"The clock is ticking," said GM CEO Fritz Henderson, but efforts to craft a "faster...deeper" viability plan may be running into gridlock.
With “the clock ticking,” General Motors Corp.’s efforts to “go faster and go deeper” with a revised restructuring plan may be facing gridlock that could push the automaker into bankruptcy.
During a call-in news conference, Friday, GM CEO Fritz Henderson offered a status update on the troubled automaker’s desperate race for survival. In a bluntly candid tone, the new chief executive made it clear that time is running out for GM, which President Barack Obama gave until June 1st to fix its survival plan if it is to get additional federal aid.
Even if the company does meet its deadline, Henderson confirmed, there will be further plant closings and significant additional job cuts.
“Our preference is still to try to accomplish this outside the bankruptcy process,” said Henderson, in a call-in discussion that drew so many participants many journalists were unable to access the news conference. “But the clock is ticking. We have to be ready in case we do have to go through the bankruptcy process.”
There are a variety of issues that appear to be stalling GM’s effort to provide the White House with a convincing plan for recovery. The two key issues involve the United Autoworkers Union, which is being asked to reduce the amount of cash needed for its VEBA health car fund in return for GM stock, and corporate bondholders who are being asked to trade much of their debt for equity.
The UAW, Henderson noted, is currently focusing its attention on negotiations with Detroit’s other failing automaker, Chrysler LLC. That maker was given only until the end of April to revise its viability plan – and pull off a strategic alliance with Fiat SpA.
Considering the timetable facing Chrysler, Henderson said, “I would expect (GM) could pick up the pace in the next couple weeks.”
The situation with bondholders appears less certain. Industry insiders contend the various banks and other parties holding GM debt are pushing towards the 11th hour in the hope of gaining maximum value. Some may even see the opportunity to get their debt covered – with a higher return – in the event of a GM bankruptcy.
In all, GM is expected to sharply reduce its $27 billion in debt, halving its $20 billion VEBA obligations, and then lay out a plan that would not only permit it to survive but thrive.
During his conversation with reporters, Henderson confirmed that the planned elimination of 3400 hourly workers has already begun, while he also acknowledged that an unspecified number of salaried jobs will also be cut in the near future, while there will be more plant closings, as well.
“There are certainly going to be further reductions in facilities to get our capacity utilization moved higher,” said Henderson.
Henderson addressed several other matters that had hit the headlines during the past 24 hours. He called “premature,” for one thing, reports that the White House had approved an additional $5 billion in aid. But that was “in line” with the amount GM had previously indicated it needed to make it through the fourth quarter, Henderson acknowledged.
Meanwhile, the CEO insisted that GM is switching from its “four core-brand strategy,” which would leave Chevrolet, Cadillac and Buick as its primary nameplates, and Pontiac serving as the producer of specialty models, such as the Solstice roadster.
Henderson revealed that he is “expecting final bids from three potential partners” interested in acquiring the Hummer division, “by next week.” GM will decide how to proceed on a planned sale of the truck unit by next month.
There are a number of interested parties considering the Swedish-based Saab unit, Henderson added, and that process could move forward before the timetable GM has set to abandon the imported brand.
Meanwhile, Henderson said that GM remains “open to solutions” for the other brand it wants to get rid of, with “several” potential buyers making serious inquiries. Among the groups pushing to buy Saturn is Oklahoma City-based Black Oak Partners, which, TheDetroitBureau.com reported, on Wednesday, would team up with some of the GM division’s dealers. (Click here for that report.)
Henderson did have one positive bit of news to report. Saying he was “very appreciative of” the comments made by President Obama, on March 30th, Henderson indicated the government’s promise to back GM (and Chrysler) warranties has helped overcome the concerns of many potential buyers. Sales results, so far this month have “been okay,” according to the GM chief. But he concluded that “the current environment we find ourselves in is not helpful to anyone.”
Could GM get in and out of bankruptcy quickly? Click here to read Ken Zino’s analysis.