GM Satisfied with Early Post-Bankruptcy Progress
October 07, 2009
Saying the "new" General Motors Co. that emerged from Chapter 11 bankruptcy on July 10 
is mostly achieving its goals for cost and debt reductions and is exceeding its projections in some key business metrics, CEO Fritz Henderson said in a media conference call Wednesday that GM is making progress in its three-pronged future strategy to focus on customers, cars and changing its corporate culture.
Just 90 days into its new status as a private company, GM was long on generalities and brief of specifics, however.
"We've made a lot of progress in 90 days," Henderson said. "We have been granted an extraordinary second chance to reinvent this company. We are driving hard to change the way we interact with our customers, to ensure our new cars and trucks are the best in their segment, and to change the way we operate and how we think about the business. We need to prove ourselves every day, and we will."
One of the most critical points in GM's restructuring was the reduction of its cost structure, with too much labor cost and too much manufacturing capacity widely acknowledged as the factors GM had to immediately change in order to survive.
GM's brief journey through Chapter 11 (along with wide-ranging concessions from the United Auto Workers union) was used to address these issues, and GM's "report card" indicates progress as expected -- mostly.
Facilities and Head-Count Costs Not Yet Cut as Planned
For example, the company's reorganization plan dictated a reduction of six manufacturing facilities by the end of 2009. GM so far has shed four plants, going from 47 at the end of 2008 to the current 43; the company's release said it still plans to hit its target by year's end.
But GM also is taking on four "new" facilities acquired from former mega-supplier Delphi Corp.
The company also is far from attaining its target of reducing its hourly employee workforce from 62,000 to 40,000 by year-end. The current number stands at about 49,000.
Nor has the target of reducing the salaried workforce been attained. GM wanted to reduce to 23,000 white-collar employees by the end of the year, but so far is down to 24,300. At the end of 2008, GM had 29,700 salaried employees.
"Attrition programs fell short of our expectations," Henderson admitted, also conceding that the company has reinstated some hourly workers in order to increase production in some needed areas.
The controversial culling of its large dealer body is tracking close to projections, however, with the 5,800 dealers at the end of the third quarter exceeding by just 200 the goal of 5,600 dealers. GM had 6,375 dealers at the end of 2008.
"We're on a path to achieve our structural-cost reductions," Henderson concluded.
Source: GM
Product Metrics
Henderson pointed to better-than-projected performance in market share -- both globally and in the U.S. -- as positive indicators, particularly in dispelling the notion that the company's bankruptcy would hurt its reputation with consumers.
GM reports its third-quarter global market share of 11.9 percent is tracking ahead of its projection for an 11.2-percent share by the end of the year. And U.S. market share of 19.5 percent in the third quarter also is better than the 18.5 percent GM had hoped for by the end of 2009.
In the U.S., GM is pointing to early success of new products such as the 2010 Chevrolet Equinox crossover and Buick LaCrosse midsize sedan, both of which, at least by early measures, have drastically increased share in their segment, average transaction prices and even residual values.
And GM's new products -- and culling of underperforming brands -- may be translating into a reduced need for incentives, too.
According to data from Edmunds.com's proprietary Total Cost of Incentives metric, GM's incentives levels have decreased slightly in the months following the company's bankruptcy, despite a disproportionate hike in TCI at Cadillac. The recent Cash for Clunkers program may have temporarily helped ease the need for incentives, but the trend nonetheless is a positive indicator for GM.
GM Incentives: Pre-, Post-Bankruptcy
Source: Edmunds.com
Culture Change Less Measurable
Less definitive is what GM is doing to change its culture, although it might not be reasonable to expect sea change in three months. One thing is certain: GM's board of directors - with many individual members placed by the U.S. Department of Treasury - is palpably more involved.
Henderson said GM has "overhauled our management," adding that, "We are taking aggressive actions and moving quickly to transform our culture into one that is truly customer-focused."
It's impossible to know if GM considers Wednesday's announcement of the imminent departure of U.S. sales chief Mark LaNeve an example of customer focus, but LaNeve's departure for a new job outside the industry leaves GM with an important and crucial post to fill -- one Henderson insinuated might be staffed from outside GM's ranks.
Several other key GM executives have gone or said they are retiring, including Gary Cowger, former group vice president for manufacturing and labor relations; Troy Clarke, group vice president and president, GM North America; Jim Queen, group vice president of global engineering; Beth Lowery, vice president of energy and environmental policy and Larry Burns, vice president of R&D and strategic planning.
Next Priorities
Henderson said the company's near-term priorities are manifest:
- Improve market performance
- Improve global growth
- Enhance business results
- Prepare for an initial public offering in 2010
Henderson said GM remains concerned about the U.S. unemployment figures. The company also needs to "rebuild" consideration for GM vehicles, he acknowledged. And he said the company wants to complete its unfulfilled restructuring steps by the end of the year.
Prospects for next year will come in the environment of U.S. industry sales projected to be in the 11.5-million range, Henderson said. GM has said it now is structured to be break-even at an annual sales rate of 10 million units.
Of GM's forecast for 11.5 million light vehicle sales in 2010, Henderson said, "We think that's a fair number." -- Bill Visnic, Senior Contributing Editor
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