General Motors submitted its viability plan to the U.S. government on Tuesday, with all the details released publicly at the same time. GM’s viability plan is more widespread than originally thought – extending through 2014 – and calls for additional government loans up to $13 billion, depending on economic factors.
Job cuts
In a bid to make the company profitable within the next 24 months, GM will cut another 10,000 white collar jobs worldwide. The details of the job cuts have yet to be announced, but they will undoubtedly be linked to some of GM’s lame duck brands.
General Motors’ updated viability plan also includes the closings of 14 production plants, up five from the company’s December plans.
The UAW has agreed to more concessions, with the latest round focusing on work rule cost cuts.
Dealer reductions
In order to make the company leaner and more agile, GM’s viability plan calls for a significant reduction in its dealer base. GM’s current network of 6,200 dealers will be reduced to just 4,700 by 2012, with that figure dwindling to 4,100 dealers by 2014.
Fewer brands
It’s no secret that some of GM’s brands have been on the chopping block, but the latest plan details what to expect in the coming months and years. GM’s Hummer brand will be sold or phased out by March 31st, with Saab facing an equally uncertain future. GM says it is working closely with the Swedish government to come up with a solution for the Saab brand, but has yet to come up with a concrete solution. GM is actively searching for a Saab buyer, but hasn’t ruled out an independent status and bankruptcy for the Swedish brand.
GM’s Saturn brand is essentially a lame duck, with no future products planned for the automaker’s youngest brand. GM will entertain any offers to purchase Saturn’s distribution network, but will phase out the brand by 2011 if no agreements are reached.
Additionally, GM will offer just 36 vehicle models by 2012, four less than originally outlined.
Up to $13 billion more needed
GM has already received $17.4 billion in government loans, but says it needs more in the wake of collapsing auto sales. GM’s viability plan requested an extra $5.1 billion in loans – totaling $22.5 billion – with the possibility of more loan requests in the future. If new car sales total 9.5 million units in 2009 and 11.5 million units in 2011, GM would require another $7.5 billion, for a total of $30 billion in government loans. If things continue to worsen, GM would need further government funding in 2013 and 2014.
However, if things go according to plan, GM plans to begin paying back its loans by 2012.
Bankruptcy
Although GM sees bankruptcy as a “highly risky and very costly” option, GM CEO Rick Wagoner says the company has not completely ruled it out as a “potential option”. However, Wagoner also added that bankruptcy would be the automaker’s “last resort”.
GM says it is unable to arrange financing to pull off Chapter 11 restructuring from a private lender. As such, the government would have to act in this role, or the company would be forced to shut down. Even if the government agreed to finance the a Chapter 11 bankruptcy, GM contends it would cost between $50 and $100 billion, which is considerably more than the loans it says it needs to stay out of bankruptcy. GM argues sales would suffer under bankruptcy, possibly to the point of no return.
