GM has announced it will cut 21,000 jobs and Pontiac will be shut down next year, as the company tries to avert a bankruptcy proceeding by the end of May.
The new plan for GM's restructuring will result in a company of 40,000 hourly employees and four North American brands--including Chevrolet, Buick, Cadillac and GMC.
Also as a result of the new plan for shareholders, GM will offer the government equity in the company in exchange for outstanding federal loans that already exceed $15.4 billion. The U.S. government will become the majority shareholder in General Motors if the debt-to-equity offer is accepted. The UAW will be offered a similar deal; combined, the government and the union will control 89 percent of GM shares, the AP reports.
Previously, GM had confirmed plans to shutter or sell off the HUMMER, Saturn, and Saab brands. It now says it will stop producing vehicles for these brands in the 2009 calendar year unless the brands are sold and a contract-manufacturing deal can be reached.
In Europe and around the world, GM is moving to refine its brand structure too, though it has no plans to eliminate its Holden and Vauxhall brands in Australia and Europe. It has discussed the possibility of another automaker investing in its Opel brand--Fiat's been widely rumored to be interested--but GM expects to retain a stake in that company and maintain a strong presence on the continent. It also is in talks with major bondholders to reach agreement on forgiving debt, one of the major sticking points in a deal to keep the company out of federal bankruptcy court.
GM will shut down an additional 16 plants by 2012 to reconfigure its North American operations and to shed workers. Though it still has to gain the approval of the United Auto Workers, the blueprint for these cuts is expected to carry through outside or inside a Chapter 11 bankruptcy proceeding, GM CEO Fritz Henderson said in a press conference.
"We are taking tough but necessary actions that are critical to GM's long-term viability," he said as he outlined the new measures to shore up the automaker's U.S. operations.
GM is racing to meet a deadline at the end of next month to complete a restructuring plan acceptable to the Obama administration. If the company's new plan doesn't meet the White House's target for sustainability, GM could be forced to file bankruptcy.
GM says with the cuts announced today, it will be a viable company in a U.S. market selling 10 million new light-duty vehicles a year. For the past few months, U.S. sales have reached an annualized rate of just about 9 million units--though analysts suggest that April sales will rebound over the 10-million mark. When the cuts are complete, GM will offer 34 vehicles in its U.S. lineup of brands, down from 48 in 2008.
GM's prior plan, under former CEO Rick Wagoner, has anticipated profitability at 12.5 million U.S. sales across the industry. Wagoner was ousted as CEO last month as the Obama administration requested big changes to the automaker's viability plan and gave it an additional 60 days, through the end of May, to revamp its roadmap to profitability.
Twitterstream from this morning's press conference, via TCCBlog Twitter feed:
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 (http://www.gm.com/corporate/investor_information/sec/.)
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.http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewpressreldetail.do?domain=2&docid=52168. 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.