GM CFO Ray Young: 16 bidders for Saturn, 3 for Saab. The post-bankruptcy GM could go public by 2010, but may withhold financial data until then, Young cautioned.
With a buyer apparently chosen for its Hummer division, General Motors is now turning to Saturn, the once-vaunted brand that it also hopes to sell off as part of its effort to slim down through bankruptcy. According to GM Chief Financial Officer Ray Young, there are now 16 potential buyers interested in Saturn, with another 3 looking at Saab, the Swedish maker GM also hopes to sell.
As part of yesterday’s bankruptcy filing, the ailing U.S. automaker intends to eliminate all but four of its brands, and along with the hoped-for sale of Hummer, Saturn and Saab, GM will also abandon its once-legendary Pontiac brand. Meanwhile, the automaker will restructure its vast global empire, starting with the planned sale of a controlling interest in its European subsidiary, Opel, to a consortium headed by the Canadian supplier, Magna International.
“We’re still going to be a global company, but how we’re going to operate as a global company will change,” explained Young, during a 90-minute teleconference with automotive analysts and reporters.
The sale of Hummer was announced a few hours before the call, but Young declined to reveal the name of the buyer. As TheDetroitBureau.com reported, this morning, it appears the new owners will consolidate operations, which would mean some overseas production would be brought back to a Hummer plant in Shreveport, Louisiana, from the current site in South Africa.
How soon an announcement on Saturn and Saab will be made is uncertain. The decision to sell the latter brand was not unexpected and, in fact, was long called for by industry analysts worried about GM’s deteriorating situation. But the move to abandon Saturn is another matter entirely.
Saturn was conceived, to much acclaim, in 1984, and went into production five years later, billing itself as “another kind of car company.” It initially operated as a virtual standalone firm and didn’t even mention its ties to General Motors. But despite initial success, largely based on the brand’s customer-friendly marketing strategy, GM failed to provide the assets to expand the brand – at least until it had already lost momentum. In recent years, the maker tried to kick-start Saturn with an infusion of cash and the addition of an array of new product, many based on models also being sold by the European Opel subsidiary. But the public response was lackluster, triggering the decision to sell off the once-maverick division.
Who might be among the 16 bidders is uncertain. There had been reports that Roger Penske, the Detroit-based entrepreneur, might seek to acquire the name and then supply Saturn dealers with an assortment of foreign-made models. But Penske later downplayed his interest.
While Opel apparently will have no more role in the development of products for Saturn, Young confirmed that GM intends to continue using the German-based operation as one of its so-called “centers of excellence.” A variety of Opel-developed midsize models are just going on sale, this year, through the surviving GM brands, in North America, including an all-new version of the Buick LaCrosse.
“Our expectation is that we’ll continue leveraging…their expertise,” said Young, though he acknowledged that this will require “some challenges.” To start with, GM still has to formalize the sale to Magna and its backers, in Russia, steps that would leave the U.S. carmaker with a 35% stake. Then some basic issues of governance and responsibility will need be hammered out. Nonetheless, Young insisted there will be no delays in the development of other Opel-derived products planned for the U.S. market.
During his wide-ranging conversation, the GM CFO took pains to convince analysts and reporters that the “newco” will be far healthier than the old General Motors that will vanish in a New York bankruptcy court, perhaps within the next 60 to 90 days. Among other things, he promised, the “new” GM “will have significantly higher cash balances” when it emerges from Chapter 11.
GM will emerge as a privately-held company, with its new shareholders divided among the U.S. government, union workers, former bondholders and the Canadian and Ontario governments. On Monday, President Barack Obama asserted his interest in maintaining as brief an ownership stake as possible. Canadian officials are taking a similar stand.
When asked how soon the newco – legalese for the “new company” – might stage an IPO, Young said. “2009 will be impossible. At the earliest, we’re probably talking the first quarter or second quarter of 2010 to begin the process of registration,” with a sale to follow sometime afterwards. The CFO also stressed that he didn’t expect the various governments to simply dump their shares onto the market. That would be disruptive, and would not be the best way “to maximize the value to taxpayers.” By the time GM again goes public, the U.S. Treasury is expected to have invested at least $50 billion in the company.
One surprise to emerge from the conference call was Young’s cautious suggestion that “as a privately held corporation, we’ll probably not disclose (financial) information except to the shareholders.” Considering the U.S. government’s investment, such a move would likely generate significant controversy and calls for the Obama Administration to ensure GM give the public a full financial accounting.
Even before the bankruptcy filing, GM had announced it would phase out 1,100 dealers by terminating their franchise agreements. Now, it appears, the number of dealers to be cut will grow to more than 2,000. And Young issued a less-than-veiled warning to those retailers who will survive.
“We expect the performance level of the remaining 3600 dealers to be very high,” he asserted. “And if they don’t perform, it will be reason for termination” under a post-bankruptcy franchise agreement that will strictly detail such factors as sales volumes, margins and customer satisfaction.