GM Studies Several Plant Closures

Assembly plants in Michigan, Delaware and Louisiana top a list of facilities General Motors Corp. could close as the auto maker accelerates a plan to reduce its production footprint to 34 sites by the end of 2010, from 47 in 2008.

The downsizing is part of an updated viability plan from GM to satisfy demands by the Obama Admin. for a “faster, deeper” restructuring than the auto maker outlined in February.

GM President and CEO Fritz Henderson says the probability of a bankruptcy has grown since then. The auto maker also released details of its much-anticipated debt-for-equity exchange.

The debt-for-equity exchange heavily favors the United Auto Workers union and taxpayers, but it hinges on acceptance by bondholders, with some $24 billion worth of an estimated $27 billion in outstanding GM debt.

The auto maker is asking bondholders to take 225 shares of company stock for every $1,000 worth of debt they hold. By most accounts, bondholders now face a low-ball offer, as it comes without a cash element. They must decide by May 26 whether to accept the terms or push GM into bankruptcy.

“When you're offering someone all equity for a company that's trading at $1.50-$2.00 (a share), that's saying you're not getting much out of the chute here,” says Van Conway, senior managing partner of Conway MacKenzie consultancy in Birmingham, MI.

Says David Cole, chairman of the Center for Automotive Research: “The closer (GM gets) to bankruptcy, the better chance of avoiding it. I don't think anyone wants to go there.”

Obama has given GM until June 1 to strike a deal with its bondholders and the UAW. The latest plan reduces GM's rolls by another 7,000-8,000 jobs.

Henderson outlines a more rapid downsizing of its U.S. footprint. The updated plan pulls forward six plant closures previously outlined.

He says three of the six now face closure in 2010 and will learn their fate this month.

With the decision to kill the Pontiac brand by the end of next year, the future of its Orion Twp., MI, assembly facility grows dim. The plant builds the Pontiac G6 midsize car.

Additionally, it assembles the popular Chevrolet Malibu midsize sedan, but only when demand exceeds capacity at the auto maker's Fairfax, KS, facility.

Speculation also arises over the fate of plants in Wilmington, DE, and Shreveport, LA. Wilmington builds the Pontiac Solstice roadster, which faces extinction next year. Shreveport stops building Hummer SUVs by the end of the year.