GM's Henderson: Four-Brand, Not Two-Brand, Strategy Remains the Plan
By Michelle Krebs April 17, 2009By Michelle Krebs
DETROIT -- General Motors CEO Fritz Henderson, in a Friday morning conference call, brought the media up to date on the progress of the automaker's latest "go deeper, go faster" plan required by the U.S. government and tried to dispel some reports that have been circulating.
Henderson reiterated bankruptcy still is not GM's preference, but it remains a possibility and is more probable as time marches on. He said GM is planning two tracks -- one for restructuring out of court and another within the bankruptcy court. Should bankruptcy be required, Henderson said, the plan in the works is to do it quickly, something many experts doubt can happen.
On other topics, he said: potential buyers and investors are lined up for a look at Saab, Saturn and Opel; more job cuts are coming; and no other brands, namely Pontiac and GMC, have been targeted for elimination as of now.
Private Equitylike Scrutiny
Henderson said the U.S. Treasury Department with GM is examining every aspect of its business much as a private equity firm would in its due diligence process.
He said Friday's talk with the media would be the the first of a series of regular conference calls to keep the press and public updated on GM's progress in developing a revised viability plan.
President Obama and his automotive task force rejected GM's first viability plan, submitted February 17, and sent them back to the drawing board with Henderson at the helm instead of former Chairman and CEO Rick Wagoner, who resigned at the Obama administration's behest. The government, which is funding GM to keep it afloat, told GM in late March to dig deeper and go faster in its restructuring efforts.
Four-Brand Strategy
Henderson called speculation that GM would drop one of its core brands, namely GMC, and niche brand Pontiac, as just that -- "speculation." He did admit GM was "taking apart its strategy and rebuilding it in a way that gives GM the best chance to be profitable" with four core brands -- Buick, Cadillac, Chevrolet and GMC, with Pontiac as a niche brand.
"We are working on a four-brand strategy, not a two-brand strategy," Henderson said, in response to reports that GM is considering -- or that President Obama's auto task force is pressuring GM to consider -- elimination of the GMC and Pontiac brands.
"Our base plan is still a four-core brand strategy," Henderson said. "As we finalize our plan, we must make sure that there's a purpose and objective for every one of the brands...and they pay suitable rent on the company's resources."
Henderson said both Buick and GMC are "highly profitable" and have strong and loyal customer bases.
Talking to Buyers
Henderson said GM continues talking to potential buyers of its various assets.
In Europe, GM has signed non-disclosure agreements with about six potential investors in Opel; they include "financial and industrial players," Henderson said. "A lot of work will be done on that in the next two to three weeks," he said.
Meantime, Henderson said, Opel is in less dire straits in terms of liquidity than previously forecasted. He said Opel needs cash later in the second quarter rather than earlier in the quarter than was thought. The German subsidiary has been "snowplowing expenses" and has done better than expected on revenue side, Henderson said. Opel has benefited from the sales success of the Opel Insignia and as the beneficiary of Germany's cash-for-clunkers scrappage program that has helped buoy vehicle sales generally.
In Sweden, Henderson confirmed, Saab has signed non-disclosure agreements with "a number of interested parties" (press reports have the number at 20 to 27) and has opened the books to some of them. GM intends to sever ownership ties completely with money-losing Saab, which currently is in the equivalent of Chapter 11 in Sweden, by year-end.
In the U.S., Henderson said more than one party is interested in Saturn, including but not limited to private equity Black Oak investors and some Saturn dealers.
Henderson also said the company will not sell its ACDelco parts division.
No final word on the fate of Hummer, though Henderson said there's a buyer interested in the SUV brand. GM has been under review for sale or elimination since last June. In late March, Henderson said it would be "days or weeks" not months until a decision was reached on Hummer, with the previous March 31 already passed.
Restructuring Update
In other news regarding GM's restructuring:
-- Buick could add more models to its line as GM sheds Saturn and reviews the future of Pontiac, Bloomberg News reported Friday, though Henderson did not confirm the report. According to Bloomberg's unnamed sources, options include making a Buick version of Saturn's Vue sport-utility vehicle. A Buick Regal designed by Opel now set for sale in China also might be offered in the U.S.
Before GM decided to phase out Saturn, the division was to be the U.S. recipient of vehicles developed by GM's German subsidiary Opel, including the Saturn Vue, based on the Opel Anterra and the Saturn Astra, a rebadged Opel Astra. Bloomberg's sources said with Saturn out of the picture, Opel and Buick may share more models.
-- GM says it is preparing to launch a public bond-exchange offer that would let the company start slashing its debt, even without an agreement from a committee of large institutional bondholders. GM has been trying to convince bondholders to swap debt for equity to reduce its cash debt load. A GM spokesperson said the only way to reach the company's thousands of bondholders before the government deadline is to formally offer a debt exchange and see who accepts it.
-- White-collar retirees of GM have banded with those salaried retirees from Ford, Chrysler and bankrupt supplier Delphi Corp. in hopes of preserving their benefits and pensions. Representatives of more than 200,000 salaried retirees from the companies, who fear they may be stripped of many benefits if GM and Chrysler file bankruptcy, are renewing a push for a meeting with President Obama's automotive task force, an effort so far rejected by the panel. Salaried retirees are seen as among the most vulnerable groups in restructurings and bankruptcies because they typically aren't represented by unions and companies are generally free to slash their retirement packages.
-- GM will brief salaried employees next week on who will be let go under its plan to cut more than 3,000 salaried jobs at his downtown Detroit headquarters and its engineering centers in the Detroit suburbs. The reductions are part of GM's February 10 viability plan to eliminate 4,700 salaried jobs globally, of which 3,400 will be in the U.S. To date, about 250 of those jobs are gone.
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