After filing for bankruptcy protection on June 1st, General Motor's CEO Fritz Henderson holds a dealer teleconference and talks to the press.
GM exits bankruptcy and will cut model lines and streamline its workforce, according to Chrissie Thompson in the July 10, 2009 Automotive News article “The New General Motors.” At a press conference in Detroit today, viewed in a dealer teleconference at a GM store in New Mexico (Friday Motors), CEO Fritz Henderson said the company would have to be "lean and mean to win back the American car buyer."
What are their plans to do this? They will make a commitment to fuel efficient cars and focus on fewer brands. Henderson pointed out that Bob Lutz, who was schedule to retire, would stay on as Vice Chairman in charge of design, brands, marketing, and communications. In Smith’s article, according to a statement made July 10th by Lutz, "his new group at GM will focus on business results, products, brands, and what the customer wants." Lutz also said, "instead of the former Strategy Board, GM will enlist a smaller executive committee that will report to him."
GM Will Cut Model Lines and Brands
The teleconference told dealers that GM intends to put marketing dollars to only Cadillac, Buick, GMC, and Chevy lines. The Saturn, Saab, and Hummer brands will be sold. “GM will receive profits from the sale of these assets,” Henderson told dealers. Perhaps a good thing since GM owes $11 billion in US debt alone, Smith reported. GM’s US sales have dropped a whopping forty percent in 2009, according to Edmunds June 30, 2009 report, “Automotive Scorecards.” Edmunds also reports that the last time GM realized sales over fifty percent was way back in 1962.
Bankruptcy Forces a More Streamlined Workforce
Further along in the teleconference, GM's CEO Fritz Henderson also said “GM will streamline its workforce; especially the sales, marketing, and advertising workforce.” This means employees with administrative jobs may be forced into early retirement. Smith reported, Steve Rattner, head of the Obama administration's auto task force says, "It would be natural for CEO Henderson to cut layers of management to make the company a bit closer to the ground." Nice words for what truly means layoffs, early retirement, and benefit cuts.
In the teleconference, Henderson also said, “GM will follow the new UAW labor contract.” This contract limits hourly operating costs and promises to match Japan automakers costs like Toyota, Henderson pointed out. While this is hopeful, this may cause a stir among union workers, supporters, and leaders.
Will GM See a Savior in Bob Lutz?
Smith reports new Vice Chairman Bob Lutz of Chrysler fame, which at 77 years of age will report only to Henderson. The influx of Lutz and his expertise may help GM. Their plan to introduce only ten model lines in the US and seventeen outside the US was announced in the dealer teleconference. Lutz, once the CEO of Chrysler learned from the best about streamlining when Chrysler was under the direction of Lee Iaccoca (1978-1992).
Unlike Chrysler, the government will own sixty percent of GM and will lend GM a whopping fifty billion, Smith reported. Lutz has worked his magic in the auto industry at Chrysler and DaimlerChrysler and he hopes he can "re-energize GM, “ Lutz shared in the dealer teleconference. With less brands to sell and Saturn, a favorite among car buyers gone, Lutz will endure a tough challenge.
Sadly, this emergence from bankruptcy, even with the help of Lutz, will mean slashing forty percent of GM dealers, Smith’s story outlined. Many will have little option but to close their doors, much as 789 Chrysler dealers were forced to do in June of this year. The auto industry works much different than other franchise businesses.
If GM wants to cut a Cadillac only dealer and give his Cadillac franchise to a spared dealer, they can do it and will. The cut dealer will realize no profits from this franchise transfer. ‘This is standard practice in the auto industry regarding the point-transfer system,” said General Manager, Debbie Friday of Friday Motors, who watched the teleconference with this reporter.
GM's bankruptcy exit may not be the end all of a great automaker. Like Chrysler, dealers and lawyers are planning on fighting the decision. GM dealers like Friday, who got the letter to close in just eighteen months, have hired attorney’s to plead their case.
A bankruptcy judge will need to decide whether federal or state franchise laws will prevail in each case. If state laws prevail, GM dealers located in the states with the strongest franchise laws will have the advantage. While GM exits bankruptcy and hires Lutz to oversee the slashing of model lines and streamlining the workforce, the car buying public awaits the new GM. For its efforts to succeed, it must keep the model lines US buyers want with increased fuel efficiency the Obama administration has demanded.
The copyright of the article GM Exits Bankruptcy in Automotive Technology is owned by Jean Scheid. Permission to republish GM Exits Bankruptcy in print or online must be granted by the author in writing.
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