DETROIT - General Motors will phase out Saturn by the end of the 2012 model year -- the end of the current model life cycle -- unless someone comes forward to buy the sales channel. Hummer is as good as gone in 2010, unless GM can close a deal to sell the militaristic SUV maker by this March 31. And GM will cap its financial support for Saab with hopes that it will become an independent business entity by January 1, 2010. GM would be happy to sell technology -- which means, sharing existing platforms -- with new owners of Saturn, Saab and Hummer in the event that someone with money comes forth to buy them, very soon.
That's the big product news included in General Motors' updated plan for viability, submitted Tuesday to the Treasury department as required in exchange for the $13.4-billion in loan guarantee commitments the automaker received at the tail of the Bush administration. GM asked for an additional $7.5 billion, and says that if U.S. sales fall to its worst-case scenario, 9 1/2-million in '09 and 11 1/2-million in '10, it will need a total "in the $30-billion range," according to Chairman/CEO Rick Wagoner. Based on production and cost cutting, GM expects to be viable again by '11, and will repay the government loans from 2012 to 2017. GM says its "operating cash flows" will improve to $6-billion from 2012 to '14, "reflecting both the full effect of GM's global restructuring initiatives and recovering industry volumes."
Chrysler LLC also presented its interim plan Tuesday. GM and Chrysler owe the Treasury department final plans by March 31, and these two documents give the government a chance to tell the automakers what they need to change in the next month-and-a-half.
Part of the equation is sacrifice from the United Auto Workers, who announced a tentative agreement on revisions to its 2007 contract late Tuesday. Tentative agreements don't mean much, though, and you can expect the UAW component to drag on to March 31. The union is understandably reluctant to convert money GM and Chrysler owe to its Voluntary Employee Benefit Association (which shifts retiree health care from the automakers to the union's control) into shares of the two companies' stock.
The UAW's modified 2007-11 contract would apply to Ford Motor as well as GM and Chrysler.
Chrysler's 177-page interim plan seems far sketchier than GM's 117-page plan, at least in the outlines that CEO's Bob Nardelli and Rick Wagoner presented after the New York Stock Exchange closed Tuesday night. Chrysler announced it will cut three more models beyond the four already announced, but when asked for specifics, co-President Jim Press named the Dodge Durango/Chrysler Aspen (which halted production late last year) and Chrysler PT Cruiser, which will go out of production this summer unless Chrysler finds a buyer for it.
Nardelli said that Chrysler is asking for an additional $2-billion beyond the $7 billion committed, of which it has received $4 billion so far. Its interim plan also includes 3,000 more job cuts, in addition to the 32,000 made since January 2007, and elimination of one more production shift beyond the 12 shift cuts already announced. Nardelli didn't specify the additional shift cut. The new cuts add $700,000 in fixed cost savings to the $3.1-billion in savings made in 2008.
Both automakers cited severe cost cutting already taking effect as signs of their restructuring and said that 2009 looks to be a worse year for sales than either imagined just a few months ago. Wagoner called GM's plan "a comprehensive and bold update."
GM will close 14 factories by 2012, five more than listed in the company's first revitalization plan, presented to Congress December 2. It will cut 47,000 employees, including the 10,000 white-collar redundancies (3,400 of those in the U.S.) announced last week. It will cut U.S. dealers, now at 6,200, to 4,700 in 2012 and then to 4,100 in 2014. That would include about 400 Saturn dealers, who have different, easier to cut franchise agreements than other GM brands, and a much smaller number of Hummer dealers.
And GM will cut its current lineup of 48 nameplates sold in the U.S. by 25-percent, to 36 nameplates by 2012, four more nameplate cuts than announced in the December 2 plan.
Hummer, Saab and Saturn account for nine or 10 of those nameplates, depending on whether GM is counting the lame-duck Saab 9-7x among those (or, it could be counting the Saab 9-4x as stillborn). If the 9-7x is counted, then the lame-duck Chevrolet TrailBlazer would account for product number 11. And the Pontiac G6 would almost certainly be number 12.
The Chevrolet Cruze replacing the Cobalt is a wash, but the Volt is an added model. So you can count on the Pontiac G5 to go away. The Buick Lucerne and Cadillacs STS and DTS will almost certainly be dropped for a two- or three-year interim, and the STS/DTS will return as one car.
Back at Chrysler, Nardelli touted the automaker's non-binding deal with Fiat (which was contingent on Mopar receiving its first $4 billion in loan guarantees) as key to its recovery. Still, there was not much detail to be found. The Chrysler-Fiat deal will provide Fiat with U.S. production and distribution and Chrysler with Fiat-based small cars and a European sales channel -- all stuff we already knew. Co-President Tom LaSorda says the Phoenix V-6 engine program is on-schedule and will be built in Trenton, Michigan, and Saltillo, Mexico -- he wouldn't say whether the Kenosha, Wisconsin (a 1906-built plant it got when it bought AMC two decades ago) engine plant might be a third.
Now, it will be interesting to see how the Obama Treasury department will react to GM's and Chrysler's plea for funds. If you're keeping score, that's a total of $22.5- to $30-billion for GM into 2011 and $9-billion for privately owned Chrysler. Even with its much smaller request, Cerberus' automotive albatross, Chrysler, will have a tougher time of it. Why won't Fiat spend any money on this deal, after all? And why hasn't Cerberus?
As part of their plans, both automakers had to submit bankruptcy contingencies: GM Vice Chairman Fritz Henderson said, "in any scenario, there is no debtor-in-possession funding for a company GM's size." A traditional Chapter 11 process, he said, would require $50- to $60-billion, twice the worst-case scenario funding it seeks in loan guarantees.
Chrysler would need $20- to $25-billion in debtor-in-possession funds, Nardelli said, allowing some ongoing operations. If it failed to obtain that kind of cash, Chrysler would undergo liquidation in two to three years.
Nardelli was adamant about this much: "This is not a course of action we're recommending."