The new General Motors Co. is expected to debut today with the promise of a leaner, greener, more customer-focused automaker, but it will have to convince skeptical Americans to give it a chance.
The rebirth of the iconic Detroit company was made possible Thursday, when U.S. District Judge Lewis Kaplan refused to delay GM’s emergence from bankruptcy. The sale of the automaker’s “good” assets to an entity sponsored by the U.S. government to create the new GM was expected to close this morning, just 41 days after the former General Motors Corp. filed for bankruptcy protection.
“This is a new General Motors, which is going to be focused on fewer brands, fewer entries — every new product is going to hit the right spot in the market and delight our customer,” GM North America President Troy Clarke told The Detroit News on Thursday, likening the bankruptcy to “a near-death experience.”
GM, the largest industrial company to ever file for Chapter 11 bankruptcy and the fourth-largest overall, defied skeptics with a faster-than-expected stay in court protection that wiped out billions in debt. Backed by $50 billion in federal loans, GM now becomes one of the world’s largest government-owned companies and will spend years under the watchful eye of the White House.
GM CEO Fritz Henderson is expected to join the company’s new chairman, former AT&T Chairman Ed Whitacre, at a press conference in Detroit this morning to launch the new GM and announce structural and leadership changes. But most corporate changes will be revealed later this month, after the rest of the board of directors is named.
The News learned Thursday that GM product czar and Vice Chairman Bob Lutz, won’t retire at the end of the year as previously announced, but will continue in a new role.
The automaker won’t replace its globally recognized corporate logo, or name new board members today. But it will emphasize that it has turned the page.
“This milestone is really the beginning of something big as opposed to the end of something,” Clarke said.
“We’ll ask for people to please give us that one look. Give us that one consideration and we won’t disappoint you.”
Sean McAlinden, vice president of the Center for Automotive Research in Ann Arbor, expects today’s press conference to be “a pretty good commercial about the new GM Co. — their commitment to consumers, their trustworthiness, and everything they’ve accomplished, how they’ve achieved their targets so far.”
By any estimate, GM’s trip through bankruptcy was amazingly quick.
“I had no idea it could go this fast,” said McAlinden. “It has been perfect. Just like a no-hitter baseball game.”
Still, not all of GM’s struggles are behind it.
A majority of U.S. House members have signed onto a bill to reverse the closing of 789 Chrysler Group LLC dealerships and block GM from closing more than 1,300. The full House could vote on the bill as early as next week. Chrysler emerged from bankruptcy last month.
The Automobile Dealer Economic Rights Restoration Act of 2009, sponsored by Rep. Daniel Maffei, D-N.Y., now has 221 cosponsors — enough for passage in the 435-member House. A Senate version sponsored by Charles Grassley, R-Iowa, has 14 co-sponsors, including Edward Kennedy, D-Mass.; Tom Harkin, D-Iowa; and Robert Bennett, R-Utah.
GM’s vice president for sales, service and marketing, Mark LaNeve, and Clarke met with more than 20 members of Congress over the past two days. LaNeve said GM, in the second quarter of 2010, will take another look at its closing dealers to reconsider some if the market or GM’s sales improve.
“This has been the most difficult, hard thing I’d ever have to do,” LaNeve said. “In terms of creating a viable, competitive GM on taxpayer dollars, you can’t look in the mirror and say we didn’t have to restructure the dealer body.”
GM also faces more pain as it continues to shrink. It must close another 10 plants by the end of 2010 — including four in Michigan — and will trim another 4,000 salaried workers by Oct 1. It will prune its top executive ranks by 35 percent.
U.S. Bankruptcy Judge Robert Gerber noted that GM employs 225,000 worldwide — including 91,000 in the United States — and supports an estimated 500,000 retirees and dependents. It has nearly 6,000 dealers and 11,500 suppliers. GM’s active workforce is expected to shrink to fewer than 70,000 by the end of 2009.
“If GM were to have to liquidate, the injury to the public would be staggering,” Gerber said this week in declining to expedite an appeal of his ruling approving GM’s asset sale. “This case likewise raises the specter of systemic failure throughout the North American auto industry, and grievous damage to all of the communities in which GM operates.”
GM’s quick trip through bankruptcy closed eight tumultuous months that began Nov. 8, when GM disclosed it had burned through nearly $7 billion in cash in the third quarter and warned it would collapse in early 2009 without a government bailout.
Its sales plunged amid a weak economy and GM lost its title last year as the world’s largest automaker by sales when it was overtaken by Toyota Motor Corp.
President George W. Bush rescued GM and Chrysler with $17.4 billion in loans in the waning days of his administration, giving them until March 31 to win dramatic concessions from unions and bondholders.
His successor, President Barack Obama, fired GM Chairman and CEO Rick Wagoner, rejected GM’s restructuring plan and ordered deeper cuts. The White House also told Chrysler to tie up with Fiat SpA or face liquidation.
Obama’s auto task force pushed GM and Chrysler into bankruptcy but with the promise of billions in new aid, believing a court-overseen process was the best way to wipe clean the two companies’ overextended balanced sheets and win needed concessions.
While today marks the end of GM as a public company, the new GM will have far less debt, four fewer brands and a much smaller footprint. It will shrink some of its overseas operations.
In its bankruptcy filing, the Detroit-based automaker, which has lost $88 billion since 2005, listed $82.3 billion in assets and $172.8 billion in debts.
The post-bankruptcy GM has an enterprise value of between $63 billion and $73 billion, as well as debts of about $17 billion — with about half of that held by the government.
GM will get another $20 billion in government aid by Dec. 31, bringing the federal government’s total investment to $50 billion. In total, the Treasury Department will have by year’s end committed about $100 billion to the troubled auto industry.
Taxpayers are likely to lose billions of dollars on auto investments — including the first $20 billion in aid GM received.
The Treasury Department will hold a 60.8 percent stake in the new GM and the Canadian government will hold 11.7 percent.
A UAW health care trust fund will own 17.5 percent; unsecured creditors will receive a 10 percent stake and warrants equal to 15 percent of the stock.
Although the White House vows not to “micromanage” GM, and claims it wants to sell its stake as soon as possible, that will likely take years.