GM’s CEO: ‘There are no third chances’
GM’s CEO: ‘There are no third chances’
David Shepardson / The Detroit News
General Motors Co. completed the paperwork, and its good assets exited bankruptcy at 6:30 a.m. this morning.
The new company, which emerged after a 41-day stay in court, vowed to end "business as usual" and immediately announced a shake-up of its management team, eliminating its North American president position and some other top jobs.
GM President and CEO Fritz Henderson will take responsibility for GM’s operations in North America, eliminating the separate GM North America president position.
"There are no third chances," Henderson said, adding that the company does not plan to seek additional government assistance.
Henderson ducked a question on whether current North American president Troy Clarke or Mark LaNeve, GM’s vice president for sales, service and marketing, will remain with the company. Despite the changes announced this morning, GM will make the bulk of its management changes, which includes cuts of its top management ranks by 35 percent, by the end of the month.
"To speed day-to-day decision-making, two senior leadership forums, the Automotive Strategy Board and Automotive Product Board, will be replaced by a single, smaller executive committee, which will meet more frequently and focus on business results, products, brands and customers," GM said.
GM will also end its regional operating structure. This eliminates the regional president positions and the regional strategy boards. Nick Reilly will be named executive vice president of GM International Operations, which will be based in Shanghai.
The White House praised GM’s exit.
"While this restructuring required difficult and painful sacrifices from all of the company’s stakeholders — and the American taxpayer — it has saved tens of thousands of American jobs and positioned GM to reclaim its position as a competitive and sustainable global company," the White House said in a statement. "The hard work of charting a path to viability now rests with GM’s board and management, but we are confident that we remain on track to ultimately see returns on these taxpayer investments."
GM vowed to change its culture and focus on customers.
"We will work hard to repay the trust and the money that so many have invested in GM," Henderson said.
GM and Treasury Department officials signed the documents at the company’s primary bankruptcy law firm in New York.
The Detroit automaker has shed billions in debt, cutting four of its eight brands and trimming its work force significantly, among other measures. Its good assets had been approved for sale to a group headed by the U.S. Treasury, though the Obama administration insists it will not "micromanage" the company. The government, in exchange for agreeing to invest $50 billion in GM, will hold a 60.8 percent stake in the company.
Henderson disclosed that GM has received all of the $50 billion, though he said some of the government money is held in escrow. GM will outline more details later this month. A GM spokeswoman said the automaker may make a catch-up payment to its pension plans later this year. GM needs to make $6 billion pension payments in both 2013 and 2014 to its underfunded pensions.
The new GM will begin with a much stronger balance sheet, including U.S. debt of about $11 billion, which excludes preferred stock of $9 billion, and could change under fresh-start accounting. In total, obligations have been reduced by more than $40 billion, GM said. GM will still make public financial filings, even though it will remain a privately held company until at least early 2010.
GM said the company is launching a "Tell Fritz" Web site to improve customer communications. Starting in August, Henderson will be on the road every month and around the world to meet with customers and others. "We need to listen … to the people who matter most — the people who own and drive General Motors cars and trucks," he said.
"We know we have to change," Henderson said, noting that Albert Einstein’s "definition of insanity is doing the same thing over and over."
GM confirmed it won’t change its iconic blue square logo to a green-colored logo, as had been incorrectly reported by some other media.
Henderson wouldn’t commit to saying that taxpayers would be repaid in full for their investment, saying GM would do its best to create shareholder value to improve the return to taxpayers. GM’s compensation practices must be approved by the Treasury Department’s special master.
GM noted that by the end of 2010, the company will operate 34 assembly, powertrain and stamping plants, down from 47 in 2008, and capacity utilization is expected to reach 100 percent during 2011. Overall U.S. employment will decline from about 91,000 at the end of 2008 to about 64,000 at the end of this year, "creating a company sized to respond quickly to changes in the market, while still retaining the global scope necessary to develop world-class products and technologies," GM said.
GM will launch 10 vehicles in the United States; 17 outside in the next 10 months. GM vowed to try an experimental program in California to sell vehicles via auction on eBay.
A new board of directors will be in place by the end of the month, and some executive management changes are expected to be announced this morning. GM’s vice chairman Bob Lutz is staying with the company in a new role heading the company’s marketing and communications department. He will remain as a vice chairman "responsible for all creative elements of products and customer relationships."
Lutz and Tom Stephens, vice chairman of product development, will work together, partnering with Ed Welburn, vice president of design, to guide all creative aspects of design. GM’s brands, marketing, advertising and communications will report to Lutz for consistent messaging and results. He will report to Henderson, and be part of the newly formed executive committee.
"I am pleased to announce that we are ‘unretiring’ Bob Lutz so he can fill this important position in the new GM," Henderson said. "He has a proven track record of unleashing creativity in the design and development of GM cars and trucks. This new role allows him to take that passion a step further, applying it to other parts of GM that connect directly with customers."
The Republican National Committee criticized the announcement.
"It’s official. American taxpayers now own GM, and President Obama is both Commander and Carmaker in Chief. After spending $50 billion of the taxpayers’ money, President Obama and his union cronies now own a nearly 80 percent share of GM," the GOP said in a statement. "The president and Democrats think more spending and government intervention in private enterprise will turn our economy around."
Rep. Gary Peters, D-Bloomfield Township, praised GM’s exit.
"Decades from now, our nation will be glad we did not let a global credit crisis put an end to the American automobile," Peters said, adding that GM is "reborn a new company, not just under the law but with substantial changes in its thinking and business practices."
Rep. John Dingell, D-Dearborn, also praised the exit.
"GM will survive, but more importantly, the new company is poised to flourish and once again dominate the automobile marketplace," Dingell said. "It is has been a long, hard road to this point, and while there are certainly more speed bumps ahead of us, today is a day on which we can all feel good about for GM."
Detroit Mayor Dave Bing congratulated GM’s exit.
"The emergence of a new GM is an encouraging sign of progress for the auto industry and the city of Detroit," Bing said. "As one of the top job providers in the city and a substantial portion of our tax base, a GM built to succeed in the future is critical for the city of Detroit."
GM held an internal employee broadcast at 8:30 this morning ahead of Henderson’s press conference.