GM exits bankruptcy
General Motors completed an unusually quick exit from bankruptcy protection on Friday with ambitions of making money and building cars people are eager to buy.
Once the world’s largest and most powerful automaker, new GM is now leaner, cleansed of massive debt and burdensome contracts that would have sunk it without federal loans.
But GM, whose 40 days under court supervision was far shorter than anyone predicted, faces the worst auto sales slump in a quarter-century.
At a news conference, CEO Fritz Henderson said the revamped automaker will be faster and more responsive to customers than the old one. It will generate cash and repay billions in government loans ahead of a 2015 deadline.
The new company will build more cars and trucks that consumers want and launch them faster than in the past, the CEO said. GM also announced a partnership with online retailer eBay to test auctioning vehicles online.
“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,” he said.
Known for its sluggish decision-making process and bloated management ranks, GM will create a single, eight-member executive committee to speed up day-to-day decision-making, replacing two senior leadership forums.
Henderson said General Motors Corp. will streamline its bureaucratic management structure, cutting U.S. salaried employment by 20 percent, or 6,150 positions, by the end of 2009. The cuts include 450 executive jobs.
Henderson, who was promoted to chief executive in March, will run the global company and oversee its North American operations. GM’s former chief operating officer, Henderson was chosen when President Barack Obama said former CEO Rick Wagoner’s restructuring plans didn’t go far enough.
Top executives at the new company will focus on business results, new vehicles, brands and consumers.
Bob Lutz, a legendary industry executive, was “unretiring” to become a vice chairman responsible for creative elements of products, marketing and customer relationships, Henderson said. Lutz had previously planned to retire at the end of the year after more than four decades in the auto business.
Nick Reilly, who has served as GM’s Asia-Pacific president, will become executive vice president of GM’s international operations based in Shanghai, China.
The new company will focus on customers, cars and culture.
“If we don’t get this right, nothing else is going to work,” Henderson said at GM’s Downtown Detroit headquarters. “Business as usual is over at General Motors.”
The automaker is launching a “Tell Fritz” Web site to allow owners and the public to share their concerns with senior management, and Henderson plans to go out on the road every month.
He said GM will partner with eBay in California to allow consumers to bid on vehicles just as they would in a typical eBay auction. They could also choose a “Buy it Now” option in an experiment to make car shopping easier. Dealers would still distribute the cars.
“As a culture, General Motors needs to be prepared to experiment and adjust,” he said.
New Chairman Edward Whitacre Jr. said GM’s trip through bankruptcy protection had been extremely challenging. “There have been a lot of long hours, there have been a shuttering of plants, there have been painful layoffs.”
Whitacre cited the “strong leadership” of Henderson and the management team, giving the CEO a vote of confidence.
The company’s logo will remain blue with white underlined GM letters, although the company had considered changing the background to green to symbolize an environmental focus. GM has no plans to change the background, Henderson said.
He said the U.S. government, which owns a majority stake in GM, has vowed that it would not get involved in day-to-day decisions.
The Treasury Department released a statement Friday afternoon crediting GM’s restructuring with saving both the automaker and “tens of thousands” of American jobs.
“The hard work of charting a path to viability now rests with GM’s board and management,” Treasury said in its statement. “But we are confident that we remain on track to ultimately see returns on these taxpayer investments.”
GM received $19 billion to $20 billion more in federal aid on Friday, the remainder of the $50 billion it will receive, Henderson said. A large part of the money will be held in escrow.
GM, in a viability plan presented to the government, said it would break even before interest and taxes next year, and be slightly above break-even for 2011 on a pretax basis.
“Sitting here today, I don’t have any reason to disbelieve those numbers,” Henderson said, giving no details of when the company would make a net profit.
Turning a profit will not be easy. GM has piled up losses and survives only because of government loans.
Besides the U.S. government’s 61 percent controlling interest, the United Auto Workers union gets a 17.5 percent stake of the company through its retiree health care trust, and the Canadian government will control 11.7 percent. The remaining shares went to bondholders of the old company.
Concessions made by the United Auto Workers union just before the company entered bankruptcy protection have brought GM’s labor costs down to where they are fully competitive with Toyota Motor Corp., Henderson said.
The parts of GM not moving to the new company will become part of “old GM,” a collection of assets and liabilities that will be sold to pay creditors.