GM CFO Ray Young huddles with former Chairman Rick Wagoner during a Washington hearing called to discuss the automaker's request for a federal bailout.

Call it trial by fire. Last year, as General Motors began the meltdown that ultimately led to its bankruptcy filing, last week, senior company officials frequently sat down with reporters to outline the latest cutbacks in jobs and production. There were the familiar faces, like former CEO Rick Wagoner, as well as the man who replaced him, in March, Fritz Henderson. But less familiar was Ray Young, the traditionally soft-spoken veteran who was appointed Chief Financial Officer, in March 2008.

It was clearly not a great time to be counting the beans at the fast-failing automaker, but it puts Young in a key strategic position, now that GM is shedding billions of debt, half of its North American brands and more than a third of its dealers under a court-managed restructuring largely crafted under the heavy hand of the Obama Administration.

A 23-year GM employee, Young was born in Guangzhou, China, emigrating to Canada as a youngster.  After earning an MBA at the University of Chicago, in 1986, he signed on with GM and has followed an increasingly familiar career path that included the GM Treasurer’s office, in New York, and several stints overseas. Young spoke with TheDetroitBureau’s Paul A. Eisenstein about opening GM’s books to its shareholders – the American taxpayer – the lessons learned in bankruptcy, and the threat of a GM boycott by the right wing.

TDB: When the White House forced out CEO Rick Wagoner, in March, there seemed to be a change in attitude by GM towards accepting a bankruptcy.  Is this accurate?

Young: It’s hard to say when it became more evident. Time worked against us. The Obama Administration set some pretty tough targets. In March, $26 billion worth of debt had to be converted into equity.  If you recall the original, December 31st agreement, Treasury had called for a two-third reduction.  When President Obama increased that to 90%, that increased the risk that bankruptcy would have to be the tool to reach those objectives.  So, March 30th, the stakes got raised.  Without being able to restructure the unsecured debt, we would not be able to restructure outside bankruptcy.

TDB: What have you learned about bankruptcy?

Young: Initially, you have a lot of trepidation.  But we’ve learned a lot over the last five months. Without the help of the U.S. government, I don’t think we would have been able to go through the process and emerge a viable company.  We owe a lot to the Obama Administration in terms of how they’re supporting us through this in-court bankruptcy process. People ask me why we didn’t file back in December.  Because we weren’t prepared.  It took us five months to get to the point where we could file, effectively. In the absence of this type of planning, it would result in a very sloppy court process.

TDB: There seem to be some things you can handle better in court, do you agree?

Young: Clearly, the bankruptcy process gives us more support for our dealer restructuring process.  There are also certain liabilities we can leave behind, like excess machinery and equipment, which we can leave behind, and our corporate aircraft, which, in the bankruptcy process, we can leave the leases behind.  We can shed liabilities that would, otherwise, be very, very difficult for us.

TDB: Fritz Henderson, GM’s CEO, has said he’d hope to see GM break even, at least on an EBIT (Earnings Before Interest and Taxes) basis, in 2009.  Can you give us more detail?

Young: Our official viewpoint of 2009 is a seasonally-adjusted annual sales rate (SAAR) of 10.5 million units.  That includes trucks and buses. Right now, we’re running behind that, but our assessment always called for a recovery in the second half of the year.  Some of it will depend on whether there’s a government scrappage (cash-for-clunkers) program. In terms of profitability, we’re going to get our costs down to the point where we’re going to break even on an (EBIT) rate of 10 million units.  So, do we believe we can get above 10 million next year?  We believe there will be a modest global recovery in 2010 and we have a very good shot.

TDB: And a true profit?

Young: If we believe the industry will continue to recover through 2010, ’11 and ’12, clearly it would get us back there.

TDB: There are plenty of folks who scoff at GM’s latest market share projections, especially when you are getting rid of so many brands.

Young: We did reduce our share assumptions in our plan to 18 to 18.5%, down from 21% when we first submitted our plan to Congress – and for exactly the reason you suggested. We’re going to take out four brands, Saab, Hummer, Saturn and Pontiac, and that will have some impact. We’re going to eliminate a lot of dealers…and certainly, that will have some share impact. And we’re going to scale back non-profitable fleet sales. The reason it’s not going to go lower is that the remaining brands will be very well supported in terms of marketing dollars and engineering development dollars. It’s a strategy of fewer-and-better.  Fritz made the comment that we cannot afford to launch average products anymore.  He’s absolutely right. So, as we launch fewer products, each of them will be aimed at being the perfect product, rather than spreading ourselves thin over a plethora of products.

TDB: Over the years, GM has frequently made majors errors when predicting how well a new product would do, usually over-estimating volume and setting prices too high.

Young: We need to have a culture where people are free to express their opinions openly, like volume forecasts. The second point is accountability. We have to make sure that if we launch a product based on a particular business plan, that we meet those commitments. In the past, we may not have held people accountable enough. Under the new GM, there will be a lot of accountability.

TDB: Back to the Obama Administration.  A lot of people scoff at the idea the government can or will sit on the sidelines.

Young: I’m absolutely comfortable with that. There’s no desire, on their part, to take part in the day-to-day operations of the new GM. That’s why they’re so active in the board of directors search. We’ll have a very powerful board with a lot of experience to guide us. The Obama Administration believes that when you allow politics to guide General Motors, we’re not going to be a successful company.  They want good decisions that will benefit shareholders, who are, right now, the taxpayers.

TDB: Do you find it funny that there’s a group, on the right, calling for a boycott of General Motors?

Young: There are certain parts of the country that do not like the concept of government support for Chrysler or General Motors. I respect that. At the same time, I believe the vast majority of Americans want us to succeed. They want the hometown team to succeed.

TDB: You’re not worried?

Young: I don’t think so. I think people will see that we’re very sincere about what we’re going to do and that it’s our last opportunity to make General Motors a viable, successful and prosperous company that will play an important role in the U.S. economy.

TDB: At the announcement of bankruptcy, CEO Henderson stressed that GM would emphasize “transparency” during and after the bankruptcy process. Yet, later in the week, you appeared to suggest GM would not release detailed financial data while it was a privately-held company. Can you explain?

Young: I think people took my comments out of context.  I was referring to the level of information we provide the SEC, like 10Ks and 8Ks, an extensive list of reporting associated with being a public company.  As a private company, we will continue to provide our sales numbers, our financial numbers.  They may not be in the form of an SEC filing, but we’re going to continue to do that, so people can be apprised of how we’re progressing in terms of our viability plan.

TDB: To wrap up, could you discuss whether there is a role for government in dealing with things like trade and American industrial competitiveness.

Young: Most countries in the world view the auto industry as a strategic industry.  You see that in Asia and in Europe.  The French government stepped up to support Renault, in December.  In terms of national policy, there has been an erosion of industrial America, over the years.  I think the Obama Administration views the automotive industry as an important sector of the American economy.  A combined failure of GM and Chrysler would have triggered failures in the rest of the automotive sector.  The rest of the economy is in a fragile state.  The argument is that it was important to save both of them right now.  Now, it’s important for us to deliver on our plan.