UPDATE: GM To Cut 21,000 Hourly Jobs, Eliminate Pontiac Brand
27 April 2009 - 3:52PM
Dow Jones News
General Motors Corp. (GM) said Monday it will cut 21,000 hourly
jobs and eliminate its Pontiac brand by the end of next year as
part of a stepped-up restructuring plan.
The auto maker will also start an exchange offer for $27 billion
of its unsecured public notes as the company looks to become
viable, saying a successful exchange offer would allow it to stay
out of bankruptcy court.
GM, which is surviving on federal loans, is racing to
restructure by June 1 under close watch of the Obama
administration.
"The objective here is not to just survive but to come up with
an operating plan that will allow us to win," Chief Executive Fritz
Henderson said Monday.
The U.S. Treasury will extend an additional $11.6 billion to GM,
in addition to $15.4 billion in existing loans. The government will
forgive half the debt in exchange for equity in a restructured
GM.
Henderson said earlier this month the White House had demanded
"faster, deeper" cost cutting. Under the latest viability plan,
GM's fourth iteration, the company will idle one additional factory
and look to eliminate 500 additional dealers.
Other reductions will come sooner than initially planned. GM
said it expects to further reduce salaried employee headcount as
well, but did not specify a number.
The company said it will focus on four core brands in the U.S. -
Chevrolet, Cadillac, Buick and GMC - as it looks to make fewer
different models and focus on product development programs.
Production of the Pontiac brand will end by next year.
"You have a strategy that wins or you have to stop," Henderson
said. "We didn't have a strategy that allowed us to win with the
Pontiac brand."
It will also restructure its U.S. dealer organization, reducing
its U.S. dealer count by more than 40% by the end of next year, a
reduction of 500 more dealers four years sooner than its earlier
viability plan.
Under the exchange program, the company is offering to exchange
225 common shares for each $1,000 principal amount of outstanding
notes. The stock closed Friday at $1.69 a share and shares were
recently up 11% at $1.87 in premarket trading.
Today's bond exchange filing represents an important step in
GM's effort to restructure its company, President Barack Obama's
automotive task force said in a statement. The interim plan that GM
laid out in this filing reflects the work GM has done since March
30 to chart a new path to financial viability. "We will continue to
work with GM's management as it refines and finalizes this plan and
with all of GM's stakeholders to help GM restructure consistent
with the President's commitment to a strong, vibrant American auto
industry," the statement said.
The exchange will commence only if 90% of bondholders agree to
the terms. Under the plan, if GM fails to get adequate
participation, it will file for bankruptcy protection.
The company added that negotiations regarding contract changes
with the United Auto Workers union are still ongoing.
Chrysler LLC, which is also seeking more U.S. government aid,
announced Sunday that it reached a tentative agreement with the UAW
and won a ratification vote from the Canadian Auto Workers allowing
the auto maker to cut hourly compensation by C$19 an hour.
Chrysler, the third largest U.S. auto maker, is also seeking
concessions from its debt holders and must sign a merger deal with
Italian auto maker Fiat SpA. All of these moves must be completed
by April 30.
-By Sharon Terlep; Dow Jones Newswires; 248-204-55329;
sharon.terlep@dowjones.com