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GM Releases New Viability Plan, Launches Bond Exchange; Phasing Out Pontiac

General Motors presented an updated Viability Plan that accelerates and deepens the cuts in US brands and nameplates, dealers, manufacturing operations and employees intended to enable GM North America to breakeven (on an adjusted EBIT basis) at a US total industry sales volume of approximately 10 million vehicles. As part of the new plan, GM will accelerate the wind-down or sale of HUMMER, Saturn and Saab to the end of 2009, and phase out Pontiac by the end of 2010.

The new plan is included in the prospectus for bond exchange offer in which GM is offering certain bondholders 225 shares of GM common stock for each $1,000 principal amount of GM notes and a cash payment for all accrued but unpaid interest to the settlement date. The bond exchange is a critical step; failure will result in GM’s entering the bankruptcy process. If the exchange succeeds, GM shares will be 89% owned by a combination of the US Treasury and the UAW Voluntary Employee Benefit Association (VEBA); the US Treasury will own at least 50%.

“The objective [of the plan] is not to survive; the objective is to develop an operating plan that allows us to win.”
—Fritz Henderson

In total, the US Treasury debt conversion, VEBA modification and bond exchange could result in at least $44 billion in debt reduction.

Significant changes in the viability plan from the February 2009 version include:

  • A focus on four core brands in the US—Chevrolet, Cadillac, Buick and GMC—with fewer nameplates and a more competitive level of marketing support per brand. Media speculation to the contrary, GM CEO Fritz Henderson said on a conference call this morning, GM and Buick are highly profitable brands, and the company has no intention of losing either of them.

    The Pontiac brand will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010, a reduction of 29% from 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries. The revised plan moves up the resolution of Saab, Saturn, and Hummer to the end of 2009, at the latest.

    Saab Automobile AB filed for protection under the reorganization laws of Sweden in order to reorganize itself into a stand-alone entity. GM has received final bids for HUMMER from potential purchasers and is in the process of reviewing them. A final decision regarding a sale or phase-out of HUMMER is expected in early May. With regard to Saturn, GM is currently evaluating opportunities regarding a potential sale of the Saturn Distribution Corporation, and expects to make a decision regarding a sale or phase out by the end of 2009.

  • Accelerated idling and closures of powertrain, stamping, and assembly plants to improve US capacity utilization.

  • A more aggressive restructuring of GM’s US dealer organization. The number of dealers will drop to 3,605 by end of 2010 from 6,246 in 2008—a 42% reduction. This is a further reduction of 500 dealers, and four years sooner, than in the 17 February plan.

  • The Viability Plan lowers GMNA’s breakeven volume to a US annual industry volume of 10 million total vehicles, based on the pricing and share assumptions in the plan. GM will lower its breakeven point by cutting its structural costs faster and deeper than had previously been planned.

  • GM will reduce the total number of assembly, powertrain, and stamping plants in the US from 47 in 2008 to 34 by the end of 2010, a reduction of 28%, and to 31 by 2012. This would reflect the acceleration of six plant idling/closures from the 17 February plan, and one additional plant idling. Throughout this transition, GM will continue to implement its flexible global manufacturing strategy (GMS), which allows multiple body styles and architectures to be built in one plant.

  • US hourly employment levels are projected to be reduced from about 61,000 in 2008 to 40,000 in 2010, a 34% reduction, and level off at about 38,000 starting in 2011. This is a further planned reduction of an additional 7,000 to 8,000 employees from the 17 February plan. GM also anticipates a further decline in salaried and executive employment as it continues to assess its structure and execute the Viability Plan.

  • The Viability Plan assumes a reduction of US hourly labor costs from $7.6 billion in 2008 to $5 billion in 2010, a 34% reduction.

  • As a result of these and other actions, GMNA’s structural costs are projected to decline 25%, from $30.8 billion in 2008 to $23.2 billion in 2010, a further decline of $1.8 billion by 2010 versus the 17 February plan.

“None of us like this situation; it’s our job to do something about it...I’m a believer in dealing with reality.”
—Fritz Henderson

GM dealers in the United States sold 412,903 vehicles during the first quarter of 2009, which represents a decline of approximately 49% compared to the same period in 2008. The baseline sales assumption in the Viability Plan for the United States in 2009 is 2,048,000 vehicles, which is based on a baseline industry vehicle sales forecast for 2009 of 10.5 million total vehicles sold in the United States.

The Viability Plan reduces GM’s market share projections to adjust for the impact of the brand and dealer consolidation, as well as for the short-term impact of speculation regarding a GM bankruptcy. The plan assumes a 19.5% share in 2009, with share stabilizing in the 18.4 to 18.9% range in subsequent years.

Throughout the Plan, GM will continue to make significant investment in future products and new technologies, with an investment of $5.4 billion in 2009, and investments ranging from $5.3 to $6.7 billion from 2010 to 2014. Very importantly, development and testing of the Chevy Volt extended-range electric car remains on track for start of production by the end of 2010 and arrival in Chevrolet dealer showrooms soon thereafter.



With a 34% reduction in the hourly paid workforce (workers) and a 34% reduction in pay package, GM admits that it will keep on paying the remaining employees the same $73 to $76 an hour.

Even if GM closes all but one plant, it will still go bankrupt because it will not be competitive with plants paying $57/hour or less.

Importing (all) Buicks from China may help GM's balance sheet.

What will happen to GM's USA 40+ large plants? The one in St-Therese, QC was completely demolished to make room for a large shopping centre & 1000+ appartments. Does USA need 40+ more new shopping centres and 400,000 new appartments?

Account Deleted

A viable business plan is one that is profitable for the stock holders in the long-term. GM and Chrysler have two options; 1) Shut down all US manufacturing and move it abroad but keep R&D, design, sales, financing etc at home. 2) Cut wages and benefits at the factories to the same level as non-organized labor and keep producing in the US. In both cases they also need to restructure through a bankruptcy proceeding.

The current plans that will have the government and the unions as the key owners of GM and Chrysler are a recipe for a slow but certain death for GM and Chrysler. Fords strategy of getting gradually more concessions from the unions may work if the end result is that Ford end up with the same cost potential as their competitors that use non-organized labor. In any case the unions will have to abandon their strategy of getting better paid than non-organized labor. This strategy will ultimately kill the companies that are the basis for their own existence.



I have to agree with you.

A UAW run GM will not last more than 3 to 5 years and could cost the Fed Government many more $$$ B.

Union run manufacturing has been tried before and it failed quickly enough.

It seems that nothing short of bankruptcy can pull GM from the financial mess they are in. GM cannot keep over paying all those employees and retired employees unfair benefits and survive. Tax payers will quickly get tired over more give aways to UAW and GM.

With Chrysler and GM bankrupt or operating on a much reduced scale, Ford will have a chance to survive, if it can manage to introduce eough common sense in their UAW overpaid employees and produce better products. Of course, Honda and Toyota USA would get a boost, specially for their advanced Hybrids and higher quality efficient vehicles.


"...$73 to $76 an hour..."

Maybe I missed it, but I did not see any mention of this in the article. When high hourly pay rates are quoted in this context, they usually include ALL compensation. Vacations, sick days, retirement, health care and many other per employee expenses. If you added up the worker that get $30 per hour with all the benefits, it might total $50 per hour, especially when you count heath care at $12,000 per family. It is all compensation.


Unlike the typical anti-union or anti management diatribes, I think this needs further discussion.

The UAW has an obligation to meet transplant payscales, as part of the agreement, for the government to to finance a DIP bankruptcy filing. Or an out of court reorgainization akin to a bankruptcy.

They have done so. The CAW has agreed to the same concessionary contract with Chrysler already setting a pattern for them to comply also with GM andthe Canadian government rerquierements. GM is reducing to four brands, three car brands including a car brand that builds trucks and a separate Truck brand that relables the Chevy trucks and manufactures commercial truck vehicles too. This brand reduction is long overdue. Mid luxury car dealers need acess to crossovers and BOF SUVS. GMC in conjunction makes these dealers viable, in volume. The GM bond holders are being squeezed to accept a conversion of debt to equity. Unbelievably, it is working. Chrysler has achieved its targetted debt-equity conversion goal, set by the government.

The VEBA pension obligations are still being negotiated with Chrysler whose situationis worse, is more accelerated but it seems the UAW will agree to take half its money owed inteh form of stock.

Chruyselr appearto be pullin goff anothe rmiracle on the scheduel set by the TReasury . furthermor eis t settingprecedents for GM to folow ion a la=rger scale,, a month alter.

In summary, Two of the domestic caramkers appear to be emerging with a fundamental reorganization akin to a Chapter 11 filing, that makes them viable for the current deep recession and with break evens, meeting this 50% smaller market. When the market turns, both wil become enourmously profitablel in the is high fixed cost, highly leveraged business. Ford will have a pattern to do likewise.

This is as fundamental an industry reorganization, as that done to the American Steel industry 15 years ago. The US steel industry went from a a unionized, non-competitive high-cost business, competing with lots of low cost imports to the most modern, and highly profitable steel industry in the world. Using electric rcycled scrap, and basic oxygen raw steelmaking processes, that is winning back markets and market share.


“plan lowers GMNA’s breakeven volume to a US annual industry volume of 10 million total vehicles”
Good luck with that 10 million.

I thought that "...$73 to $76 an hour..." was generally accepted; as total compensation, of course.

ExDemo, when you say “When the market turns, both [GM & MoPar] will become enormously profitable in the is high fixed cost, highly leveraged business.”
Do you mean if chapter 11 provides competitive wages & compensation and fewer old plants ? Or do you include some government modernized plants or …?

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