GM to submit ‘progress report’ to U.S. Tuesday

GM to submit ‘progress report’ to U.S. Tuesday
 

UAW being offered preferred stock for VEBA liability, CNBC reports



Jamie LaReau

Automotive News | March 27, 2009 – 3:07 pm EST

 

DETROIT — General Motors executives are hammering out what will be the company’s third survival report, to be submitted to the U.S. government next week.

GM will give the document to President Barack Obama’s auto task force on March 31.

This newest plan is considered a progress report rather than an actual viability plan, company sources say. But it could include new information — possibly changes to the amount of financial aid requested or tweaking GM’s sales expectations for the auto market.

“There will be some new information in it,” said Tom Wilkinson, GM’s spokesman. “But it doesn’t change the viability plan. It’s a report on where we are now. I’m sure there’ll be some new information and new numbers. The plan will continue to evolve, but it’s not a new direction.”

The White House said today Obama is expected to reveal the government’s restructuring plans for the industry on Monday, according to media reports.

UAW vs. bondholders

On Feb. 17, GM submitted its viability plan to the U.S. Treasury Department, outlining a new business model. In that plan, GM requested as much as $30 billion in financial aid. The company also said it would work to reduce its outstanding debt through negotiations with bondholders.

GM also is trying to persuade the UAW to take half of GM’s $20 billion obligation to the Voluntary Employees’ Beneficiary Association in stock rather than cash.

GM has yet to reach terms with either the bondholders or the UAW.

The business news network CNBC is reporting today that GM is offering the UAW $10 billion in cash over 20 years along with $10 billion worth of preferred stock to fund the retiree health care trust.

The company is offering bondholders up to 90 percent of GM’s stock equity, the report said. So far, bondholders have balked at the offers, saying they are being asked to take a greater hit than the UAW or suppliers.

GM declined to comment on the CNBC report.

The UAW contends the bondholders aren’t giving the union credit for taking drastic concessions on retiree health care liabilities in their 2007 contracts. During those talks, the union agreed to take half of the $100 billion projected to be owed by the Detroit 3.

‘We have to deal with the brands’

GM also said in its plan that it would sell its Hummer and Saab brands. The company said it would supply product to Saturn through the 2012 model year and would wind down or terminate the brand if a spinoff could not be achieved by 2012. GM also plans to cut its dealer body by 2,146 stores by 2014, to 4,100.

Wilkinson said GM has been talking with Obama’s task force “on a regular basis” and said the task force has not given any indication that GM’s Feb. 17 plan is flawed.

“We have to deal with the brands; we have to wrap up negotiations with the bondholders to reduce the debt; we have plants we have to close and other downsizing,” Wilkinson said. The progress report “may be some course direction, but not a whole new direction. Unless the task force says you’ve got it all wrong. But we’re not hearing that.”

Market expectations

GM might have to change its expectations for overall vehicle sales that it outlined Feb. 17, depending on the studies the presidential task force has conducted, Wilkinson said.

On Feb. 17, GM set its baseline market scenario at 10.5 million total vehicles sold in the United States for 2009. That increases to 12.5 million in 2010. GM’s downside scenario is 9.5 million total vehicles sold this year and 11.5 million in 2010.

“At present we think our baseline scenario is fairly conservative and our downside is extremely conservative,” Wilkinson said. “But we’ll have to see what the economists and the task force says.”

He said the biggest variable in the task force’s decision on how much money to lend the auto industry is determining future sales volume. When asked whether GM will be requesting more financial aid in the progress report, Wilkinson said he didn’t know whether GM would ask for financial aid beyond what it already has requested.

“We said that under the baseline scenario, we could need as much as $22.5 billion,” he said. “On a downside scenario, we could need as much as $30 billion. That was in the plan on Feb 17th. I don’t know if we’ll update that or not on Tuesday.”

Part of GM’s core strategy is to shrink the business enough to achieve breakeven at 11.5 million total units sold in the overall U.S. market. At that level, Wilkinson said, GM’s cash flow becomes positive, and it could start paying down debt and adopting the new business model to become a viable company.

Share
Seniority Lists
Recent Posts!
Bargaining Committee

Chairman
Mike Herron
President
Tim Stannard
Zone at Large – 1st
Danny Taylor
Zone at Large – 2nd
Mark Wilkerson
Committeepersons
Joe McClure
Chad Poynor
Steve Roberts
Derek Lewis
Bill Cundiff
Kirk Zebbs
Don Numinen
Jay Minella
Danny Bragg
Chris Hill
Rashad Thomas
Keith Oswald
Chris Brown

1853 Officers

President
Tim Stannard
Chairman
Mike Herron
Vice President
Darrell DeJean
Financial Secretary
Mark Wunderlin
Recording Secretary
Peggy Mullins
Trustee (3)
Jay Lowe
Dave Clements
Dave Spare
Sgt. at Arms
David C Spare
Guide
Ashley Holloway
E-Board at Large (2)
David Ryder
Steve Roberts
GM Unit Chair
Mike Herron
Voith Unit Chair
Larry Poole
Ryder Unit Chair
Patrick Linck
AFV Unit Chair
Neil Osborne
Retiree Chair
Mike Martinez

Get Text Alerts



asdasdsd

*Standard text messaging rates may apply from your carrier