By on July 15, 2008

\'Nuff saidGM just sent out a press release outlining "further steps" they taking "to adapt its business to rapidly changing market conditions." The high points of Rick Wagoner's plan include:

∙ Reduction of salaried workforce via attrition and "other separation tools."

∙ Eliminating "annual discretionary cash bonuses for the company's executive group in 2008… For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. "

∙ Making "additional structural cost reductions… achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity."

∙ "Revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans… 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."

∙ "Improv(ing) working capital…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."

∙ "Defer(ing) 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."

∙ "Undertaking a broad global assessment of its assets for possible sale or monetization."

∙ "Opportunistically access(ing) global markets to raise additional liquidity"

"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."

Click here for PDF of full press release 

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52 Comments on “Rick Wagoner’s Mystical Magical Plan to Save GM...”


  • avatar
    210delray

    Too little, too late.

    “Other separation tools” — don’t you love these euphemisms?

  • avatar
    Antone

    I smell a new death watch…
    Bloated dealer network, x-year away viable small car option, the continued cash-burn.

  • avatar
    Ronin317

    Off-topic: Great pic…that is a fantastic collection of short stories by a great author, whom I had the pleasure of meeting and having a coffee with to discuss. Neil Gaiman – great guy, great writer.

  • avatar

    “The message is not likely to be an announcement of management changes or that GM is filing for Chapter 11 bankruptcy protection, a source familiar with GM told Automotive News today. The news will be ‘fairly upbeat,’ the source said.“

    Upbeat? Upbeat? This is the new definition of “upbeat”?

  • avatar
    lewissalem

    210delray,

    Separation tools? Could he be talking about pliers? I’m confused.

    Looks like the executive bonus gravy train may finally get derailed.

  • avatar
    nudave

    The most important message in the entire press release is the sentence that says “…actual results may differ materially due to a variety of important factors.”

  • avatar
    gamper

    Well, it would appear the GM is willing to pull out all the stops to avert bankruptcy. I suspect they have additional wells of cash already being prospected should this most current turnaround plan falter. So, even assuming the cash conflagration does not subside anytime soon, GM is likely to remain solvent for years to come, GM death watch could be up in the thousands.

    To borrow a quote from Mark Twain:

    Reports of GM’s death have been greatly exaggerated.

  • avatar
    Jordan Tenenbaum

    Opportunistically access(ing)? As opposed to what, begrudgingly accessing?

  • avatar
    NickR

    “other separation tools.”

    A steering wheel puller?

    “annual discretionary cash bonuses for the company’s executive group in 2008… For the company’s top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. ”

    That’s tragic *sniff*

    “additional structural cost reductions… achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity.”

    read ‘shift reductions and closures’

  • avatar
    Gotta Chime In

    Gamper – I was afraid the GM cheerleaders were gone from this site. Please advise the locations of these magical cash wells. I’ll bring the buckets.

  • avatar
    OldandSlow

    Yep, the number of truck and body on frame SUV plants will be slashed to a bare minimum – but there will be restructuring costs in doing this.

    Good luck in getting through 2009 – it will be a close call – may the energy price gods be more favorable than they were this year.

  • avatar
    Pch101

    Well, it would appear the GM is willing to pull out all the stops to avert bankruptcy.

    That’s the tragedy of the whole thing. Instead of solving the ongoing business problem, they seem intent on running the company into the ground to the point that there won’t be any chance of recovery.

    GM reminds me of someone who treats his tumor with a bandaid instead of seeking the help of a surgeon. They think that covering it up is a substitute for cutting it out. If they wait too long to just accept reality and take the painful solution, it will be too late to remove it at all.

    I’ve been betting on a bailout, but after the fallout from the Fannie Mae and Freddie Mac bailout yesterday, I am starting to doubt that there will be enough leftover for GM by the time that the financial institutions take their turn at the till.

  • avatar
    210delray

    Jordan Tenenbaum:
    Opportunistically access(ing)? As opposed to what, begrudgingly accessing?

    You know, like those “pass with care” signs, as opposed to “pass with reckless abandon.”

  • avatar
    Pch101

    Oh, I forgot to ask — is there some sort of turnaround plan that is supposed to be announced today? I kept looking for one here, but I didn’t see it.

  • avatar
    Samir

    Eliminating “annual discretionary cash bonuses for the company’s executive group in 2008… For the company’s top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. “

    Well, it mirrors the drop in share price.

  • avatar
    mel23

    From Wagoner: “pretty easy to build a consensus among ourselves”. Yeah, that’s a good part of the problem. The only good thing from this is the dividend cut; let’s see what happens to the stock today and pressure on the board in the next few days. Of course there’s so much going on in the larger picture that this might not get much play.

  • avatar
    J.on

    All of this will be implemented by *drum roll* 2010!

  • avatar
    SherbornSean

    OK, So GM is losing $1B per month. This plan would cut $10B annually, which almost gets GM to break even. Add in some improvements in inventory control, and you find a few $B more (one-time, not annual svaings). Which means that GM is looking OK through the next 18 months, until the economy heals.

    So GM addresses the cash burn issue. But their real problem — as it has always been — is that losses in market share are not reversible. When the auto market improves next year, Toyota and Honda will have expanded capacity — by some 200K units each — to absorb the additional volume.

    D2.8 factories that close never re-open.

    It is neither magical or mystical — it’s just sad, really.

  • avatar
    guyincognito

    eliminating “annual discretionary cash bonuses for the company’s executive group in 2008… For the company’s top executive officers”

    That still sounds like there’s plenty of room for executive bonuses. Remember, stock options merely lock in a price on a stock and can then be extremely profitable even if the stock tanks.

  • avatar
    gamper

    Gotta Chime In Says:
    July 15th, 2008 at 9:35 am
    Gamper – I was afraid the GM cheerleaders were gone from this site. Please advise the locations of these magical cash wells. I’ll bring the buckets.

    Dont worry, I am not a cheerleader, I own two foreign cars. But I am not a hater like most posters on this site who had the bubbly on ice waiting for a bankrupcty announcement. I personally dont know where the magic wells are, but I am sure GM has a team of overpaid execs looking for the next big cash infusion, if needed. Despite the hopes and dreams of TTAC’s best and brightest, it will most likely be many years, and many more turnaround plans before GM finally throws in the towell, assuming that things cant be turned around. Who knows, crazier things have happened.

  • avatar
    ZoomZoom

    lewissalem Says:

    210delray,

    Separation tools? Could he be talking about pliers? I’m confused.

    I have a nice chisel set he could borrow, but a chisel won’t help when the tool that’s needed is the jaws-of-life.

    The cessation of the common stock dividend is huge news. This should wake up Wall Street.

    marketwatch.com has a new headline:

    “CORRECT:General Motors to raise $15 bln in cash through 2009″

  • avatar
    yankinwaoz

    Wow… I wonder how they managed to weasel out of their VEBA contribution obligations. That was a critical part of their new UAW contract. Perhaps they are hoping for a strike?

    I find it hilarious that last week they were planning to “borrow” the VEBA money they already gave to the UAW.

  • avatar
    KatiePuckrik

    I’m not terribly impressed with this press release.

    Take this extract:

    “GM is undertaking a broad global assessment of its assets for possible sale or monetization, which is expected to generate $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 the remaining GM brands”

    There’s too much “management speak” and too many wishy-washy terms. I mean, look at the first sentence:

    “GM is undertaking a broad global assessment of its assets for possible sale or monetization, which is expected to generate $2 – 4 billion of additional liquidity.”

    What exactly has been said here? A “broad global assessment of its assets for sale…which is expected to generate $2 – 4 billion…”.

    Firstly, “…is expected to generate $2 – 4 billion…”. “Expected”? No-one knows for sure? How much thought has been put into this? Didn’t anyone get a harder figure?

    Secondly, “…and GM is continuing to focus on profit improvement initiatives across the remaining GM brands.”. Translation: “We’re still looking at ways to save money”.

    This press release seem heavy on “initiatives” and light on “hard figures”. I suspect, this is “press release” is a cynical ploy to assure people that GM is on the right track, without actually saying anything. Thus, helping the share price.

    My theory gained credibility when I read this extract from a BBC article:

    “Some analysts have predicted GM will need to raise $15bn (£7.4bn) to ride out the downturn in car and truck sales.

    GM says it has $31bn in cash, which will be enough for this year without further borrowing.

    But Wall Street says if GM does want to borrow more, it will have to make more progress in cutting its costs.“

  • avatar
    Zarba

    The only announcements I wanted to hear from Rick Wagoner are:

    1) I am resigning today, effective immediately.

    2) Due to my gross mismanagement of this company, I am forgoing any claim on retirement benefits beyond those of any line worker covered by the VEBA.

    Oh yeah, the VEBA. “We ain’t paying”. Sorry UAW guys, you’re hosed. I’m sure you’ll like that cat food, while Rick and his friends enjoy frappucinos on their bankruptcy-proof pensions.

  • avatar
    zerofoo

    “Undertaking a broad global assessment of its assets for possible sale or monetization.”

    Uh-oh – they’ve sold all the domestic assets they can sell, and are now raiding the overseas assets.

    The end is nearer than I thought.

    I just saw Ted Koppel’s China special on Discovery and the Chinese auto manufacturers are going to make life VERY difficult for ALL car companies.

    It seems that to get a foothold in China, the Chinese government requires all foreign companies to “team-up” with a domestic equivalent. It is only a matter of time before the Chinese domestics acquire/steal all the intellectual property to build cars that meet western safety and emissions requirements.

    When that happens, the western car companies will be toast. GM probably knows this and is starting to “man the lifeboats” globally.

    -ted

  • avatar
    mel23

    Watching the boys on the web, I can see how it keeps going. They really do believe their own bullshit. When asked if they were getting out of Nascar; a yes/no answer would have sufficed but no, the response was about reducing the promotional footprint.I suspect the objective of everyone in that outfit is to get through the day without shooting themselves in the foot. Maybe somebody up the line will do it before I do or retire and I can keep the game going.

    One thing I did learn was that they expect to make as much money selling Malibus and Cobalts as with Silverados and Tahoes. We’ll see.

  • avatar
    Happy_Endings

    How much do they think they’re getting for Hummer? If Land Rover was essentially a “throw-in” with Jaguar when they were sold to Tata, why do they think they would much of anything?

  • avatar
    Gotta Chime In

    Gamper – I agree that the GM haters are making their voices heard louder than ever. However, the silent majority just want to see GM be competitive again. We believe that it will take a reborn company which bankruptcy provides. GM seems incapable of making drastic paradigm shifts without it. That said, got the buckets ready to go.

  • avatar
    AKM

    Fun apart, that’s a pretty drastic plan. If the dividend and 3/4 of executive compensation disappear, it means GM is really serious about cutting costs as deep as possible. I don’t think the UAW will see much money in the near future either, based on the deferral of GM’s contributions to their new fund.

    At least, GM’s management is not pulling stops anymore. We’ll see if it really helps. It certainly buys them time.

  • avatar
    Richard Chen

    GM’s stock price is down to $9.00 $8.90 right this second. Google has live quotes, so open the link in a tab and you watch the stock price update in the background.

  • avatar
    MikeInCanada

    I’ve already started to print out copies of the Press Release for my business class later tonight.

    Of the few actions listed, they seem pretty obvious ‘lean out the inventory, cut back on cash outflows, etc.’ Why weren’t they doing this 18 months ago…?

  • avatar
    JT

    A press release with a gazillion bullets items about financial management and funding.

    But nothing about building intelligent, reliable vehicles that people actually want to buy and, you know, selling them at a profit.

    Feh!

  • avatar
    eastaboga

    GM North Am. can probably be saved, the rest of the world is making money (yes, Chevy in Europe is a disaster).

    General Electric suddenly decided recently that making appliances was no longer part of their core competency, GM may decide it doesn’t need to sell cars in NA. The product revival lead by vehicles like Malibu, CTS and Enclave, which by any objective measure are very competitive, may just be too little too late.

    Back in the 80′s Ford looked brilliant and GM was likely the most mismanaged company on the planet. Product is cyclical and companies fortunes rise and fall. Nobody’s going into Chap 11 and there won’t be any government bailouts, unless Cerebus the hellhound goes belly-up, but that’s a different post entirely

  • avatar
    jaje

    Big deal when GM cuts its best consumer product – its dividend!

    GM’s been mismanaging itself for the past 20 years into oblivion with short term focus on profits, market share by purchasing other automakers, and holding 8 brands that only made sense when they had 50% market share. The haters for GM are speaking loudly b/c looking at this company from the outside in – we see a rotten corpse of greed and mismanagement from it’s high level execs, to its dealers, to its overpaid line workers. They are killing the company slowly and softly trying to keep an unsustainable status quo. GM needs bankruptcy to flush out the poison, fiefdoms, unconscionable union and franchise contracts and bring in a new set of talent. Recreate itself from the ashes – this GM will be better for American than the walking corpse we have today.

  • avatar
    26theone

    This press release could very well have the title “GM Enters Bankruptcy Protection”. It looks like a bankruptcy exit plan to me already.

  • avatar
    menno

    OK help me out anyone, where was the “upbeat news” in this press release? I can’t find any.

  • avatar
    Kevin

    Change the dateline to 2005 and it just might work!

    Well let’s hope they’re a little more proactive and timely in declaring bankruptcy.

  • avatar
    Kevin

    Firstly, “…is expected to generate $2 – 4 billion…”. “Expected”? No-one knows for sure? How much thought has been put into this? Didn’t anyone get a harder figure?

    Well to be fair to GM, this is legally necessary — no publicly-traded US company ever makes unqualified, outright assertions about future events that depend on market conditions. Else you not only lose the inevitable lawsuits, but set yourself up for fraud prosecution. Basic template for a public co.

    Moreover, this line was talking about cash to be raised by selling automotive assets in a haywire automotive market, and that’s certainly unpredictable anyway.

  • avatar
    mel23

    where was the “upbeat news” in this press release?

    That’s the point. It WAS upbeat to those on the stage. They actually feel good about this; or do a pretty good job of acting like they do. What would have happened to the poor bastard who had the guts to point out in their discussion of this ‘plan’ before announcement, that it was just more of the same? So that’s how this keeps going. Wagoner has no clothes on but nobody can say it. Wagoner, the board and those raking it in have bought themselves some time and way more income than they could get anywhere else. What did change today was the dividend. Some real pain will be felt, and the only relief will be return of the dividend or increase in stock price; both highly unlikely. So I’m hopeful some movement will be started among the stock holders. Too late to save the company I’m afraid but at least Wagoner might bear some shame.

  • avatar
    cjpistonsfan

    The health care deal is bad news bears for GM employees. My dad is a GM engineer and said that he hasn’t spoken to other coworkers since today’s meeting yet, but that was a big deal for a lot of them. Sure they get more monthly pension, but for a lot of them, hospital care and medication is a reality and the extra pension isn’t going to help them any. Fortunately for my parents, they don’t really get sick and don’t need medication, so aside from emergencies, it works out better for them, seeing as how they would have more money in their pocket. He’s in General Assembly Manufacturing Eng., in his late 50′s, and early retirement is not likely, so he along with a whole lot of others are hoping the upcoming angel of salaried layoffs death passes by his door.

    Interestingly enough, I’m currently in the middle of a TOYOTA internship. Thanks to him for advising me to stay away from the Detroit 3.

  • avatar
    truthbetold37

    They need to cut salaried within Finance and Marketing. Too much redundancy.

  • avatar
    hltguy

    I saw Waggoner being interviewed on CNBC this morning, he looked very uncomfortable. Very fidgety with his hands.

  • avatar
    Scottie

    Wonder how much of a pay cut he’s taking with this brilliant plan.

  • avatar

    Skooter:

    Sounds like the General not going away anytime soon. Bad news for all the GM bashers gathered here.

    Actually, it sounds like GM IS going away soon (depending on your definition of soon).

    And I’d like to state clearly, for the record, that assessing GM’s distress and/or predicting its failure is not “bashing.”

    Personally, I have never been “let down” by a domestic product (I knew my Pinto was crap and accepted that from the git-go). And though I am offended by GM’s management (or lack thereof), telling the truth about GM is not the same as an unwarranted, unjustifiable attack.

  • avatar
    yankinwaoz

    GM may decide it doesn’t need to sell cars in NA

    I’ve felt that GM needs to get out of the auto biz and into the medical care biz since they are on the hook for billions in medical care anyhow. GM can stand for General Medical. Kaiser Shipyards, the ship building company, did this.

    Think about it. If you have to pay billions for medical care, then why on earth not become the vendor yourself?

  • avatar

    I have now read the Press Release.
    Shorter version:

    Rick Wagoner say’s he’ll account GM back into shape.

    He-he.

    (And to someone who spoke about GM-haters on this site. I don’t hate GM – I am in awe at the sheer lunacy of management, and the fact that it’s been kept on board, but I do not hate GM. I have owned GM cars – and who knows, maybe the day will come when I own one again — but it won’t be one of the cars that Rick’s been accounting instead of building.)

  • avatar
    Skooter

    The term “GM basher” was used- not “hater”. Two very different descriptives. Did not mean to accuse most of the folks here. Just seems that GM is finally planning to survive and eventually prosper. It is obvious that TTAC prides itself on predictions. You know, the “as TTAC predicted…” headlines. So what is TTAC’s prediction for GM’s demise? Is there a hard date? Or is TTAC not so sure that GM will fail?

  • avatar

    Skooter:

    The term “GM basher” was used- not “hater”. Two very different descriptives.

    A distinction without a difference.

    So what is TTAC’s prediction for GM’s demise? Is there a hard date? Or is TTAC not so sure that GM will fail?

    The situation is, of course, fluid. The rate of GM’s decline into bankruptcy depends on a number of factors: the state of the U.S. new car market, the price of gas, the UAW’s reaction to its “deferred payment,” Delphi’s health (remember them?), suppliers’ health, etc.

    One thing is for sure: if you take in less money than you spend, you eventually go broke. The question of the day: with what will GM replace its king-sized pickup truck and SUV profits?

  • avatar
    jkross22

    I did a key word search for “accountability”, but nothing was found. I’m shocked, SHOCKED I say.

  • avatar
    kjc117

    The Federal Government will “save” GM not RW or his “boys”.

  • avatar
    Johnson

    gamper:
    I personally dont know where the magic wells are, but I am sure GM has a team of overpaid execs looking for the next big cash infusion, if needed.

    You just did a great job at contradicting yourself. If you “don’t know where the magic wells are” … then you *certainly* DON’T KNOW for sure that GM has a source where they can obtain a big cash infusion.

  • avatar
    folkdancer

    I have learned a lot about car history, bankruptcy laws, have enjoyed the speculations, and suggestions on TTAC. Many of you have suggested that GM should reduce its brands but have pointed out that the dealers for eliminated brands sue. But apparently if GM sells instead of eliminating a brand (possibly Hummer and Saab) the dealers can’t sue. Is this true? Could GM sell the Pontiac brand to say the Mattel Toy Company and not face dealer lawsuits?


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