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GM’s Fritz Henderson says dealers will learn fate this week

Monday, May 11, 2009

GM’s Fritz Henderson says dealers will learn fate this week

Robert Snell and David Shepardson / The Detroit News

Detroit –General Motors Corp. will start notifying dealers this week of the automaker’s plans to close or consolidate its retail outlets as part of a broad restructuring plan, President and Chief Executive Officer Fritz Henderson said today.

Dealers will be closed over a period of months as GM handles the distribution of vehicles and ensures customers are taken care of, and as retailers are reimbursed for warranties.

"It’s not a one- or two-month process. It is something that will take place over a reasonable period of time," Henderson told reporters during a conference call.

GM plans to shrink its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent — 500 more than announced on Feb. 17. Dealers will be on Capitol Hill on Wednesday lobbying against the closure of dealerships.

Henderson provided updates on the company’s restructuring plan, which also involves cutting 21,000 U.S. factory jobs by next year — 7,000 more than originally planned — and closing 16 of its 47 U.S. manufacturing plants by 2012.

Henderson said the company was reviewing all aspects of its business, including the location of its corporate headquarters at the Renaissance Center in Detroit. But he said the automaker has no current plans to move. Some officials have suggested GM could move its headquarters to the Warren Tech Center in part to reduce its tax bill, since Warren has no city income tax.

"We’re looking at frankly everything within our business, but it is not like we have that queued up as the top of our list," Henderson said of moving the headquarters. "As we look at the structure, look at the business, we’re looking at everything particularly as we slim down."

GM is negotiating with two bidders for the Hummer brand and could reach a deal by the end of the month, Henderson said.

And Henderson confirmed several parties have emerged as possible bidders for Saturn, which GM plans to eliminate by the end of this year.

Those interested parties include Detroit auto tycoon Roger Penske and, separately, Telesto Ventures, which wants to partner with a foreign manufacturer and import vehicles under the Saturn name.

The Telesto group, which includes Oklahoma City-based private equity firm Black Oak Partners LLC and several Saturn dealers, submitted a bid last month, terms of which were not made public. Telesto proposes initially distributing GM-built vehicles through Saturn’s 439 dealerships in North America and eventually offering small, fuel-efficient vehicles produced by several manufacturers, most of which would be sold under the Saturn brand.

A third party, headed by Ohio auto worker Gary Marvicsin, met with GM and proposed building vehicles using union workers at U.S. factories targeted for closure by the Detroit automaker.

"We’re not out actively trying to market a plant per se," Henderson said. "But if a party were interested in that, we would be very open and encourage it."

The automaker, surviving on federal loans, has until June 1 to reach money-saving concessions with the United Auto Workers and bondholders or face a potential Chapter 11 bankruptcy filing. Henderson has said a bankruptcy filing is probable, but not the preferred route.

GM is trying to get unsecured bondholders to agree to swap $27 billion in debt for a 10 percent equity stake in the company, though bondholders countered and are seeking a 58 percent stake.

The company’s offer to bondholders likely won’t be sweetened.

"We don’t have any plan to make modifications at this point," Henderson said.

GM is restarting concession talks with the UAW and pressing ahead with plans to cut plants, jobs and dealerships, and eliminate about $44 billion in debt as part of a broad restructuring plan.

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