• Jul 15, 2008
GM CEO Rick Wagoner announced sweeping organizational challenges designed to cut costs by $15 billion by the end of 2009. The Detroit automaker is looking reduce costs in an increasingly difficult market that could drop to 14 million units per year with fewer SUVs and trucks leaving dealer lots. Among the cost cutting measures, GM plans on reducing organizational costs by $10 billion, and another $5 billion by selling assets and working in the capital markets. Here are some of the highlights from the press conference:

  • Reduce salaried employee expenses by 20 percent through retirements, voluntary separations, buyouts, and other separation initiatives
  • Cut all salaried retiree health care after age 65, and use the over funded retirement fund to increase pension pay
  • No raises through 2009
  • Executive discretionary bonus elimination
  • Reduce sales and marketing expenses through reductions in events, motorsports, and ad spending
  • Cut truck production by 300k units by 2009
  • Reduce product development budget for 2009 to $7b by delaying launches of next generation trucks and SUVs and cutting V8 development
  • Increase spending on alternative powertrains
  • Push back blue collar retirement VEBA payment from 2008 to 2010, saving $1.7b
  • Eliminate stock dividend payouts effective immediately to save $800m
  • Raise $4 billion to $7 billion through asset sales and financing using some $20 billion in assets as collateral
  • Continue review of the Hummer brand

GM is under quite a bit of pressure right now, and with stocks sliding to $9.63 per share, the General didn't have the luxury of waiting until its August shareholder meeting to unveil its plans. Now it's up to Wall Street to determine whether $15b in savings is enough to turn things around.

UPDATE: Wagoner addressed GM employees and shed some light on what products are in the pipeline.


PRESS RELEASE

GM to Bolster Liquidity by $15 Billion through 2009

* Operating and related actions to generate approximately $10 billion in cash improvements
* More than 20 percent reduction in salaried employment cash costs
* Dividend on common stock suspended
* Asset sales and capital market activities to raise $4-7 billion of additional liquidity

DETROIT - General Motors Corp. (NYSE: GM) today announced it is taking further steps to adapt its business to rapidly changing market conditions, marked by the weak U.S. economy, record high fuel prices, shifts in consumer vehicle preferences, and the lowest U.S. industry sales volumes in a decade.

"We are responding aggressively to the challenges of today's U.S. auto market," said GM Chairman and CEO, Rick Wagoner. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles." Wagoner noted that 11 of GM's 13 most recent major U.S. product launches, and 18 of its next 19 launches, are cars and crossovers, which are key growth areas.

"Today's actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company," Wagoner said.

For liquidity planning purposes, GM is using assumptions of U.S. light vehicle industry volumes of 14.0 million units in 2008-2009 which are significantly below trend. Other planning assumptions include lower U.S. share of approximately 21 percent and continued elevated average oil price estimates ranging from $130 to $150 per barrel by 2009. Based on those assumptions, GM is taking actions to further reduce structural cost, and generate cash, with the goal of maximizing liquidity.

At the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion. While the company has ample liquidity to meet its 2008 funding requirements, it is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn. The actions include a combination of operating and related actions, as well as asset sales and capital market activities. The cumulative impact on cash through 2009 is projected to be approximately $15 billion.

Operating and Other Actions

Through a number of internal operating changes and other actions, GM expects to generate approximately $10 billion of cumulative cash improvements by the end of 2009, versus original plans.

* GM plans further salaried headcount reductions in the U.S. and Canada in the 2008 calendar year, which will be achieved through normal attrition, early retirements, mutual separation programs and other separation tools. In addition, health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. Affected retirees and surviving spouses will receive a pension increase from GM's over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage. And there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009.

Beyond these moves, which also impact GM executives, additional actions are being taken. There will be no annual discretionary cash bonuses for the company's executive group in 2008. With the elimination of the annual cash bonus, combined with GM's long-term incentives which are driven by GM stock price performance to assure alignment with its stockholders, GM's executive group will have a significant reduction in their cash compensation opportunity for 2008. For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent.

These benefit changes, salaried headcount reductions and other related savings will result in an estimated reduction in cash costs of more than 20 percent, or $1.5 billion in 2009.

* Additional structural cost reductions of approximately $2.5 billion are expected in GM North America (GMNA). The reductions will be partially achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity in response to lower U.S. industry volume. Truck capacity is expected to be reduced by 300,000 units by the end of 2009, half of which is from acceleration of prior announced actions, and half from new capacity actions.

In addition, GM will reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising. Engineering spending in 2008 and 2009 will be held at 2006-2007 levels, substantially lower than original plans. These operating actions, combined with the benefits of the 2007 GM-UAW labor agreement, are targeted to reduce North American structural cost from $33.2 billion in 2007 to approximately $26-27 billion in 2010, a reduction of $6-7 billion.

* GM is revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans. Capital expenditures are now estimated to total $7 billion in 2009 versus prior plans of $8.5 billion (these figures do not include the $1 billion in capital spending planned in both 2008 and 2009 in China, which is self-funded by the GM joint ventures, to support growth in that market). A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity.

Spending for non-product programs will also be significantly reduced, while powertrain spending will be increased to support the development of alternative propulsion and fuel economy technologies and small displacement engines. The revised 2009 capital spending plan is higher than the average capital expenditures in 2005-2007, excluding large pickup and SUV-related spending. Excluding China, GM expects capital expenditures to run in the $7-7.5 billion range beyond 2009.

* Aggressive actions are being taken to improve working capital by approximately
$2 billion in North America and Europe, primarily related to the reduction of raw material, work-in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses.

* GM will defer approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA.

* The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately $800 million through 2009.

Asset Sales and Financing Activities

In addition to the operating changes and other actions, GM expects to raise additional liquidity of $4-7 billion through asset sales and financing activities.

* GM is undertaking a broad global assessment of its assets for possible sale or monetization, which is expected to generate approximately $2-4 billion of additional liquidity. The company believes there is significant liquidity potential from asset sales, without impacting the strategic direction of the company. Outside advisors are currently engaged in evaluating alternatives. A strategic analysis of the Hummer brand is underway, and GM is continuing to focus on profit improvement initiatives across all remaining GM brands.

* GM will continue to opportunistically access global markets to raise additional liquidity. The company is initially targeting at least $2-3 billion of financing. The company has gross unencumbered assets of over $20 billion, which could support a significant secured debt offering, or multiple offerings, that would far exceed the initial target. Examples of such assets include stock of foreign subsidiaries, brands, stake in GMAC, and real estate.

Actions outlined today comprehend the anticipated impact of second quarter results, which the company plans to announce in the near future. GM anticipates it will report a significant second quarter loss, driven in part by the previously disclosed negative impact of the American Axle and local union strikes in North America, as well as the continued weakness in the U.S. auto market and adverse vehicle segment mix.

In addition, the company expects to record significant charges or expenses related to its previously announced hourly attrition program in the U.S., the recently announced North American truck capacity actions, valuation of GMAC stock, lease assets, Delphi recoveries, the American Axle settlement, the Canadian labor contract, and others.

GM is highly confident that the initiatives announced today, in conjunction with the current cash position and its $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009.

"The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner. "Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up."



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    • 1 Second Ago
  • 85 Comments
      • 6 Years Ago
      You can thank our over safety concious government for not having the Sparks and Focus' from overseas. Something about 5MPH bumpers and impact standards that we as Americans are too concerned with. I say f@#k it, survival of the fittest. If you can't out run, better yet out handle a Hummer bearing down on you in a Spark, oh well, more roads and gas for the rest of us.
      • 6 Years Ago
      Sweet! Can't wait for the CTS Coupe!
      Now, wasn't the Invicta supposed to be on the FWD Epsilon platform? If it's RWD, does that mean it's really replacing the Lucerne, not the LaCrosse?
      Also, does anyone know what platforms the SRX and the 9-4X are supposed to be on?
      • 6 Years Ago
      It is an interesting announcement. However, it seems that GM is more than reviewing Hummer. If the rumors are correct, it is as good as sold to one of bidding groups out of India.

      If this is true, then Hummer will retain its sales base in the Middle East and Asia. It may continue elsewhere, but under a separate (and riskier) channel.

      I am intrigued how the new products will be received in light of these deeper cuts announced by the company. One would hope that an even more efficient GM will concentrate on quality products that are sold in realistic numbers than their current business methodologies employ.
      • 6 Years Ago
      "continue to review Hummer"

      Drop. Yesterday.
        • 6 Years Ago
        My gosh, Vintage....Low ranked again....... People hate you even if you make sense sometimes......I not saying you make total sense right now but damn, you get hated on mostly.
        • 6 Years Ago
        Please, Vintage, don't try and argue dumb points with an automotive engineer.

        You stated:
        "No it does not. The H2 weighs over 8,000lbs, on purpose, in an effort to exploit a loophole in Cafe requirements. "

        Weight != Gross Vehicle Weight Rating.
        So, either be consistent, get a memory, or learn.

        Besides, as a GM fan, I like HUMMER's image potential. In reality, the H3 should be the biggest vehicle they sell (and it shouldnt weigh over 5000lbs either). GM has a global brand that has great recognition. If Jeep and Land Rover can survive in todays world, so can HUMMER.
        • 6 Years Ago
        Major Geek is right. HUMMER has brand value. SUVs are not hot right now, but history has shown that small Jeep-like vehicles have a niche and over the long run are an asset.

        • 6 Years Ago
        Actually, allow me to clarify with facts as all I do is drive in the burbs. I get 12.5 average fuel. I know people who own Tundras who get less. Trooper who pulled me over told be his suburban gets less. This is fact, yours is speculation. Im in Central New York, come on over ANYTIME and I will take you for a ride, reset the fuel computer and prove it.

        Of course I still swear your car gets 15 MPG per http://www.fueleconomy.gov/feg/findacar.htm which you also deny. Odd thing is, I tend to believe you.

        I would like the same respect because I can, and will, back it up on request.
        • 6 Years Ago
        You guys are correct about GVRW but you really can not hate on the H2 properly unless you skew the facts a bit to make it seem worse then it is. Otherwise, you need to make the same argument for just about every full sized truck and SUV. Easier to pick on one brand. Lazy enviromentalists. Ive even argued, on this very website, with someone who was using the H1 and H2 stats for the H3 (Claims like the H3 being built on Tahoe frame and getting 10 mpg). I try and argue the very same points, but those who hate the Hummer want to ignore the H1 demise, the H2 being new large Hummer, the H3 and soon the HX although its going to be hilarious to watch Hummer haters dissing on the Flex Fuel Hx. Really, they should be pleased with the brands direction of making off road capable daily drivers with respectable fuel mileage and options.
        • 6 Years Ago
        H2 has a curb weight of 6400lbs.

        • 6 Years Ago
        Vintage,
        Curb Weight: 6614 lbs.

        Learn what GVWR means.
        • 6 Years Ago
        Please, Vintage, don't try and argue dumb points with an automotive engineer.

        You stated:
        "No it does not. The H2 weighs over 8,000lbs, on purpose, in an effort to exploit a loophole in Cafe requirements. "

        Weight != Gross Vehicle Weight Rating.
        So, either be consistent, get a memory, or learn.

        Besides, as a GM fan, I like HUMMER's image potential. In reality, the H3 should be the biggest vehicle they sell (and it shouldnt weigh over 5000lbs either). GM has a global brand that has great recognition. If Jeep and Land Rover can survive in todays world, so can HUMMER.
        • 6 Years Ago
        vintage, you are aware that there are people who don't blink an eye at $100 fillups?

        You make it as if GM's building the H2 to spite people; but as incompetent as they are, there's probably still a market. I still see brand-new SUVs driving up and down the road. Expensive? Yes. But it's not stupid because you can't afford. It's stupid for other reasons - namely because you'd be better off buying a Tahoe/Suburban.
        • 6 Years Ago
        Standard GVWR (lb): 8600lbs

        Hence, exempt from CAFE averages. And it's a truck, so no gas guzzler tax. Awesome.
          • 6 Years Ago
          Vintage, if you knew anything about trucks (or vehicles at all), you would know that GVWR is Gross Vehicle Weight Rating (ie, how much the vehicle can safely weigh, including all passengers, cargo, tongue weight, etc). It IS NOT curb weight (the actual weight of the vehicle).

          By the way, you're one to talk, being a fan of the SVX and all. Odd that you're a fan of a 3600lb compact car.
        • 6 Years Ago
        No it does not. The H2 weighs over 8,000lbs, on purpose, in an effort to exploit a loophole in Cafe requirements. It does not have an emissions test, it does not affect CAFE averages, it does not even have a crash test. The government assumed any vehicle over 8,000lbs would be a work/utility vehicle like a Freightliner or dumptruck. The H2 gets between 7-12mpg in the city.
        • 6 Years Ago
        @ Jay Tee & Brent: I do know what GVWR means. Apparently you don't. Cafe relationship to GVWR:

        "Corporate Average Fuel Economy (CAFE) is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year"

        http://www.nhtsa.dot.gov/CARS/rules/CAFE/overview.htm

        HENCE, the H2 was built with a GVWR rating HIGHER than 8,500lbs to make it EXEMPT from emissions regulations, safety regulations, crash testing, and it does not affect CAFE averages.

        But props on trying to sound like you know what you are talking about!

      • 6 Years Ago
      Simple plan for savings:

      -Fire everyone in the union.
      -Hire the millions of Americans who will work for only $10 - $12 an hour and be far more appreciative.
      -Problem solved.

      *flame suit on*

      As Ron White would say: "You can't fix stupid!"

      Do the math, can you live, raise a family or really contribute to the economy on 10 or 12 dollars an hour?
        • 6 Years Ago
        Yes, you can, millions of people do it on far less. Or are you one of those people who thought they could do more and took a subprime mortgage?

        And guess what...those are starting rates. If you do a good job you can actually attain raises!

        PS: The reply button is a good place to start :-) and Ron White is probably the last person to preach about stupid.
        • 6 Years Ago
        The people who have the least amount of money in this country can easily go to college for free. In New York state, there are pell grants and tuition assistance (TAP) that never have to be paid back. I know people who only paid a few hundred dollars a year to go to college (SUNY/state schools). It is the middle classes whose families make more than 50-60k that will receive little to no tuition assistance.

        What it really boils down to is whether the person has the drive, ambition and focus to take a small four year chunk of their life to set up their next 60 years.

        "Ambition is a poor excuse for not having enough common sense to be lazy" - Steven Wright
        • 6 Years Ago
        "So I guess we should lower ourselves to 3rd world wages and working conditions, because if you haven't noticed the decline in real buying power in the last 10 years and faced with (from the news today) about 9% inflation and the dollar sinking, that's where we are heading."

        Richard, you are one of the few that know what the hell you're talking about. I think we are about there already. You are so corret about the decline in the buying power in the last 10 yrs (actually longer). The dollar is worth basically $.04 today, losing more than 90% of it's value since W.W.II. Then we have the Federal Reserve private banking cartel pump up the money supply to no end with funny money conjured out of thin air, and with fractional reserve banking the banks are allowed to issue more money than what they have on reserves, which drives inflation even higher. Inflation is the increase in the money supply, which drives prices up. That's why everything is more and more every year, like that bag of groceries today compared to 3 yrs ago. It affects our earning capacity. Therefore, it is a 'hidden tax'. We are all getting our pockets picked every year, literally.

        Because of all of our outsourcing to compete globally, As China and India's middle class is rising size and income wise, our middle class is shrinking and pretty much now we only have 2 classes in America, rich or poor. I live in N. Michigan, so I see the toll 'globalization' has taken on our state. Big corporations are outsourcing not only blue collar, but white collar jobs as well. Maximizing shareholder value & profits is the #1 priority.

        Welcome to the new Amerika
        • 6 Years Ago
        Then get an education and work a real job that pays more than $12 an hour rather than mopping the floors for a union job that pays $40 an hour....Unions---The scourge of American industry in the late 20th, early 21st century....
        • 6 Years Ago
        Preahing to the choir boys.

        I have 3 degrees, own 3 businesses, have dealt with union and non union employees and been both union and non union. Currently all my employees earn at least $15 per hour and that's in the lower wage rural Midwest where you can still buy a house under 100,000. However, car payments, energy, food, medical insurance and fuel are just about the same as anywhere.

        Perhaps you should look at what comparable wages and benefits are in assembly at the non union plants. Actually pretty close. So are they the scourge of the 21st century?

        And no, I don't have any subprime loans, my house is paid for and has been for 5 years thank you.

        Sure you can survive on 20,800 a year, that's what 10 bucks per hour comes to by the way.

        So I guess we should lower ourselves to 3rd world wages and working conditions, because if you haven't noticed the decline in real buying power in the last 10 years and faced with (from the news today) about 9% inflation and the dollar sinking, that's where we are heading.

        Thanks for proving: "You can't fix stupid!"


        • 6 Years Ago
        Sure Dan... Have everyone go to college & problems are solved, eh? Get real! The economy would not support 100% employment. You would still have unemployment, so you would just have very smart people with no job (& still having to pay off student loans).

        Union guys making $40 to sweep the floor? Get some actual FACTS to back up your internet dream. Most line workers, actually making product don't get that hourly rate (unless on O.T.)

        Union workers that are "sweeping floors" are members that were injured, or received low performance reviews at their primary job. Their pay is effected, just like a white collar employee's would be. The WC guy might be fired easier, while the union person is shuffled around, but that is one perk on a union.
      • 6 Years Ago
      • 6 Years Ago
      This was the perfect opportunity for GM to announce a deep brand/division restructuring.

      I applaud all the actions taken by GM today.

      But it was a major missed opportunity to not take on the real work that everyone knows must happen to refocus GM into a much stronger company going forward.

      • 6 Years Ago
      A RWD BUICK INVICTA!

      An old man's wet dream!

      I like all the new models, but the Cruze can come much sooner, IMO.
      • 6 Years Ago
      This years North American Auto show is going to have a ton of new GM product. The production versions of the Camaro, CTS Wagon and CTS Coupe will probably be there. There will be the new Equinox, the Chevy Cruze, the Buick Invica and the Chevy Volt.

      Not a bad roll out.
      • 6 Years Ago
      So how come Autoblog hasn't stopped this guy from advertising in every post yet?
      • 6 Years Ago
      "Eliminate stock dividend payouts effective immediately to save $800m"

      This is VERY significant and probaly should be the lead.

      The .25 dividend reduction is a BIG deal for investors. GM has paid a dividend since 1924! Very sad that on the 100th birthday of GM everything looks so gloomy.

      Good Luck GM. Hey the stock is up .15! (Ok small silver lining)

      • 6 Years Ago
      If anyone doesn't believe we are in a recession or damn near a depression...is on crack!

      IndyMac, Sallie-Mae, and Bear-Sterns...

      People in California waiting in line to get their money out of the bank...

      This is very scary!
        • 6 Years Ago
        Again, a recession is defined by two or more quarters of negative growth. We haven't even had one. The economy is still growing, albeit at a very slow +-1.5%, nonetheless, still positive. Not to say things aren't bad though. America has seen tough times such as these before and came out stronger, so look at it that way.
        • 6 Years Ago
        Regardless of the definition according to GDP that has a positive effect on the bottom line of the top guys at a company. The reality for me and Joe Consumer is much different.

        • 6 Years Ago
        And again, I don't care what the glorified definition is that economists and other business types came up with. The proof of bad times is around you, just open your eyes.
        • 6 Years Ago
        "And again, I don't care what the glorified definition is that economists and other business types came up with. The proof of bad times is around you, just open your eyes."

        Typical progressive. If the ACTUAL definition doesn't fit your worldview, change the standard, not your worldview. :rollingeyes:
        • 6 Years Ago
        And Again....give me something better to call it Brad, and I will call it that.

        Otherwise, when I wake up everyday wondering if my wife and I will each keep our jobs because of an economy that is clearly getting worse every minute I and everyone else will be calling it a recession.

        You obviously do not work in an industry that relies on banks lending money for things to get done.

        Of course dubya doesn't want his economists to use the R word, let alone the D word. It would tarnish his pristine legacy as he leaves office.
        • 6 Years Ago
        i totally agree with Brad. for example, I make 50k income, got a mortgage, car payments and all the other expenses except credit cards or loans and I am not seeing hard time or recession. But doesn't mean that not what going on. Most middle class out there has been trapped to live out of their means. Every where you go you get a credit car and upgrade to bigger and better regardless if its what you want. For most people it start when they are looking for a house. during the process you are shown your "dream house" that is 50k+ out of you budge. the same thing repeats car dealerships, bestbuy, home depot and every where.
        • 6 Years Ago
        I work in construction (not exactly a booming industry right now), drive an H3 and go to school full time. Skeptic, you maybe right in assuming I don't work with banks, but I truly do not see this thing called a recession, nor do many of my friends. The secret is living within YOUR means, which is what got us in this here in the first place. If people would just realize that the dream lifestyle is not just a couple credit cards away, we would have the credit crisis, or the housing crisis that we have right now.
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