GM brands, overlapping models are under review

More salaried job cuts possible; company explores ways to raise cash.

Eric Morath / The Detroit News

General Motors Corp. is undertaking an in-depth review of its product portfolio that could include eliminating or selling a brand, but most likely will result in the Detroit automaker purging overlapping models and shifting its emphasis to more fuel-efficient cars, according to a source familiar with the plans.

The automaker also is considering further cuts to its salaried work force and is assessing options to access cash, the source said. The plans likely will be discussed at a GM board of directors meeting in early August.

GM would not comment specifically on the possibility of cutting more white-collar jobs or eliminating brands, but reiterated that Hummer is the only brand now under review and that actions could be taken to conserve cash if current economic or industry conditions persist.

"Additional measures could include further reducing structural costs, selling noncore assets, and retiming or eliminating other capital spending," spokesman Tom Wilkinson said. "In addition, we will consider opportunistically executing financing transactions in the global capital markets, although we have nothing to announce."

The possibility of GM slashing more jobs or cutting brands was first reported Monday in the Wall Street Journal.

Plummeting vehicle sales have hit GM’s truck-heavy lineup more than its foreign rivals as consumers worried about high gas prices turn to more fuel-friendly models. GM is burning through cash at a rapid rate, leading some analysts to speculate that bankruptcy is possible.

Last week, JPMorgan said GM will need to raise more money before the end of the year, which could prove challenging given tight credit markets and the low value of GM’s stock, which closed at $10.24 Monday, up 12 cents.

To turn around financially, GM must raise more money while limiting expenses through moves such as cutting staff, closing plants and pulling back on product development, analysts say.

GM is reshaping its vehicle lineup, which likely will include scaling back on SUVs and pickups and adding more small cars and ultra-fuel-efficient models, such as the Chevrolet Volt range-extended electric vehicle. GM now sells 12 vehicles it describes as SUVs among its eight U.S. brands and just four compact or subcompact cars. GM last week said it’s considering bringing in a vehicle smaller than the subcompact Chevrolet Aveo to the United States.

Consumers are likely to see fewer GM models overall as it eliminates those that closely overlap, said analyst Jim Hall of 2953 Analytics LLP in Birmingham.

"There will be less duplicated sheet metal at dealerships … and clearly some current products don’t have a place in the larger scope of things," Hall said, specifically naming the Saab 9-7X SUV.

Eliminating a brand, rather than individual models, could yield additional savings through reduced product development and marketing costs. And if a brand could be sold — as GM is trying to do with Hummer — it could generate cash, although analysts say the value of most GM brands is relatively low compared with what the company needs to fund its turnaround. JPMorgan said GM needs $10 billion in added capital, although not immediately.

However, selling or killing a brand, as GM did with Oldsmobile, could open the automaker up to lawsuits and discontent from its dealers and erode sales if customers shun a dying brand. With sales down 16.3 percent so far this year, that’s a scenario GM can ill afford, said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "I don’t think cutting a brand is in the cards because it’s not something they could do quickly," he said.

Most GM brands have limited value to an outside buyer, but killing one could be a smart move, said Todd Turner, president of California-based brand consulting firm Car Concepts Inc.

GM is spending on engineering and marketing for multiple vehicles but achieving sales comparable to competitors with fewer models in the same segment, he said. "How many brands do you need between Chevrolet and Cadillac?"

GM’s less integrated Swedish Saab brand could generate some interest among international firms, and Buick could be attractive to buyers looking to improve their stake in the fast-growing Chinese market, where the brand is popular, Turner said.

GM is reconsidering its product lineup as it moves to cut costs.

In June, the automaker said it would idle four truck plants and delay the redesign of its next generation of full-size trucks. The company also scrapped plans to quickly refresh the Saturn Aura sedan — a capital-saving move that led some to speculate Saturn could be axed.

In cutting more jobs, GM would follow its Detroit rivals. Ford Motor Co. is reducing salaried costs by 15 percent, and Chrysler LLC will cut 2,400 factory jobs later this year by closing one plant in Missouri and eliminating a shift at another. To increase its liquidity, GM has several options, including leveraging its European assets, getting a bank loan or issuing more stock.

A stock sale is unlikely because at its current low value GM would have to significantly dilute its shareholders’ stake to raise significant capital, said James Mallak, an auto restructuring expert with Alvarez & Marsal in Detroit.

"They have some tricky waters to navigate through, but they are not in immediate danger," he said. "They should be able to obtain a loan because they still have a lot of unsecured assets."