eliminate the possibility of me finding a new GM vehicle I want...aside from the Corvette or MAYBE the Solstice targa.
07-17-2008, 07:51 AM
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Buy it now. Some are thinking that they might've already missed the boat (stock was up almost $2.00 a share yesterday, HUGE jump for a stock at that price level) but it's not done climbing yet.
It's going to be more of a long term buy but this company is sticking around. I would buy it now at $11.50 and I would still buy it at $16.00.
I too am holding A LOT of shares right now.
It's going to be more of a long term buy but this company is sticking around. I would buy it now at $11.50 and I would still buy it at $16.00.
I too am holding A LOT of shares right now.