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GM, Chrysler Fight To Stay Alive Through Restructuring
GM Plans To Eliminate Pontiac Brand By 2010
By JOE MURRAY, The Bulletin
General Motors and Chrysler have taken steps to restructure and save their ailing companies, as the economic downturn continues to pressure the ailing U.S. auto industry.
While GM is retiring automotive brands, slashing its payroll and reducing dealers, it is asking the federal government to forgive a substantial portion of its debt and to become a majority stakeholder in the company. If the Treasury Department approves the debt-for-equity plan, coupled with a deal reached with the United Auto Workers (UAW), GM officials say the company could bring in $20 billion.
The request comes at a time the automaker is under pressure from the Obama administration to present a viable restricting plan by June 1 to receive an additional $11 billion in government loans. GM already accepted $15 million in such loans. GM also announced plans to eliminate its Pontiac brand by 2010 and plans on closing a number of its plants for the summer.
The request for the government to take a majority share of the company, however, was not an invitation for Washington to run the Detroit-based company, nor is the request being made at the behest of the administration.
“They want to make sure the company is run well to benefit all the parties,” GM CEO Fritz Henderson told reporters in a press conference broadcasted over the Internet. Mr. Henderson added the administration has “not expressed any interest in running” the auto company.
President Barack Obama came under fire in March when former CEO Rick Wagoner resigned his post at the behest of the president. Critics said Mr. Obama was using the economic crisis to expand the government’s role in making free market decisions. They also challenged the wisdom of asking Mr. Wagoner to step down.
Mr. Wagoner, 56, spent 32 years with the company and was immediately replaced by Mr. Henderson, the company’s vice chairman and chief operating officer. Throughout his tenure as GM’s top executive, Mr. Wagoner made serious inroads repairing the company.
He had worked tirelessly to turn around GM and cut its U.S. workforce from 177,000 to 92,000.
Mr. Wagoner attempted to slice the fat from GM, abandoning the Oldsmobile brand, closing factories and reaching a landmark agreement with the UAW that addressed the massive retiree health-care debt the company was carrying.
But even as Mr. Wagoner was making such changes, the company continued to pile up $82 billion in losses over the last four years.
Racing against the clock, Mr. Henderson said GM would not only discontinue Pontiacs, but would stop building Saab, Saturn or Hummer brand vehicles by the end of 2009. The workforce is also being reduced from 62,000 hourly employees to 40,000 by the end of 2010.
In contrast to the February plan the Obama administration rejected, GM will save more jobs, but close more factories. It would also strengthen itself through a bond exchange of its $27 billion in unsecured public debt. All of these measures are being done to avoid bankruptcy.
On Sunday, Chrysler and the UAW announced it had reached an agreement where the union promised to make substantial sacrifices to keep the company viable. The “painful” concessions were necessary if Chrysler was to receive its second influx of government money.
“Once again, our active and retired members are being asked to make extraordinary sacrifices in order to help Chrysler return to viability,” said UAW Vice President General Holiefield said in a statement.
“In order for the company to have a sustainable future, all stakeholders will have to show the same willingness to contribute to the common good that has been demonstrated repeatedly by our membership,” he said.
The plan, which still must be approved by union members, would satisfy Treasury Department requirements and modify the 2007 collective bargaining agreement and the Voluntary Employee Beneficiary Association (VEBA) trust. Chrysler applauded the UAW for their sacrifice.
“The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department,” Chrysler spokesman Ed Garsten told CNN.
Chrysler must submit an acceptable viability plan to the Treasury Department by Thursday. The deal with UAW means the automaker can pursue merger talks with foreign automaker Fiat.
Joe Murray can be reached at jmurray@thebulletin.us
While GM is retiring automotive brands, slashing its payroll and reducing dealers, it is asking the federal government to forgive a substantial portion of its debt and to become a majority stakeholder in the company. If the Treasury Department approves the debt-for-equity plan, coupled with a deal reached with the United Auto Workers (UAW), GM officials say the company could bring in $20 billion.
The request comes at a time the automaker is under pressure from the Obama administration to present a viable restricting plan by June 1 to receive an additional $11 billion in government loans. GM already accepted $15 million in such loans. GM also announced plans to eliminate its Pontiac brand by 2010 and plans on closing a number of its plants for the summer.
The request for the government to take a majority share of the company, however, was not an invitation for Washington to run the Detroit-based company, nor is the request being made at the behest of the administration.
“They want to make sure the company is run well to benefit all the parties,” GM CEO Fritz Henderson told reporters in a press conference broadcasted over the Internet. Mr. Henderson added the administration has “not expressed any interest in running” the auto company.
President Barack Obama came under fire in March when former CEO Rick Wagoner resigned his post at the behest of the president. Critics said Mr. Obama was using the economic crisis to expand the government’s role in making free market decisions. They also challenged the wisdom of asking Mr. Wagoner to step down.
Mr. Wagoner, 56, spent 32 years with the company and was immediately replaced by Mr. Henderson, the company’s vice chairman and chief operating officer. Throughout his tenure as GM’s top executive, Mr. Wagoner made serious inroads repairing the company.
He had worked tirelessly to turn around GM and cut its U.S. workforce from 177,000 to 92,000.
Mr. Wagoner attempted to slice the fat from GM, abandoning the Oldsmobile brand, closing factories and reaching a landmark agreement with the UAW that addressed the massive retiree health-care debt the company was carrying.
But even as Mr. Wagoner was making such changes, the company continued to pile up $82 billion in losses over the last four years.
Racing against the clock, Mr. Henderson said GM would not only discontinue Pontiacs, but would stop building Saab, Saturn or Hummer brand vehicles by the end of 2009. The workforce is also being reduced from 62,000 hourly employees to 40,000 by the end of 2010.
In contrast to the February plan the Obama administration rejected, GM will save more jobs, but close more factories. It would also strengthen itself through a bond exchange of its $27 billion in unsecured public debt. All of these measures are being done to avoid bankruptcy.
On Sunday, Chrysler and the UAW announced it had reached an agreement where the union promised to make substantial sacrifices to keep the company viable. The “painful” concessions were necessary if Chrysler was to receive its second influx of government money.
“Once again, our active and retired members are being asked to make extraordinary sacrifices in order to help Chrysler return to viability,” said UAW Vice President General Holiefield said in a statement.
“In order for the company to have a sustainable future, all stakeholders will have to show the same willingness to contribute to the common good that has been demonstrated repeatedly by our membership,” he said.
The plan, which still must be approved by union members, would satisfy Treasury Department requirements and modify the 2007 collective bargaining agreement and the Voluntary Employee Beneficiary Association (VEBA) trust. Chrysler applauded the UAW for their sacrifice.
“The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department,” Chrysler spokesman Ed Garsten told CNN.
Chrysler must submit an acceptable viability plan to the Treasury Department by Thursday. The deal with UAW means the automaker can pursue merger talks with foreign automaker Fiat.
Joe Murray can be reached at jmurray@thebulletin.us
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