General Motor Corp. President and CEO Fritz Henderson says recent media speculation over killing the Pontiac and GMC marques runs counter to the auto maker’s intentions to maintain four core brands, while also confirming a push to accelerate a reduction in the company’s dealer network.
GM said in its Feb. 17 viability plan to the U.S. Treasury Dept. it wants to eliminate 2,000 dealers by 2013 timetable. But those plans have been sped up, he adds.
“The conclusions reached with (President Obama’s) task force was that plan was not sufficient in speed,” Henderson says in conference call with journalists today.
“We’re in dialogue with our dealers over what is the right way to do that and how do we do this in an appropriate way,” he adds. “Work is under way as we speak.”
The GM officials characterize today’s press conference as one of several planned as it works simultaneously to formulate a restructuring plan and prepare for a potential bankruptcy by June 1.
News reports surfaced earlier this week GM has appealed to 1,700 dealers to commit by June 1 to closing their stores at a future date.
GM currently has 6,177 dealers, having trimmed 201 retailers in the year’s first three months due to consolidation or businesses going belly up in the weak economy. The auto maker cut roughly 400 dealers last year and ultimately wants to get to about 4,100 locations.
Speculation also rose this week over GM possibly axing its Pontiac and GMC brands, in addition to trying to sell Hummer and Saturn and transform Saab into a salable entity – leaving just Chevrolet, Buick and Cadillac as core brands.
“I’ve seen lots of speculation about a fundamental change in our brand strategy, and it’s just that – speculation,” Henderson says.
“What we’re simply doing is taking apart our strategy and then rebuilding it to make sure we have the best chance of being successful and profitable with our four core brands. We believe a 4-core-brand strategy (Chevy, Cadillac, GMC and Buick) is the way to go to market.”
GM will receive final bids next week from three unidentified parties for the Hummer luxury SUV brand, Henderson says, adding he expects to announce whether a deal will go through by the end of May.
Henderson also confirms talks with Tolesto Ventures, an investor group that revealed earlier this week its desire to buy the Saturn brand and its distribution network. Tolesto includes the private-equity firm Black Oak Partners LLC and a number of Saturn dealers.
Saab has interested suitors, as well, he says, and talks continue with one party over the sale of a GM transmission plant in Strasbourg, France.
However, the auto maker has taken ACDelco, its service-parts organization, off the table. Henderson says due to the tight credit markets, bids for the unit have come in under GM’s requirements. “So we’re going to run it, we’re going to grow it. It’s highly profitable.”
Henderson insists GM does not have a timetable for a possible bankruptcy but reiterates the probability of a Chapter 11 filing still exists.
“We have (bankruptcy) contingency planning under way in detail,” he says, noting the auto maker would complete agreements with key stakeholders prior to a Chapter 11 filing so it could move as quickly as possible through the court proceeding, perhaps as fast as one month.
“Our preference remains to accomplish this out of bankruptcy,” Henderson says. “We have until June 1. It’s pretty simple. If we can’t accomplish it outside of a bankruptcy by June 1, we would do it inside of a bankruptcy.”
However, Douglas Bernstein, a managing partner in the bankruptcy unit of Plunkett Cooney PC in Bloomfield Hills, MI, casts doubt over a so-called “prepackaged,” or “quick-rinse bankruptcy” for GM, as speculated by the media.
He cites UAL Corp., parent of United Airlines, which in 2002 saw 729 pleadings filed in the first three weeks of its bankruptcy proceeding. The company emerged in 2006, but the final plea was filed earlier this week.
“A GM bankruptcy in and out in two weeks? That’s ludicrous,” he says. “I would think the stakeholders would certainly want a judge to take some period of time to consider all the issues and make thoughtful decisions.”
Henderson says he expects the auto maker to draw additional government loans in the second quarter to firm up its liquidity. GM’s Feb. 17 viability plan calls for it to receive $4.6 billion during the period, taking its total draw on taxpayer loans since the start of the year to $18 billion.
Meanwhile, the auto maker continues to negotiate terms of a debt-for-equity swap with bondholders carrying some $28 billion in GM debt, as well trading equity in the company for a big chunk of the $20 billion health-care trust for United Auto Workers union retirees it must begin funding.
The talks are progressing, Henderson reports, but both the union and bondholders are awaiting details of GM’s new restructuring plan.
“They, like everybody, (are) waiting to see what our plan looks like, so they can know what their recoveries will be,” Henderson says. “A lot has to happen in the next couple of weeks.”