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The New General Motors Launches; Lutz “Unretiring”

The new, downsized General Motors Company emerged from bankruptcy Friday morning. Created from the old GM’s strongest operations in an asset sale approved by the Federal bankruptcy court on 5 July (earlier post), the new GM is built on four core brands: Chevrolet, Cadillac, Buick and GMC. The four brands will offer a total of 34 nameplates by 2010, compared to old GM’s total of 48 in 2008 and 63 in 2004.

The new General Motors Company is primarily owned by the governments of the United States, Canada and Ontario, and by a trust fund providing medical benefits to UAW retirees. Specifically, common stock will be owned by:

  • US Department of the Treasury: 60.8%
  • UAW Retiree Medical Benefits Trust: 17.5%
  • Canada and Ontario governments: 11.7%
  • The old GM: 10%

In the US, the new GM will be a far leaner company. By the end of 2010, the company will operate 34 assembly, powertrain, and stamping plants, down from 47 in 2008, and capacity utilization is expected to reach 100% during 2011. Overall US employment will decline from about 91,000 at the end of 2008 to about 64,000 at the end of this year.

In May, the company accelerated its dealer consolidation efforts, with the goal of reducing the number of GM dealers in the US from 6,000 earlier this spring to approximately 3,600 by the end of next year. Even so, GM will still have the largest dealer network in the US.

The balance sheet of the new GM will carry US debt of approximately $11 billion, which excludes preferred stock of $9 billion, and could change under fresh-start accounting. In total, obligations have been reduced by more than $40 billion, representing mostly unsecured debt and the VEBA trust fund that provides medical benefits to UAW retirees.

GM’s subsidiaries outside the United States were acquired by the new company and are expected to continue to operate normally without any interruption.

Today marks a new beginning for General Motors, one that will allow every employee, including me, to get back to the business of designing, building and selling great cars and trucks and serving the needs of our customers. We are deeply appreciative for the support we have received during this historic transformation, and we will work hard to repay this trust by building a successful new General Motors.

One thing we have learned from the last 100 days is that GM can move quickly and decisively. Today, we take the intensity, decisiveness and speed of the past several months and transfer it from the triage of the bankruptcy process to the creation and operation of a new General Motors.

Business as usual is over at GM. Today starts a new era for General Motors and everyone associated with the company. Going forward, the new General Motors is fully committed to listening to customers, responding to consumer and market trends, and empowering the people closest to the customer to make the decisions. Our goal is to build more of the cars, trucks, and crossovers that customers want, and to get them to market faster than ever before.

—Fritz Henderson, president and CEO

The new General Motors Company will not initially be publicly traded. Henderson said he expects to take the company public again as soon as practical, starting next year, and to repay the government loans much sooner than the 2015 deadline.

Edward E. Whitacre, Jr., who oversaw the creation of the new AT&T, will serve as chairman of a GM board with a number of new directors. Henderson will continue as president and chief executive officer, working closely with Whitacre. He also will take responsibility for GM’s operations in North America, eliminating the GM North America president position.

To speed day-to-day decision-making, two senior leadership forums, the Automotive Strategy Board and Automotive Product Board, will be replaced by a single, smaller executive committee, which will meet more frequently and focus on business results, products, brands, and customers.

Bob Lutz has agreed to join the new GM as vice chairman responsible for all creative elements of products and customer relationships. Lutz, who had been GM Vice Chairman – Global Product Development until 1 April 2009, was due to retire at the end of 2009. (Earlier post.)

Lutz and Tom Stephens, vice chairman, product development, will work together as a team, partnering with Ed Welburn, vice president of design, to guide all creative aspects of design. GM’s brands, marketing, advertising, and communications will report to Lutz for consistent messaging and results. He will report to Henderson, and be part of the newly formed executive committee.

I am pleased to announce that we are ‘unretiring’ Bob Lutz so he can fill this important position in the new GM. He has a proven track record of unleashing creativity in the design and development of GM cars and trucks. This new role allows him to take that passion a step further, applying it to other parts of GM that connect directly with customers.

—Fritz Henderson

General Motors will also end its regional operating structure, moving decisions closer to the customer. This eliminates the regional president positions and the regional strategy boards. Nick Reilly will be named executive vice president of GM International Operations (GMIO) which will be based in Shanghai.

GM is also removing layers of management—reducing the number of US executives by 35% and overall US salaried employment by 20% by the end of this year—flattening the organization and speeding decision making.

Today we launch the new General Motors, and our promise is simple. We will be profitable, we will repay our loans as soon as possible, and our cars and trucks will be among the best in the world. We recognize that we’ve been given a rare second chance at GM, and we are very grateful for that. And we appreciate the fact that we now have the tools to get the job done.

—Fritz Henderson

Comments

dursun

OMG! The Putz is bad news.

HarveyD

Too many old friends will run the renamed (New-GM).

Reducing executives by 35% and salaried staff by 20% when sales are down by 47+ % is not enough of a correction. It should be at least 50% reduction in both cases. The New-GM will be more Top heavy and over-staffed than the Old-GM. Where will profits come from? Will Governments ever get their $60+ B back? How many $$$B did Old-GM Investors lose? Can it (New-GM) go Chapter 11 again to cancel new debts, including the $60B to governments? How often can this game be repeated?

Chapter 7 may have been a better long term solution.

JosephT


Now, Now kids. GM bashing will no longer be tolerated. Obama now owns GM and any descent or criticism will be deemed racist.

SJC

They are selling or have sold Saab and Saturn. Pontiac is no more, so getting the new GM profitable in the U.S. is the goal. They have been profitable outside the U.S. for years.

kelly

"When Lutz became chairman of GM North American development in 2001 one of the first things he stated was that his new 500 hp car was going to save General Motors. His full compensation in 2008 is estimated at $6.9 million.[3]" ..Wiki

“I’ve never quite been in this situation before of getting a massive pay cut, no bonus, no longer allowed to stay in decent hotels, no corporate airplane,” GM Car Czar Bob Lutz tells NPR radio.

"Insanity: doing the same thing over and over again and expecting different results."
Albert Einstein, (attributed)

Roy Davis

JosephT,

I believe it is "dissent," and you may be closer to the mark than you think...

Stan Peterson

Lutz has proved he knows how to enable the hierarchies under his purview and eliminate lots of redundancy. GM under Henderson have already said they have 40,000 more white collar jobs, to cut.

Having been in organizations, such bloodletting usually leads to shooting all the Indians but nary a paper pushing chief ever gets touched. GM needs to cut layers of management without touching very many working Indians, whose ranks have already been thinned. Lutz is eminently qualified to help in doing that. I hope Henderson concentrates on doing so as well.

HealthyBreeze

@SJC,

How much of that International profit was coming from Opel/Vauxhaul? Would the remaining International components be profitable in the near-term market?

I'm pretty dubious of Bob Lutz, just because he never successfully weaned GM off of SUVs in North America. He may be a "car guy," but does he have good enough taste to get GM younger buyers, buyers who went to Toyota and Honda in the last 20 years, and such?

If you look at the 7 new GM models shown on http://money.cnn.com/galleries/2009/autos/0906/gallery.gm_bankruptcy_cars/index.html, you realized that 1) They were designed and greenlighted under Lutz's auspices, and 2) They're half SUV crossovers...WTF?

Mark_BC

I don't understand why Obama didn't can the whole bunch of them along with Wagoner. GM has already proven beyond doubt that its management is incapable of running the company, so why do we assume they will do a better job when the government is keeping them afloat and therefore profits don't matter? I supported Obama at first, and still do overall except for monetary policy, but this is just silly.

ejj

Duhsun: Lutz was the guy that helped turn around Chrysler so much that Diamler Benz wanted to buy it and take it over. Lutz ain't no putz...

fred

The American industry needs learn how to make globally competitive product at profit with $3-5 fuel. Lutz has NO idea how to do that. He knows how to cram V6s&8s into any and everything in a world far, far away from here. Hes a dinosaur....and a putz!

kelly

A self-described "maverick", Lutz organizes the book around his "8 Immutable Laws of Business"

Law 1 - The Customer Isn't Always Right
Law 2 - The Primary Purpose of Business Is Not to Make small money.
Law 3 - When Everybody Else Is Doing It, Don't!
Law 4 - Too Much Quality Can Ruin You
Law 5 - Financial Controls Are Bad
Law 6 - Disruptive People Are an Asset
Law 7 - Teamwork Isn't Always Good
Law 8 – When You Inherit a Really Big Rat’s Nest, Don’t Try to Lure Them Out with Food. Use a Flamethrower!
Leadership Corollaries ????

Yeilding a resume' of successes from Chrysler to GM..

Most Americans think the 'white-haired dude' out of new ideas lost the election. Then again, the FBI's Hoover couldn't be retired per his knowledge of opponents.

Some senior consultants declare that if your going to screw-up -- screw-up BIG and involve everyone. Every last US taxpayer being stuck with sixty(60%) percent of GM's past, present, and future disasters should be big enough.

As HarveyD noted earlier.. "Can it (New-GM) go Chapter 11 again to cancel new debts, including the $60B to governments? How often can this game be repeated?"

ai_vin

Let's be fair, it isn't all management's fault. The unions have to carry some of the blame. I mean just look at their wage & benefits package. The high wages of unionized workers in the U.S. and Canada (members of the UAW and CAW, respectively), compared to the wages of non-union workers at non-U.S. companies like Toyota, meant that it was unprofitable for the U.S. auto makers to build the small cars that would sell in these times of high gas prices.

Some of the blame also has to go to 'Joe Sixpack' whom, so it would seem, has an (_*_) so wide he can't fit it in anything smaller than a Hummer.

And of course some of the blame has to go to the "Madmen" of Madison Ave. who convinced John Q. Public he will get laid if he buys a car with 300hp.

Roger Pham

The good news: 1) GM now stands for Green Motor.
2) Opening plants to produce small car in the USA (vs. importing from Asia or eastern Europe before)
3) eliminating of "legacy cost" will help reduce cost of future cars, making the Green Motor profitable and able to gain market share.

"Crisis equal Opportunity."

danm

Roger, thank you for pointing out the positives, instead of all the naysaying above.
-
It will be good for america if GM does well, so let's give them a chance. There are countless examples of big corporate screw ups in industries other than auto.
-
Personally, i believe america needs an industrial base. That's what allowed us to win WW2. so bailing out the auto cos is not a terrible idea.
If they get the Volt out the door and it does well, it could be the start of something big.

HarveyD

GM + Chrysler + Ford management can all be blamed for letting the unions get away with (low quality work+ working less + getting paid way too much) for decades. A cap could have been set on renumeration of all workers including the top executives. They did not do their job very well.

Joe's (6 + many packs) were easily brain washed into smoking-eating-drinking too much, getting too fat and driving oversized vehicles to satisfy their newly acquired ego and weight.

Winning WW2 may also be part of it.

Acquired (bad) behavior cannot be changed overnight. All the damages done over many decades may take a few decades to correct, unless we have a deep long lasting 1929 style recession.

Meanwhile, it is very difficult to see major changes in the New GM executives and workers attitude. They will be crying wolf within 3 years.

Roger Pham

Talking about "Winning WW2" reminds me of the Battle of Britain...For the British, it was to defend Britain's sky at all cost...

For America now, it should be to defend the Auto Industry at all cost. Most of America go to work on cars burning petroleum. If America has to import most of its cars and 2/3 of its petroleum...God help America! Where will the money come from to import all that...plus all household goods that come from China?

The goal should be to be self-sufficient on automobiles and on energy by using PHEV's, BEV, and FCV's.

SJC

"letting the unions get away with "

Harvey,

Give it a rest. You are obviously biased against the UAW, we get it. You do not have to continue repeating lies and hatred.

ai_vin

What about me SJC? I'm as liberal as they come and even I think the UAW and CAW got away with too much.

SJC

It is easy to blame situations on groups. Germany has much stronger auto industry union and they do not seem to have problems. There is a much deeper hatred of organized labor in this country and some people have been conditioned to blame it for lots of outcomes that were not their fault.

sulleny

Gentlemen, let's not bicker over this contentious UAW issue. And Harvey, yes. Chapter 13 at any time allows continued operations while restructuring debt.

Meanwhile, at GM-Volt.com, they are just about to break the 50,000 person wait list. Pretty good for a vehicle not yet launched.

kelly

Has the 50,000 person wait list made four-figure deposits or purchase contracts..

ai_vin

"Germany has much stronger auto industry union and they do not seem to have problems."

That's true, however Germany [like every G8 country that's not the USofA] has nationalized healthcare. So their unions don't have to force the car companies to take care of the overburden of non-productive personal - retirees.

SJC

So that is a form of subsidy that helps German auto makers. If the companies and workers do not have to pay for all of it, then that means higher profits, lower prices and higher wages, IF the car company executives and shareholders choose to share the wealth. In the U.S. the executives would give themselves larger salaries and bonuses and forget the rest of all that "do gooder" stuff.

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