GM and Chrysler Submit Updated Restructuring Plans; Up to $18.6B More Needed; Outlines for Product Plans
As required by the loan agreements signed in December 2008, GM and Chrysler submitted their updated restructuring plans showing a pathway to achieve financial viability to Congress on Tuesday. The plans, updated in the context of a worsening sales outlook for the entire auto industry, outline a need for up to an additional $16.6 billion in Federal support for GM and $2 billion for Chrysler; deeper job and brand cuts; as well as product plans for the surviving versions of the automakers.
GM. Following the steep decline in US industry sales in December 2008 and January 2009, GM responded by further lowering its forecast for 2009 US industry sales to 10.5 million units (57.5 million units globally) for viability planning purposes. These industry planning volumes are more conservative than those being used by most other industry sources.
In the US, GM will focus on its core brands; Chevrolet, Cadillac, Buick and GMC. Pontiac will serve as a focused brand with fewer entries, within the Buick-Pontiac-GMC channel. GM will have a total of 36 nameplates in 2012, down 25% from 2008 levels. Elements of the new plan include:
GM will sell or phase out the Hummer brand by 31 March, with a final resolution no later than 2010.
GM has offered Saab for sale, and is requesting Swedish government support prior to any sale. GM has developed a specific proposal that would have the effect of capping its financial support, with Saab’s operations effectively becoming an independent business entity 1 Jan 2010. While GM hopes to reach agreement with the Swedish government, the Saab Automobile AB subsidiary could file for reorganization as early as this month.
Saturn will remain in operation for the next several years, through the end of the planned lifecycle for all Saturn products. In the interim, if Saturn retailers or other investors present a plan that would allow a spin-off or sale of Saturn Distribution Corporation, GM would be open to any such possibility. If a spin-off or sale does not occur, GM plans to phase out the Saturn brand at the end of the current product lifecycle.
GM’s dealer count is also projected to be further reduced, from 6,246 in 2008 to 4,700 by 2012, and to 4,100 by 2014. Most of this reduction will take place in metro and suburban markets where dealership overcapacity is most prevalent.
GM will eliminate 47,000 jobs—37,000 hourly and 10,000 salaried—globally, including 20,000 workers in the US. In its earlier submission, GM said it would cut up to 31,000 jobs.
Five additional plant closings in North America, bringing the total to 14 plant closures within the next three years.
Outside of the US, GM has accelerated restructuring plans for its Canadian, European and Asia-Pacific operations, all of which will be funded from sources outside the US. In Europe, in addition to working with its labor partners to achieve $1.2 billion in cost reductions, GM is also in discussions with the German government for operating and balance sheet support.
GM product plans. In 2005, GM completed a long-term initiative to transform operations from a collection of semi-autonomous regions into a cohesive global enterprise. GM now manages all product development activities globally.
By 2012, more than 50% of GM’s US passenger car sales will be derived from new, global architectures, and this increases to nearly 90% by 2014. GM’s product plans, as outlined under the updated restructuring plan, sees ongoing enhancements in hybrid and electric vehicle technology, as well as potential natural gas applications, with third generation hybrid systems, lean combustion/ HCCI gasoline engines and fuel cells appearing in 2015.
|GM Fuel Economy plans. Click to enlarge.|
Chrysler. Chrysler outlined three alternatives in its plan: a “stand alone” option that would require an additional $5 billion ($3 billion of which already requested but not yet granted) in Federal funding plus DOE funding of $6 billion; a strategic partnership/consolidation option (i.e.., the Fiat plan, earlier post); and the “orderly wind down”—filing for Chapter 11 as the first step in an orderly wind down. Chrysler is pushing for the strategic partnership with Fiat.
Chrysler product plans. In the proposed alliance with Fiat, Chrysler would gain access to Fiat Group vehicle platforms that would complement Chrysler’s current product portfolio and would accelerate the company’s plans for the introduction of more environmentally friendly vehicles.
Chrysler and Fiat portfolio ranges overlap only in midsize segments; access to Fiat’s small platform technology, small gasoline and diesel engines and light duty dual clutch transmission would eliminate need for Chrysler to develop or purchase similar components.
Chrysler said that it plans on launching additional small, fuel-efficient vehicles as well as a breakthrough family of all-electric and range-extended electric vehicles.
Specifically addressing the potential granting of the waiver to California and other states to enforce the AB 1493 greenhouse gas regulations, Chrysler said that it will try its best to comply to those standards using available technology, but that as a last resort it might restrict sales of certain vehicle models in those states. The difficulty in compliance would be in the passenger car segment, rather than the light-duty truck segment.
Chrysler also said that it would have a product portfolio to meed the California ZEV mandate, and outlined an aggressive vehicle electrification plan that shows six ENVI electric drive vehicles being introduced through 2014, in addition to a second-generation Dodge Ram hybrid.