General Motors must prove to lawmakers that it can be a viable company by the end of March.
“We’re going to work on what’s been put forth today, and that’s our complete focus,” said CEO Rick Wagoner during a press conference today.
The conditions GM must meet include proving it has a positive net present value, taking into account all current and future costs, and that it can fully repay a total of $13.4 billion in government loans.
“I don’t think it’s impossible,” Wagoner said, adding he was “highly confident” GM can meet the conditions.
Wagoner says the amount President George W. Bush granted in this loan package is adequate to get GM through the first quarter. GM initially had sough $12 billion with a $6 billion in a line of credit if a severe market persists.
GM will get the first installment of the loan money by Dec. 29, says GM CFO Ray Young. Loan terms call for GM to get $4 billion initially, $5.4 billion on Jan. 16 and $4 billion on Feb. 17. That is the date that GM must submit a plan to the “President’s Designee” showing it can “achieve and sustain the long-term viability, international competitiveness and energy efficiency.”
“This is very much an all or nothing deal,” says Rebecca Lindland, a senior analyst at Global Insight in Boston. “What they need to show by March 31 is that taxpayers are not throwing good money after bad. “That’s the whole goal behind these numbers being viable numbers.”
At no point, did the president or anyone in his administration tell GM that the company would be better served going into bankruptcy, Wagoner says.
“Our view has been all along that bankruptcy is a very high risk process,” Wagoner says. “Our intention is to proceed ahead and put together a plan that doesn’t require that, and that’s what we’ll be working very hard on over the next three months.”
GM is also prepared to do whatever it needs to support GMAC Financial in its bid to become a bank holding company and get access to part of the $700 billion in federal Troubled Asset Recovery Plan funds, COO Fritz Henderson says.
“We want to remedy the issues that hamper our ability to sell cars and trucks,” Henderson says. “We’re in talks with the Treasury and Fed to do what we need to do to get that done.”
GM’s liquidity crisis will not affect GM’s new products scheduled to come to market next year, Henderson says. Products beyond 2009 have been postponed, as reported by Automotive News.
GM recently announced it is delaying construction on an engine plant in Flint, Mich., to save money. That plant would produce the engines for the Chevrolet Cruze and Chevrolet Volt sedans. Those cars are not canceled and neither should be dramatically impacted by the construction delay, Henderson says.
But GM will have to make tough decisions about the future of some of its brands. Hummer is for sale and Henderson says GM has been in talks with “interested parties.”
“We’ll have something to say in the first quarter in respect to if there is a deal here or if we need to go down a different path,” Henderson says.
Henderson says the future of Saab is being evaluated by GM’s European arm. GM had said in a plan submitted to Congress earlier this month that it would do such an evaluation.
As for Saturn, Henderson says GM is still “evaluating our options.”
And Wagoner’s future appears to be secure with GM for now. Asked if he still wants to stay given the criticism he has received, Wagoner says: “Do you think I would have gone through what I went through in the last two months and then want to leave? I wouldn’t have done this if I didn’t think this was important work.”