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2009-04-27

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Updated Viability Plan Speeds, Deepens Restructuring of U.S. Operations


GM Accelerates its Reinvention as a Leaner, More Viable Company


DETROIT -- General Motors (NYSE: GM) today presented an updated Viability Plan that will speed the reinvention of GM's U.S. operations into a leaner, more customer-focused, and more cost-competitive automaker.

The Viability Plan is included in an exchange offer whereby GM is offering certain bondholders shares of GM common stock and accrued interest in exchange for certain outstanding notes.

Revised Viability Plan goes further and faster

The Viability Plan announced today builds on the February 17 Viability Plan submitted to the U.S. Treasury. GM Media Online. The revised Plan accelerates the timeline for a number of important actions and makes deeper cuts in several key areas of GM's operations, with the objective to make us a leaner, faster, and more customer-focused organization going forward.

Significant changes include:

A focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC - with fewer nameplates and a more competitive level of marketing support per brand.
A more aggressive restructuring of GM's U.S. dealer organization to better focus dealer resources for improved sales and customer service.
Improved U.S. capacity utilization through accelerated idling and closures of powertrain, stamping, and assembly plants.
Lower structural costs, which GM North America (GMNA) projects will enable it to breakeven (on an adjusted EBIT basis) at a U.S. total industry volume of approximately 10 million vehicles, based on the pricing and share assumptions in the plan. This rate is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007.
"We are taking tough but necessary actions that are critical to GM's long-term viability," said Fritz Henderson, GM president and CEO. "Our responsibility is clear - to secure GM's future - and we intend to succeed. At the same time, we also understand the impact these actions will have on our employees, dealers, unions, suppliers, shareholders, bondholders, and communities, and we will do whatever we can to mitigate the effects on the extended GM team."

Fewer U.S. brands, nameplates, and dealers

As part of the revised Viability Plan and the need to move faster and further, GM in the U.S. will focus its resources on four core brands, Chevrolet, Cadillac, Buick and GMC. The Pontiac brand will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010, a reduction of 29 percent from 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries. This four-brand strategy will enable GM to better focus its new product development programs and provide more competitive levels of market support.

The revised plan moves up the resolution of Saab, Saturn, and Hummer to the end of 2009, at the latest. Updates on these brands will be provided as these initiatives progress.

Working with its dealers, GM anticipates reducing its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent. This is a further reduction of 500 dealers, and four years sooner, than in the February 17 Plan. The goal is to accomplish this reduction in an orderly, cost-effective, and customer-focused way. This reduction in U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. More details on these initiatives will be provided in May.

Sales volume and market share projections

The Viability Plan anticipates improved financial results despite more conservative U.S. sales volume expectations going forward. The lower volume expectations are the result of managing the business with fewer nameplates and dealers, leaner inventories, and reduced market share. To address the inventory issue, GM on April 23 announced U.S. production schedule reductions of approximately 190,000 vehicles during the second and early third quarters of 2009.

The Viability Plan also reduces GM's market share projections to adjust for the impact of the brand and dealer consolidation, as well as for the short-term impact of speculation regarding a GM bankruptcy. The plan assumes a 19.5 percent share in 2009, with share stabilizing in the 18.4 to 18.9 percent range in subsequent years.

"We have strong new product coming for our four core brands: the Chevrolet Camaro, Equinox, Cruze and Volt; Buick LaCrosse; GMC Terrain; and Cadillac SRX and CTS Sport Wagon and Coupe," said Henderson. "A tighter focus by GM and its dealers will help give these products the capital investment, marketing and advertising support they need to be truly successful."

Lower structural costs, lower breakeven point

The Viability Plan also lowers GMNA's breakeven volume to a U.S. annual industry volume of 10 million total vehicles, based on the pricing and share assumptions in the plan. This lower breakeven point (at an adjusted EBIT level) better positions GM to generate positive cash flow and earn an adequate return on capital over the course of a normal business cycle, a requirement set forth by the U.S. Treasury in its March 30 viability plan assessment.

GM will lower its breakeven point by cutting its structural costs faster and deeper than had previously been planned:

Manufacturing: Consistent with the mandate to accelerate restructuring, we plan to reduce the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, a reduction of 28 percent, and to 31 by 2012. This would reflect the acceleration of six plant idling/closures from the February 17 plan, and one additional plant idling. Throughout this transition, GM will continue to implement its flexible global manufacturing strategy (GMS), which allows multiple body styles and architectures to be built in one plant. This enables GM to use its capital more efficiently, increase capacity utilization, and respond more quickly to market shifts.
Employment: U.S. hourly employment levels are projected to be reduced from about 61,000 in 2008 to 40,000 in 2010, a 34 percent reduction, and level off at about 38,000 starting in 2011. This further planned reduction of an additional 7,000 to 8,000 employees from the February 17 Plan is primarily the result of the previously discussed operational efficiencies, nameplate reductions, and plant closings. GM also anticipates a further decline in salaried and executive employment as it continues to assess its structure and execute the Viability Plan. More details will be announced as soon as they are finalized with the various stakeholders.
Labor costs: The Viability Plan assumes a reduction of U.S. hourly labor costs from $7.6 billion in 2008 to $5 billion in 2010, a 34 percent reduction. GM will continue to work with its UAW partners to accomplish this through a reduction in total U.S. hourly employment as well as through modifications in the collective bargaining agreement.
As a result of these and other actions, GMNA's structural costs are projected to decline 25 percent, from $30.8 billion in 2008 to $23.2 billion in 2010, a further decline of $1.8 billion by 2010 versus the February 17 Plan.

Strengthening GM's balance sheet

Another key element of GM's restructuring will be taking the necessary actions to strengthen its balance sheet. GM today took an important step in improving its balance sheet by launching a bond exchange offer for approximately $27 billion of its unsecured public debt. If successful, the bond exchange would result in the conversion of a large majority of this debt to equity.

"A stronger balance sheet would free the company to invest in the products and technologies of the future," Henderson said. "It will also help provide stability and security to our customers, our dealers, our employees, and our suppliers."

Another important part of improving the balance sheet will be the ongoing discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association (VEBA), and with the U.S. Treasury regarding possible conversion of its debt to equity. The current bond exchange offer is conditioned on the converting to equity of at least 50 percent of GM's outstanding U.S. Treasury debt at June 1, 2009, and at least 50 percent of GM's future financial obligations to the new VEBA. GM expects a debt reduction of at least $20 billion between the two actions.

In total, the U.S. Treasury debt conversion, VEBA modification and bond exchange could result in at least $44 billion in debt reduction.

Throughout the Plan, GM will continue to make significant investment in future products and new technologies, with an investment of $5.4 billion in 2009, and investments ranging from $5.3 to $6.7 billion from 2010 to 2014. Very importantly, development and testing of the Chevy Volt extended-range electric car remains on track for start of production by the end of 2010 and arrival in Chevrolet dealer showrooms soon thereafter.

"The Viability Plan reflects the direction of President Obama and the U.S. Treasury that GM should go further and faster on our restructuring," Henderson said. "We appreciate their support and direction. This stronger, leaner business model will enable GM to keep doing what it does best - provide great new cars, trucks and crossovers to our customers, and continue to develop new advanced propulsion technologies that are vital for our country's economy and environment."

# # #

GM Media Online
 

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You know, I'm tired of protecting the emails and phone #s of the mouthpieces for the azzhoile Fritz Henderson who now has a target on his back!

CONTACT(S):
Tom Wilkinson
GM Communications
313-667-0366 (o)
313-378-6233 (c)
[email protected]

Reneé Rashid-Merem
GM Communications
313-665-3128 (o)
313-701-8560 (c)
[email protected]


Flood their inboxes and tell them how ****ed up they are. I know it won't change a friggin thing but at least it will be an avenue to vent frustration.
 

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It truly is a very sad day :(

As part of the revised Viability Plan and the need to move faster and further, GM in the U.S. will focus its resources on four core brands, Chevrolet, Cadillac, Buick and GMC. The Pontiac brand will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010, a reduction of 29 percent from 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries. This four-brand strategy will enable GM to better focus its new product development programs and provide more competitive levels of market support.
 

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Its no longer just about the Kappa Platform .. its about a brand that has out sold one of the brands they are keeping (Buick).

Time for Pontiac owners everywhere to send their dissatisfaction with these choices:

* Frederick A. Henderson: GM President and Chief Operating Officer
o 300 Renaissance Center
Mail Code 482-C39-B30
Detroit, Michigan 48265-3000

* Thomas G. Stephens: GM Vice Chairman, Global Product Development
o 300 Renaissance Center
Detroit, Michigan 48265-3000

o Tadge Juechter: Vehicle Chief Engineer Performance Car/Kappa
+ Mail Code: 480-210-1Y7
Warren Vehicle Engineering Center
30001 Van Dyke
Warren, MI 48090

o Keith Paterson: Kappa Program Engineering Manager
+ Mail Code: 480-210-1G5
Warren Vehicle Engineering Center
30001 Van Dyke
Warren, MI 48090

o Brian Capistrant: BPG Compact Segment Marketing Manager
+ Mail Code: 482-A31-A26
Pontiac Division
100 Renaissance Center
Detroit, Michigan 48265-1000

o David Ponitowski: Marketing/Product Manager, Performance Cars
+ 300 Renaissance Center
Detroit, Michigan 48265-3000
 

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Man...

Not sure what to say. I'm a bit worried as I don't know how this is going to directly affect all of us who own Solstices and Skys.
 

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I've been referring to him as Fritz "I love C-11" Henderson. They (the government) kicked Wagner out specifically to get someone in charge that was more pro-bankruptcy.

I'm sad to say at this point with this public announcement this means the government has seen, reviewed, and more than likely approved this new plan. There's really no hope of keeping the Pontiac line alive, but we can at least hope for a revival at some point. The 2010 end date was in line with the 2010 end of the Solstice so we can at least hope they wont cut the Solstice any shorter than it was already slated.
 

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It is a sad day indeed. :( :( :(
 

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Man...

Not sure what to say. I'm a bit worried as I don't know how this is going to directly affect all of us who own Solstices and Skys.
If you own one now it wont at all. You can take your car to any GM dealership for service, you can do that right now if you want. Just because the brand is dead does not mean GM will not support the cars.
 

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What does this mean for our warranties? I purchased an extended warranty when I got my car and wonder if it's going to be honored as well... Should I call and see about cashing it in early and getting what money is left in it out (if that's possible)?
 

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What does this mean for our warranties? I purchased an extended warranty when I got my car and wonder if it's going to be honored as well... Should I call and see about cashing it in early and getting what money is left in it out (if that's possible)?
See my previous post, nothing will happen. Your warranty is with GM not Pontiac.
 

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Bummer for sure but I suggest writing letters is a bit of a waste of time and needlessly bothering good people. Seriously, writing to "KeithPaterson:Kappa Program Engineering Manager"? Do we seriously believe Mr. Paterson voted himself out of a job, or could do a danged thing about it?

Our votes should have been cast years ago by buying the cars new. How many on this forum own a Toyota? Pontiac, and GM in general, brought this on themselves through poor marketing, "badge engineering", bad union contracts, executive squander, etc. Solstice and Sky...how silly is that? GM has been way to "fat" for a long time and this is the natural result.

For the record, 15 new cars purchased since 1990, 14 were GM...5 Pontiacs, 1 Dodge. Write letters with your checkbook if you want to see a company survive. If not, you are free to lament their death but understand why they had to go. Still sad to see them go.
 

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Business is business and this is unfortunate. Buick is kept around due to strong China sales. Pontiac is pretty much here and no where else, so that is why it makes more sense to dump them.

No kidding pterosaur... The best way to support GM is to pay STICKER for the cars. Don't even ask for the discounts.
 

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What does this mean for our warranties? I purchased an extended warranty when I got my car and wonder if it's going to be honored as well... Should I call and see about cashing it in early and getting what money is left in it out (if that's possible)?
if its a GMPP warranty, it still should be honored as along as its in force or you own the car......this is the same thing that happened to Oldsmobile......as it was phased out.....

the tougher part may be finding a dealership with the reduction anticipated.....the small town dealerships will drop leaving only the major metro area/large volume dealerships left.....

see it wrapping perhaps Chevy/Buick/GMC with Caddy as a standalone dealer....The decision to keep Buick was probably based on the overseas sales numbers.....particularily in the exploding Asia market.....read China here...

As was mentioned above.....the car will still be supported maintenance wise....
 

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Discussion Starter #14
Extended warranties are usually not from GM, and wil depend upon the viability going forward of that extended warranty company (see Triad debacle for details).


There will be NO Saturns built after 12/31/2009 by GM, which means if there is any production of Sols in calendar year 2010 it will have to depend on Sols only.
 

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...and no carryover of Solstice or Vibe into other channels (read brands) within GM. (live from conference)
 

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...and no carryover of Solstice or Vibe into other channels (read brands) within GM. (live from conference)
Not surprised on either, Solstice already had it's expiration date coming up, and the Vibe only exists because of Toyota.
 

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Bummer for sure but I suggest writing letters is a bit of a waste of time and needlessly bothering good people. Seriously, writing to "KeithPaterson:Kappa Program Engineering Manager"? Do we seriously believe Mr. Paterson voted himself out of a job, or could do a danged thing about it?
I concur. It's the numbskulls at the top that messed this one up.

Our votes should have been cast years ago by buying the cars new. How many on this forum own a Toyota? Pontiac, and GM in general, brought this on themselves through poor marketing, "badge engineering", bad union contracts, executive squander, etc. Solstice and Sky...how silly is that? GM has been way to "fat" for a long time and this is the natural result.
I replaced an American made bicycle with my American made (GM) car. :)

For the record, 15 new cars purchased since 1990, 14 were GM...5 Pontiacs, 1 Dodge. Write letters with your checkbook if you want to see a company survive. If not, you are free to lament their death but understand why they had to go. Still sad to see them go.
Here's where you and I seem to part ways. My parallel sentence is, "For the record, of the four (4) new cars purchased since 1983 (seven cars purchased total), 1 Honda, 1 Ford/Lincoln/Mercury, 1 Hyundai, and 1 GM. The three used cars were GM, Toyota, and Isuzu. The latter two were _beaters_ for the kids to drive while in school."

I can no more imagine buying 15 new cars in 19 years than I can imagine flying without the aid of an airplane. I do not condemn, but simply cannot understand this level of turnover. :huh:

Clearly, _I"M_ the reason GM is having difficulties! I buy a car, then drive it until it becomes too expensive to repair, and only then do I purchase a new one.
Sorry, folks, Mea culpa, mea culpa, mea maxima culpa! :(;)
 

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Very sad to see this announcement. :( I was truly hoping the plan to keep Pontiac a "niche" brand would be viable. I sure hope GM doesn't go too far to the "green" side and leave no choices in their line-up for true car enthusiasts to buy.

I am glad that I bought my G8 when I did, even if it wasn't the best financial decision for me. It looks like I will now be the owner of a rare Solstice and an even rarer G8.
 

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...I can no more imagine buying 15 new cars in 19 years than I can imagine flying without the aid of an airplane. I do not condemn, but simply cannot understand this level of turnover. :huh:
My wife and I each need a car, we put on a lot of miles making a lease unattractive. I hate driving out of warranty and until recently GM has had very short warranties. And I enjoy driving a new car.

From a purely financial view, what I do is expensive. Buy new, and drive it into the ground is probably the best way to go. I confess, I am indeed an "auto-holic". :D

I too do not "condemn" anyone who chooses to by used or foreign...only pointing out if you do then do not be surprised by the fall of an American icon. Letters don't help, sales do.
 
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