New Volt to Get 230 MPG

WARREN, Michigan – General Motors Corp. said Tuesday its Chevrolet Volt rechargeable electric car should get 230 miles per gallon (98 kilometers per liter) of gasoline in city driving, more than four times the current champion, the Toyota Prius.



The Volt is powered by an electric motor and a battery pack with a 40-mile (65-kilometer) range. After that, a small internal combustion engine kicks in to generate electricity for a total range of 300 miles (480 kilometers). The battery pack can be recharged from a standard home outlet.



GM is marketing the 230-mile (370-kilometer) figure following early tests using draft guidelines from the U.S. Environmental Protection Agency for calculating the mileage of extended range electric vehicles.



The EPA guidelines, developed with guidance from automakers, figure that cars like the Volt will travel more on straight electricity in the city than on the highway. If a person drives the Volt less than 40 miles (65 kilometers), in theory they could go without using gasoline.



Highway mileage estimates — which are generally higher than city ones — for the Volt have yet to be released using the EPA's methodology.



"We are confident the highway (mileage) will be a triple-digit composite," GM CEO Fritz Henderson said.



If the figure is confirmed by the EPA, which does the tests for the mileage posted on new car door stickers, the Volt would be the first car to exceed triple-digit gas mileage.



EPA said in a statement Tuesday that it has not tested a Volt "and therefore cannot confirm the fuel economy values claimed by GM." The agency said it applauded "GM's commitment to designing and building the car of the future — an American made car that will save families money, significantly reduce our dependence on foreign oil and create good-paying American jobs."



GM has produced about 30 Volts so far and is making 10 a week, CEO Fritz Henderson said during a presentation of the vehicle at the company's technical center in the Detroit suburb of Warren.



Henderson said charging the volt will cost about 40 cents a day, at approximately 5 cents per kilowatt hour.



Most automakers are working similar plug-in designs, but GM could be the leader with the Volt, which is due in showrooms late in 2010.



Toyota's Prius, the most efficient car now sold in the U.S., gets 48 miles per gallon (20 kilometers per liter) of gas. It is a gas-electric hybrid that runs on a small internal combustion engine assisted by a battery-powered electric motor to save gasoline.



Although Henderson would not give details on pricing, the first-generation Volt is expected to cost near $40,000, making it cost-prohibitive to many people even if gasoline returns to $4 per gallon.



The price is expected to drop with future generations of the Volt, but GM has said government tax credits of up to $7,500 and the savings on fuel could make it cost-effective, especially at 230 miles per gallon (98 kilometers per liter).



"We get a little cautious about trying to forecast what fuel prices will do," said Tony Posawatz, GM's vehicle line director for the Volt. "We achieved this number and if fuel prices go up, it certainly does get more attractive even in the near-term generation."



Figures for the Volt's combined city/highway mileage have not yet been calculated, Posawatz said. The combined mileage will be in the triple digits as well, he said, but both combined and highway will be worse than city because the engine runs more on longer highway trips.



The mileage figure could vary as the guidelines are refined and the Volt gets further along in the manufacturing process, Posawatz said.



GM is nearly halfway through building about 80 Volts that will look and behave like the production model, and testing is running on schedule, Posawatz said.



Two critical areas, battery life and the electronic switching between battery and engine power, are still being refined, but the car is on schedule to reach showrooms late in 2010, he said.



GM is simulating tests to make sure the new lithium-ion batteries last 10 years, Posawatz said, as well as testing battery performance in extremely hot and cold climates.



"We're further along, but we're still quite a ways from home," he said. "We're developing quite a knowledge base on all this stuff. Our confidence is growing."



The other area of new technology, switching between battery and engine power, is proceeding well, he said, with engineers just fine-tuning the operations.



"We're very pleased with the transition from when it's driving EV (electric vehicle) to when the engine and generator kick in," he said.



GM also is finishing work on the power cord, which will be durable enough that it can survive being run over by the car. The Volt, he said, will have software on board so it can be programmed to begin and end charging during off-peak electrical use hours.



It will be easy for future Volt owners living in rural and suburban areas to plug in their cars at night, but even Henderson recognized the challenge urban, apartment dwellers, or those that park their car on the street might have recharging the Volt. There could eventually be charging stations set up by a third-party to meet such a demand, Henderson said.



Chrysler Group, Ford Motor Co. and Daimler AG are all developing plug-ins and electric cars, and Toyota Motor Corp. is working on a plug-in version of its gas-electric hybrid system. Nissan Motor Co. announced last month that it would begin selling an electric vehicle in Japan and the U.S. next year.

by the associated press

Congress gives GM a deadline to sell assets or lose federal funds

NEW YORK — A senior member of President Barack Obama’s auto task force testified Wednesday that the U.S. government will not continue to fund General Motors Corp.’s operations if the automaker doesn’t get approval to sell its assets to a new company within the next 10 days.

"We have no intention to further fund this company if the sale order is not entered by July 10,” Harry Wilson, one of the Treasury Department officials overseeing GM’s restructuring, said while being cross-examined by an attorney for a group of GM bondholders who are opposed to the sale.

The No. 1 U.S. automaker’s government-backed plan for a quick exit from Chapter 11 hinges on the sale plan, which would allow it to leave behind many of the costs and liabilities that have made the company unprofitable.

The Detroit-based automaker, whose June 1 filing for bankruptcy protection was the fourth-largest in U.S. history, is hoping to avoid a lengthy court battle over the sale. Last month, objections from bondholders and other groups dragged out rival Chrysler LLC’s hearing on its sale for three days. This is day three of the GM hearing.

U.S. Judge Robert Gerber urged the parties involved to try and reach resolutions on as many issues as possible in order to avoid lengthy arguments, but he conceded that the process would likely carry over to today.



by the associated press

Better Auto Sales

DETROIT — After a yearlong free fall in the American car market, the decline of sales slowed in June, offering hope to automakers that the bottom has been reached and more shoppers may slowly start returning to showrooms soon.

Still, sales were down 7.1 percent from May, which generally is a stronger sales month.

Overall, automakers sold 859,847 vehicles in June, a 28 percent drop from the same month last year, according to Autodata Corp.

Sales declines slowed for four of the six major carmakers, with Ford Motor Co. reporting the smallest drop of 10.7 percent. For many months, Ford and other companies have been reporting year-over-year declines of 40 percent or more.

Even Chrysler, which emerged from bankruptcy protection early in June, saw its decline shrink.

Analysts say that’s among the signs that the auto industry’s slump that began with $4 per gallon gasoline last summer could be leveling off.

"It is unlikely things will get any worse,” said Jesse Toprak, executive director of industry analysis for Edmunds.com.

The slowly improving economy and government incentives of up to $4,500 to trade in inefficient clunkers for new vehicles could lead to modest improvements in the second half of the year, he said.

In anticipation of heightened traffic at dealers and higher sales later this year, Ford has increased its production order by 25,000 vehicles for the third quarter.

"We’re making steady progress,” Jim Farley, Ford’s vice president of marketing, said in a statement. "We remain grounded, however, given challenging industry and economic conditions.”

And while Chrysler’s sales results were dismal — only 68,297 cars and trucks, many sold because of incentives of more than $4,800 per car.

"At a time when they are emerging from bankruptcy and trying to reinvent themselves, it is not a huge surprise,” Toprak said.

Affordability and rising fuel prices — from $2.28 per gallon in May to $2.64 in June — boosted sales of sales of compact cars, some hybrids and larger crossover vehicles.

Sales of fuel-efficient hybrid vehicles that run on gasoline and electricity were mixed.

Analysts had speculated that June sales, when adjusted for seasonal variances and multiplied to calculate an annual selling rate, would exceed 10 million for the first time this year.

But sales once again fell just shy of that mark at 9.7 million for June. That’s a huge reduction from more than 16 million as recently as 2007.


by the associated press

GM’s top executive, ‘new’ company bankcrucy

NEW YORK — General Motors’ Chief Executive was grilled by a string of lawyers Tuesday about his company’s bid to sell its "good” parts into a new company and emerge from bankruptcy protection.

GM, whose June 1 filing for bankruptcy protection was the fourth-largest in U.S. history, is hoping to avoid a lengthy sale hearing that could postpone its emergence from Chapter 11. Last month, objections from a group of bondholders and others dragged out rival Chrysler LLC’s sale hearing for three days.

At a packed Manhattan courthouse Tuesday, Fritz Henderson was questioned for around five hours by attorneys for the various parties challenging the sale, including bondholders, consumer groups and unions.

Despite U.S. Judge Robert Gerber’s urging the attorneys to keep their arguments concise and to avoid redundancies, the hearing dragged on as a parade of lawyers made their way up to the podium.

"I think people have forgot why we’re here and what we have to accomplish,” Gerber said sharply. "I’m not going to deny anybody due process, but I expect the questioning to be more focused.”

Henderson wasn’t fazed by his lengthy stay on the stand, answering questions quickly and directly for the most part.

When asked about the current condition of GM, Henderson testified that June sales were "slightly better than expected” excluding fleet sales.

Fate of claims

Consumer groups and several individuals with product-related liability claims are objecting to the sale because people with pending product-related liability claims against GM will be forced to seek compensation from "Old GM,” the collection of mostly unprofitable assets leftover from the sale where there likely will be nothing left to pay their claims.

Early on in the hearing, Mark Salzberg, an attorney for a group of bondholders, questioned why GM would opt for a sale plan instead of a restructuring plan, charging that the automaker took that route to make it harder for its creditors to negotiate.

But Harvey Miller, an attorney from GM, questioned the validity of the bondholder group’s challenge, noting that it only has three members, one of which bought his bonds for 2 cents on the dollar, while the other two spent no more than 20 cents on the dollar for theirs.

Besides the bondholders, a trio of labor unions are trying to block the sale. Unlike the UAW, which brokered a deal for a stake in the company, those unions say they won’t have anything to pay for retiree health care.

Henderson said retiree benefits for the three unions cost GM about $26 million a month.



by the associated press

Car sales are up for June

DEARBORN, Mich. (AP) — Citing better-than-expected sales and traffic at dealerships, Ford Motor Co. said Monday it plans to increase third-quarter production by 25,000 units — marking the automaker's second production hike in recent weeks.

Ford spokesman Mark Truby said that will bring total quarterly production to 485,000 units, a year-over-year increase of 16 percent or 67,000 units. Last month the company said it would raise third-quarter production by 42,000 units.

The boost affects all models of Ford, Lincoln, Mercury vehicles, with more emphasis being placed on Mustangs, pickup trucks and the Ford Focus compact car, Truby said.

"We had pretty well lowered production in recent quarters to meet demand," Truby said. "Now as we're seeing market share increases and showroom activity, we're ramping up production to meet that demand."

The increase comes as Ford's top sales analyst, George Pipas, said the company's June sales were "good" compared with the overall industry. The Dearborn, Mich.-based automaker could see a year-over-year decline of 10 to 20 percent, which could be the lowest among all major automakers, he said.

"This will be our lowest decline of this year," Pipas added.

Automakers, which are due to report June U.S. sales on Wednesday, have seen sales fall 37 percent over the first five months of the year. Pipas said U.S. auto sales may have halted their month-to-month declines in June and could be down less than 30 percent for the first time since September of last year.

As bad as it sounds, a decline of less than 30 percent could be a welcome relief, as automakers and suppliers have trimmed production and other costs to adjust to lower consumer sales.

"The important takeaway is that we're not going backward, we're not slipping back," said Pipas during a sales preview talk with reporters. "It suggests the worst is behind us, not just the economy, but we may have seen the low point for the year."

Pipas said individual regions of the country are showing sales improvements compared with June 2008, another sign that the auto market has bottomed out and is recovering. While sales in the Great Lakes states are improving, they're still slow in California and Florida, two areas hit hard by the decline in the housing market, Pipas said.

Pipas joined other industry analysts in predicting that June sales could surpass a 10 million seasonally-adjusted annual selling rate for the first time this year.

Last week J.D. Power and Associates predicted that automakers would sell 914,400 vehicles in June, 26 percent less than in June of last year and 1 percent lower than the 924,064 sold in May.

Pipas said May typically is a stronger sales month than June, but he was unsure if this June would surpass May figures.

He said federal "cash for clunkers" legislation recently signed into law could boost sales later in the year, and noted that consumer confidence is improving, suggesting that the worst is over with the economy and auto sales.

Shares for Ford rose 3 percent, or 17 cents, to close Monday at $5.78.


by the associated press

GM and Chrysler's bankruptcy

A summary of developments in the Chapter 11 bankruptcy cases of General Motors Corp. and Chrysler LLC:

GENERAL MOTORS — DAY 29

WHERE DOES IT STAND?: Monday marked Detroit-based GM's 29th day under court protection.

GM said Monday it's ending its joint venture with Toyota Motor Corp. at a Fremont, Calif., manufacturing plant as it continues to shrink its operations under bankruptcy protection.

GM said it was unable to reach an agreement with Toyota about a new product plan at the facility. The plant, called New United Motor Manufacturing Inc., or Nummi, currently produces the Pontiac Vibe for GM and the Corolla and Tacoma for Toyota.

GM announced it was phasing out the Pontiac brand earlier this year. The facility will cease production of GM vehicles in August, the company said.

Late last week, the automaker said in court filings that it has agreed to take on responsibility for future product liability claims.

In a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, the new company will now assume responsibility for future claims involving vehicles made by the old company.

Consumers with pending cases against the automaker or who haven't filed suit yet in connection with a past incident, will still need to seek damages from the old company where there will likely be nothing left to pay their claims.

WHAT'S NEXT?: A hearing on GM's plan to sell its assets to a new government-controlled company and emerge from Chapter 11 is scheduled for Tuesday. GM CEO Fritz Henderson is expected to testify.

CHRYSLER

WHERE DOES IT STAND?: Auburn Hills, Mich.-based Chrysler Group LLC emerged from Chapter 11 earlier this month after a new company was created by the sale of most of the automaker's assets to a group led by Italy's Fiat Group SpA.

WHAT'S NEXT?: Chrysler assets not sold to Fiat, including eight plants, remain under Chapter 11 protection. Hearings to decide what to do with these so-called bad assets and to settle claims by the company's creditors will continue. The next hearing is scheduled for Tuesday.


by the associated press

GM to Allow few Product Liability Claims

General Motors will assume responsibility for product liability claims filed after the carmaker emerges from bankruptcy protection, a concession that removes a potential obstacle to the Obama administration's plan for the company's quick restructuring.

Under the deal reached by the administration, GM and state attorneys general, the automaker will accept claims arising from defective-vehicle accidents that occur after it emerges from Chapter 11 proceedings. Consumers could file the claims even if their vehicles were made by the "old" GM. However, those with past claims would have to pursue the GM left behind in bankruptcy with nothing but unwanted assets, debts and other liabilities. That means these consumers are likely to recover little, if anything.

Under GM's original restructuring plan, the automaker was to have sold its valuable assets to a new GM "free and clear" of liens, including existing and future liability claims on cars the old GM produced. Consumer watchdogs and many state attorneys general, including Maryland's, have objected, saying such a sale would deprive individuals of "key legal rights."

The modification, outlined in court papers filed by GM late Friday, is a partial victory for the consumer groups and attorneys general, who took their case to Congress and pressured the Obama administration to make the automaker accept all product liability claims. GM acquiesced only on future claims; case law on that issue is unsettled and could have held up the quick bankruptcy proceedings sought by the Obama administration. The federal government, which has committed more than $50 billion to the restructuring, is to take a 61 percent stake in the new GM.

A hearing on the sale is scheduled for tomorrow.

In a court filing, GM noted that it was making the amendment "to alleviate certain concerns that have been raised on behalf of consumers" even though it was not legally obligated to do so.

Consumer groups welcomed the amendment but said the automaker, along with Chrysler, should do more. After bankruptcy proceedings similar to those being pursued by GM, Chrysler's assets were sold to a new entity led by Italian automaker Fiat, free of existing and future product liability claims.

On Friday Rep. André Carson (D-Ind.) introduced legislation that would require automakers to purchase liability insurance if they are owned by the federal government or have federal loans. This insurance must protect against past and future claims, even after a bankruptcy filing.

"Congress still needs to step in and do something for Chrysler victims," said Joanne Doroshow, executive director of the Center for Justice and Democracy. "That bankruptcy is over. The only way for victims to get help is if there's a law that establishes it."



from the washington post

GM asset sale

NEW YORK (AP) — A group of General Motors Corp. bondholders and some of the automaker's labor unions filed objections Friday to GM's plan to sell its assets to a new company that can emerge from bankruptcy protection.

Their opposition, along with additional objections filed by consumer groups, a handful of states and cities, and individual retirees, shareholders and bondholders, threatens to put the brakes on what has so far been a speedy trip through the Chapter 11 process.

The Unofficial Committee of Family & Dissident GM Bondholders claim they are being treated unfairly compared with the automaker's other stakeholders and deserve more than the 10 percent stake in the new company that they would receive if the sale goes through.

In its motion, the bondholders group accused GM and the U.S. government of unjustly speeding the case through the bankruptcy process at the expense of the bondholders and dividing the new company's assets "among a few select favored classes."

"GM's bondholders appear to be the most disfavored and discriminated class in the scheme," the group wrote, pointing to the larger 17.5 percent stake the United Auto Workers union is slated to get under the sale.

The group claims to represent about 1,500 bondholders with holdings worth more than $400 million. It's also asking the court to grant it permission to form a formal committee that would be able to negotiate with GM separately from larger bank and investment firm bondholders. A hearing on that request is scheduled for Tuesday.

GM spokeswoman Renee Rashid-Merem declined to comment on the group's objection, saying that the company doesn't discuss specific claims or possible outcomes that will be determined by the bankruptcy court.

As part of GM's restructuring plan, the automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would get 12.5 percent of the new GM, with the UAW taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

The support of bondholders is seen as a key step toward moving the bankruptcy process along quickly and allowing GM to meet its goal of emerging from court oversight in 60 to 90 days.

The day before GM's June 1 bankruptcy protection filing, a group of ad hoc institutional bondholders said that 54 percent of the automaker's bondholders had agreed to exchange their shares of automaker's $27 billion in unsecured bonds for the 10 percent stake and warrants to purchase a greater stake in the new company later.

Chrysler LLC also tried to hammer out a deal in the days leading to its April 30 Chapter 11 filing, but it faced heavy resistance from debtholders representing a fraction of its $6.9 billion in secured debt.

That group objected to Chrysler's plan to sell the bulk of its assets to Italy's Fiat Group SpA, and took the case all the way to the U.S. Supreme Court before the sale ultimately went through. Attorneys for consumer groups and people with product liability lawsuits against Chrysler also appealed the sale to the high court.

Several of the same consumer groups are also objecting to the GM sale, because like in the case of Chrysler, the new company would not be responsible for product liability claims related to vehicles produced and sold by the old company.

Consumers would be left to file claims against the assets remaining after the sale, and it is unlikely that there will be anything left to pay those claims.

Meanwhile, the IUE-CWA, United Steelworkers and International Union of Operating Engineers claimed Friday that the GM sale will ultimately take away the health care benefits of their 50,000 retirees.

Before it filed for bankruptcy protection, GM reached a deal to give the UAW a stake in the new company to help fund retiree heath care benefits, but no such agreement has been reached with the other unions.

"If GM succeeds in leaving behind these union-represented retirees and dependents, they will be left with only an unsecured claim against old GM for more than $3 billion in retiree health care and hundreds of millions more for retirement life insurance," the unions said in their objection.

Rashid-Merem said discussions related to the non-UAW health care benefits are ongoing, and the company hopes to reach final decisions about their future soon.

A hearing on the sale of GM's assets to the new government-led entity is scheduled for June 30. The deadline to file objections with the court was 5 p.m. Friday.



by the associated press

GM closes Venezuela plant

CARACAS, Venezuela — General Motors Corp.’s Venezuelan affiliate temporarily shuttered a local assembly plant Friday, suspending all car production in Venezuela and boosting fears that the closure could further slow sputtering economic growth.

GM suspended operations for at least three months at its auto assembly plant in Venezuela’s central Carabobo state, affecting 1,600 full-time employees who will see their salaries cut to minimum wage during the shutdown. A smaller plant that produces trucks will continue operating.

Car sales have soared in Venezuela in recent years as high oil prices fueled a consumer spending boom. In March, the sector employed 40,000 people and indirectly created another 100,000 jobs, according to Venezuela’s Automotive Chamber.

GM is the country’s largest automaker, producing more than half of the 54,000 cars assembled in the first five months of 2009, according to the chamber.

But auto output had already declined by 9.7 percent this year through May as government currency controls restricted imports, pushing GM to close its doors.

The controls, imposed by President Hugo Chavez in 2003, have prevented GM from getting the dollars it needs to import car parts, stalling sales and leaving the company with $1.2 billion in debts to foreign suppliers.

But lower oil prices, now 51 percent below July’s peak, have left crude-reliant Venezuela without its main source of foreign currency, making it more reluctant to part with dollar reserves and forcing it to cut back on dollar sales to importers.

GM’s operations could be halted for more than three months if the company doesn’t get permission to buy dollars soon, GM’s Venezuela chief Ronaldo Znidarsis said.

The government plans to sell auto manufacturers $2.5 billion in dollars this year so they can buy car parts, Trade Minister Eduardo Saman said.

Local businessmen worry that GM’s shutdown will slow other sectors of Venezuela’s economy, said Tulio Hidalgo, president of the Carabobo state chapter of the Fedecamaras business chamber.



by the associated press

Swedish automaker and Gm make a deal

STOCKHOLM — Saab Automobile, General Motors Corp.’s struggling Swedish unit known for its family cars, was rescued Tuesday by a consortium led by Koenigsegg Automotive AB, a tiny company that produces only a dozen custom-made super cars a year.

Having penned a memorandum of understanding, GM said the sale would include an expected $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding for Saab’s operations and investments would be provided by GM and the Koenigsegg Group AB consortium, it said.

"This is yet another significant step in the reinvention of GM and its European operations,” GM Europe President Carl-Peter Forster said in a statement.

A person briefed on the deal said GM will get nothing initially for Saab, but would be paid $150 million — capital Saab had left over from GM’s ownership — on top of the value of Saab’s assets if the new company turns a profit. The person, who did not want to be identified because the deal has not been closed, could not estimate the value of those assets.

GM bought a 50 percent stake in Saab for $600 million in 1990 and acquired the rest for $125 million in 2000. GM CEO Fritz Henderson said GM could build another car for the Saab brand.

"Based on the preliminary plan, we expect the buyer to ask GM to build the 9-4x,” Henderson told reporters during an online chat Tuesday. "We will also provide support in terms of powertrain and other technologies.”

The company fronting the consortium, Koenigsegg Automotive, was founded in 1994 by Christian von Koenigsegg, a Swedish sports car fanatic and entrepreneur, who remains the chief executive. It makes luxury sports cars at its headquarters, a former air force base near Angelholm, in southern Sweden.

With a full-time staff of 45, Koenigsegg (KOH-nigs-egg) makes around a dozen cars a year, customized for every buyer. The company doesn’t advertise prices for its models, but they are believed to range between $1 million-$2.3 million each.

Saab, on the other hand, has more than 4,000 staff worldwide, is represented in some 50 countries, and typically produces more than 100,000 cars a year.

Saab Chief Executive Jan Ake Jonsson called the deal "great news” and said it would help the brand to maximize its potential "through an exciting new product lineup with a distinctly Swedish character.”

The sale is expected to be completed by the end of the third quarter.



by the associated press

Chrysler and GM executives defend decision to close local dealers

WASHINGTON — Under withering criticism in Congress, General Motors and Chrysler executives on Friday called the closings of hundreds of dealerships painful steps needed to right-size the auto giants. Down-on-their-luck dealers said the moves would needlessly devastate their local economies and livelihoods.

"Many dealers and the communities they serve frankly feel blind-sided,” said Rep. Greg Walden, R-Ore.

GM CEO Fritz Henderson told a House panel the dealer cuts were "quite painful” but necessary to save over 200,000 jobs at GM’s remaining dealers.

"In essence, this is our last chance,” Henderson told the House Energy and Commerce Committee’s oversight and investigations subcommittee.


Carmakers criticized
Chrysler Deputy CEO Jim Press said the cuts were part of the shared sacrifices by the United Auto Workers union, bondholders and others needed to avoid liquidation.
"Going through bankruptcy was not our choice,” said Press, who along with Henderson and the other witnesses were required to raise their right hands and testify under oath.

But the committee heard from shutout dealers such as Frank Blankenbecker III of Waxahachie, Texas, whose voice cracked as he recalled the hard work of his father, a World War II veteran, to build their family business.

"I am glad that he is not alive to witness this travesty. To have risked his life for a country that would do what they are doing would destroy him,” he said.

The carmakers’ explanations won few converts from House members, who wagged their fingers at the executives and questioned their motivations.

Many of the dealers, they argued, had been profitable and received little warning or opportunity to plead their cases.

"There’s something wrong with a business model that basically says, ‘In order to survive, we’ve got to crush our local dealers,’” said Rep. Peter Welch, D-Vt.

Rep. Mike Burgess, R-Texas, confronted Henderson about GM’s decision to maintain a parts distribution center in the district of Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank had urged Henderson to keep the facility open.

"What is the number I need to call? Is it 1-800 Car Czar?” Burgess asked. "I have a nagging suspicion that there is a political calculation.”


Closing plans released
The committee released a GM document that, for the first time, provided a state-by-state list of 1,323 dealerships the automaker plans to wind down. Pennsylvania had the most with 90, followed by Ohio with 79, Illinois with 66 and California with 65. Alaska was the only state spared. GM has declined to release the name of individual dealerships.
Dealers said the closings put 100,000 jobs at risk and charged the companies with failing to be transparent about how they reached their decisions.

Many dealers said their stores had been performing well despite the economic downturn.



by the associated press

Whitacre to take over GM

NEW YORK (Dow Jones)--Edward Whitacre, who cobbled back together much of telecommunications giant AT&T Inc. (T), will try his hand at revitalizing another American icon as chairman of General Motors Corp. (GMGMQ).

Whitacre, 67, will assume the post when GM emerges out of bankruptcy later this summer. A cowboy from Ennis, Texas, he's a savvy dealmaker with the ability to work with large unions, which should benefit the troubled automotive giant. He also is expected to tap into his experience dealing with the shifting telecom landscape in order to steer GM through the auto industry's own mercurial state.

"It's a very smart pick," said Scott Cleland, chief executive of telecom consulting firm Precursor Group who has known Whitacre for 15 years. "He's somebody who's seen a lot and been through a tremendous amount of change."

There are, however, questions over what a life-long telecom worker - he started in 1963 as a facility engineer at Southwestern Bell - will bring to a car company struggling to shed its ingrained corporate culture. It's also unclear how much influence he'll be able to bring to Chief Executive Fritz Henderson and the government-controlled company, which faces steeper problems than Whitacre has encountered.

But Whitacre is known as a quick study and for his ability to run efficient and organized meetings. He is expected to bring some badly needed focus to GM.

"There won't be any more of those day-long meetings, I assure you that," said James Ellis, the former general counsel to AT&T who worked with Whitacre for nearly two decades. "I think it's a challenge he's certainly up for."

One asset he brings is the ability to negotiate with unions. When Whitacre retired, AT&T employed more union workers - mostly under the Communications Workers of America - than the entire U.S. auto industry.

"He's someone who's been able to straddle the needs of running a profitable business with working well with unions," Cleland said.

Whitacre, however, will be tested when he deals with the United Auto Workers union, a powerful force whose demands have long weighed on U.S. auto makers.

"We wish him well in GM and believe he will be the same unifier and visionary there as our nation recommits to U.S. manufacturing and the automotive industry in particular," said Larry Cohen, president of the CWA.

Whitacre's dealmaking abilities, meanwhile, are well-known in the telecom industry. He is credited with rebuilding a large part of the original Ma Bell. Shortly after taking the reins of SBC Communications in 1995, he went on an acquisition spree and scooped up Pacific Telesis, SNET, and Ameritech, culminating in the purchase of AT&T in 2005. A year later, he acquired fellow Baby Bell BellSouth and the remaining stake in Cingular Wireless, putting all of the businesses under the revived AT&T name.

While AT&T's resurrection centered on getting bigger, his goal at GM is likely the opposite - getting trimmer and more efficient. Whether it is buying or selling, Whitacre's dealmaking experience will prove vital as GM looks to divest some of its car lines.

"He's very shrewd about value," Cleland said. "He's a good negotiator. Those skills work whether you're building up or paring down."

Still, the market dynamics are different enough to pose a challenge. While the number of power players in the telecom industry is diminishing, the auto industry is flooded with competitors. In addition, overseas rivals have established their dominance in the U.S., a threat Whitacre never had to deal with at AT&T.

To survive, GM badly needs to instill an attitude of innovation into its car development. Whitacre was known to have had an eye on the future. He drove AT&T's initiative to upgrade its network to offer a faster Internet connection and an Web-based television service. He had coveted BellSouth because it would give AT&T full control of the wireless business, which now drives nearly all of the company's growth.

Some believe Whitacre can bring that push for change to GM, which hasn't been known to move with the times nearly as quickly.

"I think he's the right man at the right time at the right place," Ellis said.



Wall Street Journal

GM, Chrysler fewer dealers

Both General Motors Corp. and Chrysler LLC have announced plans to dramatically reduce their networks of thousands of dealers, saying that the moves are needed to cut costs as part of their restructuring efforts.

But the dealers argue that they don't cost the automakers much of anything — in fact, they make money for the companies, they say — and that the termination of the nearly 2,000 franchises between the two automakers could result in the shuttering of many of the businesses and the elimination of thousands of jobs.

Also, if the dealers are forced to close, cities around the country could be left with empty buildings, vacant lots and possibly hundreds of thousands of dollars in lost tax revenues.

All of which raises the questions: Just how much do dealerships actually cost their respective automakers? And what other incentives do the companies have to pare back their dealer bases?

Here are some questions and answers about why the automakers are ending their franchise agreements with so many dealers.

Q: What exactly are Chrysler and GM doing?

A: As part of its Chapter 11 proceedings, Auburn Hills, Mich.-based Chrysler released a list of the 789 dealers for which it plans to terminate franchise agreements.

The affected dealers, which account for about 25 percent of the company's dealer base, have until Tuesday to sell off their inventory. After that, they won't be able to offer Chrysler-sponsored financing and other sales incentives, making it tough for them to compete with other dealerships without dramatically slashing their prices.

The move still needs the approval of the judge overseeing Chrysler's bankruptcy case, which could also come on Tuesday.

Meanwhile, Detroit-based GM plans to drop about 1,100, or 20 percent, of its dealers when their contracts end late next year, but the automaker has declined to reveal which dealers were chosen.

The move is part of GM's plan to cut about 40 percent of its 6,000-dealer network by the end of 2010. Besides the 1,110 dealership cuts, the company will shed about 500 dealerships that market the Saturn and Hummer brands, which the company has reached deals to sell, along with the Saab brand, which GM also plans to phase out or sell.

And when the surviving dealers' contracts are up in late 2010, GM will cut still more by not offering renewals to about 10 percent of the dealers that are left.

Q: What's keeping the automakers from just closing the dealerships immediately?

A: Contrary to what a lot of people think, GM and Chrysler don't own the dealerships that sell their cars and trucks. The dealerships are franchises owned by independent companies or business people who sign a contract with an automaker to market their vehicles.

The dealers pay for the vehicles up front with a loan from either an automaker financing arm or an independent bank. Dealers also pay for things like local advertising, along with tools and parts for their repair shops.

Normally, dealers are protected by strict state franchise laws that make it tough for automakers to terminate franchise agreements without showing significant cause.

Q: Why is it so important for the automakers to cut dealers?

A: Both Chrysler and GM claim that having such a large dealer base results in extra costs for them that they need to cut in order to be competitive in today's global automotive market.

Jim Press, Chrysler's vice chairman and president, testified before a Senate committee last week that the poor performance of many of the dealers the automaker wants to eliminate costs the company $1.5 billion in lost sales each year, along with $150 million in advertising and marketing costs and $33 million in administrative costs.

Press also attributed product engineering and development costs of $1.4 billion over four years to the dealers in question.

GM and Chrysler also have argued that they need healthy dealer bases in order to be successful. Chrysler has said that most of the dealers it wants to eliminate are either unprofitable, don't carry all three brands of Chrysler vehicles, or are located too close to another Chrysler dealer.

Given the steep drop in U.S. new vehicle demand in the past year, along with the increase in competition from overseas automakers, there just are too few sales to go around, the automakers say.

And if dealers are struggling to stay afloat, they can't afford to make needed investments in their dealerships or provide the kind of service customers demand, which could reflect badly on an automaker and make it harder for the company to compete against its rivals, the automakers say.

While the dealers agree that's true, they say market forces and individual decisions by dealers should be allowed to dictate who goes out of business.

Q: Is there anything the dealers can do to fight this?

A: A group representing about 300 of the affected Chrysler dealers, along with several individual dealers, have filed objections to the automaker's plan in bankruptcy court.

A hearing on Chrysler's motion to terminate the agreements began Thursday with testimony from about a dozen dealers slated to lose their franchises. It's expected to continue on Tuesday with arguments from both sides.

U.S. Judge Arthur Gonzalez is expected to rule in favor of Chrysler. The judge noted at the beginning of Thursday's hearing that the automaker has a "strong argument" for the termination of the franchises.

The GM dealers slated to lose their franchises have a few more options. The automaker announced its plans to terminate the franchises before it filed for Chapter 11 on June 1, but has said it doesn't plan to speed up the process now that it's operating under court oversight.

The GM dealers have the option of filing an internal appeal with the automaker or could fight their termination in court.

Q: Are all the dealers losing their franchises going to shut down?

A: No. Many of the affected dealers plan to stay open selling used cars and operating their body shops. Some of them also carry other automaker brands that aren't affected by the decisions of Chrysler and GM.

But many dealers have also said that they can't stay in business selling just used cars and will be forced to completely shut down. In addition, some cities prohibit dealers from selling used cars unless they sell new ones as well, forcing them to close those operations too.

The National Automobile Dealers Association, an industry group, says the GM and Chrysler cuts combined could wipe out 100,000 jobs.



by the associated press

GM to sell Saturn dealerships,to Penske

NEW YORK — General Motors Corp. has a tentative deal to sell its Saturn brand to auto-racing magnate Roger Penske’s dealership group, both companies said Friday.Penske has signed a memorandum of understanding that would give his dealership chain, Penske Automotive Group, Saturn’s 350 dealerships, the companies said. Penske said that he expects to offer all the dealers new franchise agreements and will retain all 13,000 Saturn employees for now.

"I would expect that the model that we’re putting together, the distribution model, will be profitable day one,” Penske said in an interview with The Associated Press. "We’ll have less costs. We’ll not be in the manufacturing side.”

Neither Penske nor GM would say how much Penske is paying for the brand. Penske said he expects the deal to close in the third quarter. Initially, GM will continue to produce on a contract basis the Saturn Aura sedan as well as the Vue and Outlook crossover vehicles. But Penske said he is in talks with global car manufacturers about building Saturn cars in the future.

The sale marks a new chapter for Saturn, which GM had been trying to sell since earlier this year as part of its turnaround plan.


Slow to develop
GM Chairman Roger Smith first unveiled the Saturn brand in November 1983, describing it as a revolutionary new way to build and sell small cars in America. But the project was slow to develop and the brand did not officially launch until 1990. It featured the iconic tag-line "a different kind of car company.”
GM’s hope was that Saturn would attract younger buyers with smaller, hipper cars to better compete with Japanese imports. It built a new plant in Spring Hill, Tenn., devoted to Saturn production. The factory had more flexible work rules than traditional GM plants for the employees who built the cars.

Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM. The factory stopped making Saturns in 2007 and currently builds only the Chevrolet Traverse crossover.

As GM focused more on high-profit pickup trucks and SUVs, Saturn began to languish in the late 1990s. Then in 2006, car buyers began to find Saturn’s new models more appealing. But after a good year in 2007, sales dropped 22 percent last year as the U.S. car market withered.

"Saturn was kind of an unpolished gem at GM,” said Brad Coulter, director at the Bloomfield Hills, Mich., turnaround firm O’Keefe and Associates. "They had never really fully exploited what they developed. Saturn is known for having some of the best-run dealerships. The brand is highly rated. It’s a top-notch sales organization.”

Today, Saturn production is scattered at plants across North America.



by the associated press

Bankruptcy filing

DETROIT — General Motors’ bankruptcy filing will do what its past chief executives could not — cleanse the century-old company of burdensome labor costs, unprofitable old factories and a boatload of debt.

The price was one that no GM chief was willing to pay until now. The slimmed-down company will be a ward of the U.S. government, 60 percent owned by taxpayers, with half of its eight brands just memories.

Industry analysts, GM executives and even President Barack Obama say GM now has the cost structure to compete in the global automotive market and one day return to profits. The company says it can make money even if U.S. auto sales stay weak.

The question is whether GM can generate enough profit to free itself of government control before the president or Congress rethinks promises not to muck around in day-to-day management of the auto company.


Competing with Japan
First, though, GM needs people to start buying cars and trucks again. Worldwide sales are near historic lows. And GM has to convince buyers in its home market that its cars are as good as those made by the Japanese.
GM reached a pact with the United Auto Workers that it says bring costs more in line with Japanese automakers that have plants in the U.S.

Monthly debt payments will drop dramatically because GM will owe only $9 billion rather than $67 billion. GM says that will help it break even when the U.S. market is a paltry 10 million vehicles annually, far below the peak of 17 million earlier this decade.

That almost guarantees profits, said Tom Libby, an independent Detroit-area auto analyst.

"I’m very confident they’ll be highly profitable in years ahead because the industry is not going to stay at 10 million,” he said, adding that the number of people of driving age is rising and there’s pent-up demand for vehicles.

Bob Lutz, a GM vice chairman who is retiring after four decades in the auto business, maintains that the automaker sold hundreds of thousands of pickup trucks and SUVs because that’s what Americans wanted when gasoline was cheap.

The Obama administration wants a smaller, more efficient fleet to help end the country’s reliance on foreign oil and cut greenhouse gas emissions.



by the associated press

President Obama , put a 31-Year-Old in Charge of Dismantling G.M.

It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.



Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

But now, according to those who joined him in the middle of his crash course about the automakers’ downward spiral, he has emerged as one of the most influential voices in what may become President Obama’s biggest experiment yet in federal economic intervention.

While far more prominent members of the administration are making the big decisions about Detroit, it is Mr. Deese who is often narrowing their options.

A month ago, when the administration was divided over whether to support Fiat’s bid to take over much of Chrysler, it was Mr. Deese who spoke out strongly against simply letting the company go into liquidation, according to several people who were present for the debate.

“Brian grasps both the economics and the politics about as quickly as I’ve seen anyone do this,” said Lawrence H. Summers, the head of the National Economic Council who is not known for being patient whenever he believes an analysis is sub-par — or disagrees with his own. “And there he was in the Roosevelt Room, speaking up vigorously to make the point that the costs we were going to incur giving Fiat a chance were no greater than some of the hidden costs of liquidation.”


Mr. Deese was not the only one favoring the Fiat deal, but his lengthy memorandum on how liquidation would increase Medicaid costs, unemployment insurance and municipal bankruptcies ended the debate. The administration supported the deal, and it seems likely to become a reality on Monday, if a federal judge handling the high-speed bankruptcy proceeding approves the sale of Chrysler’s best assets to the Italian carmaker.

Mr. Deese’s role is unusual for someone who is neither a formally trained economist nor a business school graduate, and who never spent much time flipping through the endless studies about the future of the American and Japanese auto industries.

He lives a dual life these days. He starts the day at a desk wedged just outside of Mr. Summers’s office, where he can hear what young members of the economic team have come to know as “the Summers bellow.” From there, he can make it quickly to the press office to help devise explanations for why taxpayers are spending more than $50 billion on what polls show is a very unpopular bailout of the auto industry.

Several times a day he speed-walks to Treasury, taking a shortcut through the tunnel under the colonnade, near the kitchens. The other day he talked about how sharply perceptions of the industry’s future changed after Mr. Obama’s election.

“At the first meeting with Rick Wagoner,” he said, referring to G.M.’s recently deposed chief executive, “they were in a very different place. He said publicly that bankruptcy was not a viable option. It’s been a long process getting everyone to look at the options differently.”

In fact, from before Inauguration Day, few in Mr. Obama’s circle saw any other choice. Every time Mr. Deese ran the numbers on G.M. and Chrysler, he came back with the now-obvious conclusion that neither was a viable business, and that their plans to revive themselves did not address the erosion of their revenues. But it took the support of Mr. Rattner and Ron Bloom, senior advisers to the task force charged with restructuring the automobile industry, to help turn Mr. Deese’s positions into policy.


The president’s instruction to us was that we had to come up with a solution that would work on a commercial basis, that didn’t involve indefinite federal financing,” Mr. Deese said. “But we didn’t want liquidation, which would have even worse effects. So the question was how do you design a very substantial restructuring, and do it fast.”

Mr. Deese’s route to the auto table at the White House was anything but a straight line. He is the son of a political science professor at Boston College (his father) and an engineer who works in renewable energy (his mother). He grew up in the Boston suburb of Belmont and attended Middlebury College in Vermont. He went to Washington to work on aid issues and was quickly hired by Nancy Birdsall, a widely respected authority on the effectiveness of international aid and the founder of the Center for Global Development.

But he wanted to learn domestic issues as well, and soon ended up working as an assistant for Gene Sperling, who 17 years ago in the Clinton White House played a similar role as economic policy prodigy. Eventually, Mr. Deese headed to Yale for his law degree. But his e-mail box was constantly filled with messages from friends in Washington who were signing up to work for the Obama or Hillary Rodham Clinton campaigns. Mr. Deese chose Senator Clinton’s.

“He was pretty quickly functioning as the top economic policy staffer through her campaign,” Mr. Sperling said. “He could blend the policy needs and the political needs pretty seamlessly.” On the day that the Clinton campaign ended, Mr. Deese left her concession speech and received a message on his BlackBerry from a friend in the Obama campaign urging him to sign on immediately to Mr. Obama’s team.

He resumed his policy work there, and found himself stuck in Chicago — unable to fly to Washington with his dog — as the economic crisis deepened. Finally, one night, he decided to get into his car with his dog and just started driving back to Washington. Tired, he pulled over to catch some sleep in the car.

“I slept in the parking lot of the G. M. plant in Lordstown, Ohio,” he recalled. The giant plant, opened during G.M.’s heyday in the mid-1960s, is where the Pontiac G5 is produced. Under the plan Mr. Deese worked on when he arrived in Washington, Pontiac will disappear.

“I guess that was prophetic,” he said, shaking his head.



by the new york times

GM 20,000 Jobs Gone

NEW YORK (CNNMoney.com) -- General Motors unveiled plans to close 14 plants and three warehouses Monday in a move that could ultimately slash up to 20,000 workers from its payrolls, as the company undergoes an historic bankruptcy restructuring.

The largest closures include a 3,405-worker assembly facility in Orion, Mich, that makes the popular Chevy Malibu and the Pontiac G6, a 2,671-employee Chevy plant in Spring Hill, Tenn. that used to make Saturns, and a truck plant in Pontiac, Mich. that employs over 1,400 people.

"We had our suspicions, but we had hoped that we were going to remain open, so it's a little bit of a shock," Brian Larkin, an official at United Auto Workers Local 594 in Pontiac, Mich., told CNNRadio. "People are just going to have to see what their options are. Right now, that's not clear."

The Orion, Mich and Spring Hill, Tenn. plants, along with a stamping plant in Pontiac, Mich., are being placed on "standby" status, meaning they could re-open if demand bounces back.

GM said the moves will result in lower fixed costs per vehicle, and lower and more efficient capital investment.

"Our manufacturing operations will emerge even leaner, stronger and more flexible, as part of the New GM, " Gary Cowger, an executive at GM's Global Manufacturing and Labor Relations division, said in a statement.

At least one of the assembly plants on standby will reopen when GM starts building a new small car in the United States, although the company didn't specify which plant.


The closures, which will be phased in over the next few years, will result in GM going from 47 plants currently to 33 by 2012.

Shuttering the factories is part of an unprecedented effort to turn around the once mighty U.S. company that has suffered from overcapacity, high labor costs and vehicle quality issues for years.

Other plants slated for closure include a 1,069-worker assembly plant in Wilmington, Del. that makes soon-to-be-discontinued Pontiac models, as well as stamping facilities in Indianapolis, Ind., and Mansfield, Ohio.

Michigan powertrain facilities in Livonia, Flint and Ypsilanti, as well as Parma, Ohio, and Fredericksburg, Va., are also on the closure list.

Additionally, a powertrain plant in Massena, N.Y., and a stamping plant in Grand Rapids, Mich., will shut down - moves that had been previously announced.

Warehouses in Boston, Jacksonville, Fla., and Columbus, Ohio employing a total of 232 people will also be closed.

GM (GM, Fortune 500) didn't specify how many people will be laid off from each factory, but said between 18,000 and 20,000 workers will ultimately be affected. Over 15,000 people currently work at the facilities that were listed on Monday, according to the GM Web site.

A GM spokesman said all the laid-off employees will receive some type of severance package, although he could not comment on the details.

Lincoln Merrihew, an autos analyst at the market research firm TNS, said the compensation would likely be short term, not a paycheck-for-life type arrangement.

"All indications are that this will be intermittent, a couple of weeks pay for every year at the firm, or something like that," said Merrihew.

He also said he expects Monday's layoffs to account for the lion's share of job losses at GM, although what happens to workers at brands the company is spinning off - like Saturn - is another matter.

The closures are bound to be tough on the towns where these factories are located. Many have few other employment options.

The job losses are also likely to spread beyond GM, as dealerships, parts suppliers and others indirectly dependent on the auto industry feel the pinch.

In Mansfield, Ohio, the manager of a 860-person stamping plant tried to let his employees down easy.

"This decision has not been made because of something that you, plant management, the union, local or state government's have failed to do," the manager wrote in a letter to employees, now posted on CNN affiliate WMFD's Web site. "I want to stress the fact that GM management knows that all of you - the men and women of Mansfield - are proud, hard working people who have dedicated your working lives to building high quality parts for your assembly plants."

from cnn.com

Reinventing GM

DETROIT — With an almost certain bankruptcy filing days away, General Motors is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest.

As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, GM also was closing in on a sale of its European Opel unit, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon.


Dramatic changes
The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion.
GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.

With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades.

"It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "But in just the past few months, we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.”

GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year.

GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless.


Union savings
The United Auto Workers’ reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.
The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said.

"They’ve eliminated their legacy costs. They’ve already invested in new product that’s coming. They have the ear of the government unlike any time in their history, and the government has said basically ‘we are going to help you survive and thrive,’” Bragman said.



by the associated press

GM focuses on its furture

DETROIT — The government’s new road map for General Motors would briefly send it into bankruptcy, erase most of its debt and eventually have it emerge leaner and stronger — and almost three-quarters owned by the taxpayers.

The outline came together Thursday after a bloc of GM’s biggest bondholders agreed to a sweetened deal proposed by the Treasury Department to wipe out the automaker’s unsecured debt in exchange for company stock.

But GM still must settle on a buyer for its European Opel unit and decide the fate of its Hummer and Saturn brands, while workers across the country await news expected Monday on which 14 plants the company will close, shedding 21,000 more jobs.

A person familiar with GM’s plans said it was "probable” that the company will file for bankruptcy protection Monday — the government’s deadline for GM to restructure. The person did not want to be identified because the plans were still under discussion with the U.S. and Canadian governments.


What’s in the plan
Under the proposal, outlined in a regulatory filing, GM’s good and bad assets would be separated under what the Obama administration hopes will be a speedy Chapter 11 reorganization that will let GM thrive when people are ready to buy cars again.
The U.S. Treasury, which already has loaned GM $19.4 billion, would get 72.5 percent of the new company’s stock and provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.

Canada’s government is expected to provide an additional $9 billion, a senior Obama administration official said. The official spoke on condition of anonymity because of the sensitivity of the negotiations.

A United Auto Workers trust that will take over retiree health care expenses will get 17.5 percent, and the old GM, effectively owned by the bondholders, will get a 10 percent stake.

GM’s existing shareholders will probably lose everything. "It’s fair to say that there would be little to no recovery,” the administration official said.

The proposal is similar to what has happened to Chrysler, already in Chapter 11 protection. A bankruptcy judge is weighing whether to approve the sale of most of its assets to Italian carmaker Fiat.

The administration official estimated that GM would be under bankruptcy protection for 60 to 90 days, longer than Chrysler’s expected reorganization because GM is bigger and more complex.

The official said that although the government hopes to get back as much of the money loaned to GM and Chrysler as possible, it never envisioned recovering much of the aid.


Return of profits
Eventually, the government hopes, GM can return to profitability, which would allow the government to sell its GM stock. But the risks for taxpayers are daunting, with U.S. auto sales near their lowest level in 27 years.
"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so,” GM Vice Chairman Bob Lutz said Thursday at an Automotive Press Association luncheon in Detroit. "We will come out of it with an all new focus on product development.”

GM plans to cut the nameplates it sells in North America by one-fourth and keep only four brands — Chevrolet, Cadillac, GMC and Buick.


by the associated press

GM expected to find court protection

DETROIT — General Motors bondholders felt they deserved something like a 58 percent stake in the company in exchange for their billions of dollars in debt. What they were offered wasn’t even close.

As a result, the largest industrial bankruptcy in U.S. history is now all but certain. The bondholder rejection virtually ensures GM will file for Chapter 11 bankruptcy protection within days.

The government, which has already extended nearly $20 billion in loans to GM, ordered the company to come up with a plan that 90 percent of its bondholders would agree to. But the government allowed it to offer only 10 percent of the company’s stock. GM was forced to withdraw the offer Wednesday after it fell short.

A person familiar with discussions between GM and the government told The Associated Press any bankruptcy filing would probably come around the government’s Monday deadline for GM to finish restructuring or enter protection. The person asked not to be identified because the talks are private.

To avoid bankruptcy, the government said GM must shed debt, cut labor costs and close plants.

GM bondholders are owed about $27 billion, the largest chunk of GM’s roughly $58 billion in debt. They were offered the 10 percent stake to wipe out the debt, well short of the 58 percent they wanted.

Like its crosstown rival Chrysler, which was angling Wednesday for a judge’s permission to sell most of its assets to a group headed by an Italian automaker, GM was pulled down by debt, high labor costs and a devastating sales slump.

The government has poured billions into the two companies, fearing the ripple effects of catastrophic job losses might push the economy into a depression. The pair employ more than 126,000 people in the U.S., and hundreds of thousands of others rely on the companies working for parts suppliers, dealerships and other businesses.

GM spokesman Tom Wilkinson said the board would meet later this week to decide its next move


by the associated press