GO
GoAutoLogo
MENU

Make / Model Search

News - General Motors

GM increases pressure on debtors, union

Talking tough: GM CEO Fritz Henderson wants to settle with debtors - or else.

GM’s new chief Fritz Henderson says bankruptcy is a viable alternative

20 Apr 2009

GENERAL Motors has ramped up pressure on holders of its unsecured debt and United Auto Workers Union by admitting it is still working hard on a bankruptcy plan.

New chief executive officer Fritz Henderson said GM did not have a lot of time for negotiation and was working as hard on the bankruptcy as on a negotiated solution.

“We are working alongside (the US) treasury (department) to make sure they’re comfortable and confident that this plan will accomplish the goals we have mutually established,” he said.

“That means we are ... taking the watch apart step by step and rebuilding it to make sure we have a purpose in every one of our brands.” Mr Henderson said GM would have its new business plan ready sometime this month, and that it would include more plant closures and more retrenchments.

However, he said the company was still planning to retain four brands in its new guide: Chevrolet, Cadillac, Buick and GMC/Pontiac.

GM’s bondholders and the union’s retiree health benefits plan are owed a total of $US48 billion ($A66.7 billion) and have refused an earlier offer containing a little cash, new debt and a lot of new GM shares.

 center image GM has to meet the Obama government’s June 1 deadline for producing a new plan that will leave a slimmed down GM with a healthier balance sheet and a viable business plan. A key part of creating that healthier balance sheet will be the retirement of a great deal of debt, paid for with elements other than cash.

Reports in Detroit suggest the president’s automotive task force is now urging GM to drop the notion of including any cash or debt in any compensation offer to bondholders and the union.

The company is being urged to offer new shares in exchange for the $US48 billion of liabilities, a move that is likely to leave the bondholders and the union is charge of GM as the major shareholders.

The government is also reportedly willing to take new GM shares in settlement of the $US13.4 billion ($A18.6 billion) loan advanced earlier this year.

While Mr Henderson settled on the future brand strategy, he was less clear on how to resolve the issue of reducing the numbers of GM dealers across North America.

It cost GM about $US1 billion to close down Oldsmobile dealers a year or two back, but it appears likely there will be little or no cash available to compensate the dealers which are going to be terminated as the company reduces the network from 6246 to 4100 outlets by 2014.

“I think the conclusion reached by the task force was that that plan was not sufficient for speed,” Mr Henderson said.

He said GM was talking to dealers about how to speed up the dealer reduction program.

Things were looking up in Europe, where GM had received “well more” than six approaches about Opel/Vauxhall.

“And they are serious people, many of them financial players and some of them industrial players.” He said the disclosure process had started and that would be completed in “two to three weeks”, indicating a sale could follow soon after.

“In terms of liquidity in Europe, our business has actually performed better than expected, which has been helpful,” he said.

He said the scrappage programs in Europe and the release of the Insignia had helped sales while production cost cuts had been “vigorous”.

We still have issues in front of us but, frankly, we have been snowplowing expenses and doing a little better in the market.” Mr Henderson said directors had decided to pull the AC Delco parts business off the market after deciding that offers were too low.

“Given the linkages of this business to General Motors – whether it is purchases, whether it is dealers – we just concluded recently that we’re not able to achieve the kind of price we would need for this business to justify selling it.

“We are going to keep this business, run it and grow it and it is a very good business and highly successful.” He said there had been three approaches for Hummer and he was expecting final offers by the end of this week (Friday 24). He expected a decision to sell before the end of April.

Read more:

Bankruptcy looms as an option for GM

GM told to cut deeper

Obama forces Wagoner to quit

GM’s Wagoner to resign


Click to share

Click below to follow us on
Facebook  Twitter  Instagram

General Motors articles

Motor industry news

GoAutoNews is Australia’s number one automotive industry journal covering the latest news, future and new model releases, market trends, industry personnel movements, and international events.

Catch up on all of the latest industry news with this week's edition of GoAutoNews
Click here