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Chapter 11
GM likely to outperform viability plan estimates
DETROIT -- General Motors Co. is outperforming the targets set in its earnings viability plan outlined in April, CEO Fritz Henderson said today.
Henderson declined to list the areas in which GM is outperforming but said the company would provide details in its third-quarter earnings report later this month.
“I'm not going to get into whether we're generating cash or not generating cash, but I would certainly say the situation is more stable than what the outlook was even just two months ago,” Henderson said during a media briefing.
Prior to filing for U.S. bankruptcy protection in June, GM presented a viability plan to the government. The plan assumed GM would have a 19.5 percent share in 2009, with that share stabilizing in the 18.4 to 18.9 percent range in subsequent years. That would come on the back of four core brands -- Chevrolet, Cadillac, Buick and GMC -- rather than eight brands.
GM is winding down Pontiac and Saturn and selling Saab and Hummer.
The viability plan also assumed that due to cost cuts, GM's North American structural costs would decline 25 percent from $30.8 billion in 2008 to $23.2 billion in 2010.
“We didn't know what was going to happen when we went into bankruptcy,” Henderson said. “Some might argue that we set the bar exceptionally low.”
Growing confidence
GM had no idea how consumers would react after it emerged from 39 days in federal bankruptcy protection on July 10, Henderson said. GM's performance is gratifying and relevant in terms of the outlook for GM, he added.
“In other words, what's going to happen to the company, what might change, are we going to get any traction in the market, will our products do OK?” Henderson said. “All the questions that have been swirling around, I wouldn't say answers have been provided, but there's increasing confidence.”
For example, GM questioned whether the four core brands could actually provide the same sales support as eight did. “The answer so far has been yes,” Henderson said.
GM's total U.S. sales through October are down 34 percent to 1.7 million. GM's sales for October were up 5 percent to 176,632. And 95 percent of those sales were from the four core brands, said Mike DiGiovanni, GM's executive director of global market and industry analysis, during a recent sales call.
“We're getting data points that suggest while not great, there's stability, and we're starting to prove out some things which people questioned would even work,” Henderson said.
Consumer Reports and GAO
Henderson said GM was disappointed in its results in Consumer Reports magazine. For 2008, Consumer Reports recommended 12 GM nameplates vs. eight in 2009.
Henderson said GM must work harder to improve its ratings in the magazine on reliability.
“They talked about our launch products having promise, but they didn't have adequate sample size so they didn't have ability to make a judgment about long-term reliability and durability,” Henderson said. “Therefore, they weren't included as recommended buys. OK, we'll have adequate sample size next year.”
Henderson also addressed a recent report released by the Government Accountability Office (GAO), the investigative arm of Congress. In that report, the GAO listed several findings, including that GM and Chrysler Group are unlikely to grow nearly enough to enable taxpayers to recoup their investments in the companies.
“They are going to get a return based upon principally the ability to generate value in the stock,” Henderson said.
Henderson said he is confident in GM's ability to repay the $50 billion in financial support to the U.S. government. He said GM has a greater ability now to generate value in its stock than it did in the past because it has a stronger balance sheet and fewer liabilities such as health care expenses.
Henderson said: “It's my fervent desire to show that the report was wrong.”
http://www.autonews.com/article/20091105/ANA02/911059992/1231/FRONTPAGE
DETROIT -- General Motors Co. is outperforming the targets set in its earnings viability plan outlined in April, CEO Fritz Henderson said today.
Henderson declined to list the areas in which GM is outperforming but said the company would provide details in its third-quarter earnings report later this month.
“I'm not going to get into whether we're generating cash or not generating cash, but I would certainly say the situation is more stable than what the outlook was even just two months ago,” Henderson said during a media briefing.
Prior to filing for U.S. bankruptcy protection in June, GM presented a viability plan to the government. The plan assumed GM would have a 19.5 percent share in 2009, with that share stabilizing in the 18.4 to 18.9 percent range in subsequent years. That would come on the back of four core brands -- Chevrolet, Cadillac, Buick and GMC -- rather than eight brands.
GM is winding down Pontiac and Saturn and selling Saab and Hummer.
The viability plan also assumed that due to cost cuts, GM's North American structural costs would decline 25 percent from $30.8 billion in 2008 to $23.2 billion in 2010.
“We didn't know what was going to happen when we went into bankruptcy,” Henderson said. “Some might argue that we set the bar exceptionally low.”
Growing confidence
GM had no idea how consumers would react after it emerged from 39 days in federal bankruptcy protection on July 10, Henderson said. GM's performance is gratifying and relevant in terms of the outlook for GM, he added.
“In other words, what's going to happen to the company, what might change, are we going to get any traction in the market, will our products do OK?” Henderson said. “All the questions that have been swirling around, I wouldn't say answers have been provided, but there's increasing confidence.”
For example, GM questioned whether the four core brands could actually provide the same sales support as eight did. “The answer so far has been yes,” Henderson said.
GM's total U.S. sales through October are down 34 percent to 1.7 million. GM's sales for October were up 5 percent to 176,632. And 95 percent of those sales were from the four core brands, said Mike DiGiovanni, GM's executive director of global market and industry analysis, during a recent sales call.
“We're getting data points that suggest while not great, there's stability, and we're starting to prove out some things which people questioned would even work,” Henderson said.
Consumer Reports and GAO
Henderson said GM was disappointed in its results in Consumer Reports magazine. For 2008, Consumer Reports recommended 12 GM nameplates vs. eight in 2009.
Henderson said GM must work harder to improve its ratings in the magazine on reliability.
“They talked about our launch products having promise, but they didn't have adequate sample size so they didn't have ability to make a judgment about long-term reliability and durability,” Henderson said. “Therefore, they weren't included as recommended buys. OK, we'll have adequate sample size next year.”
Henderson also addressed a recent report released by the Government Accountability Office (GAO), the investigative arm of Congress. In that report, the GAO listed several findings, including that GM and Chrysler Group are unlikely to grow nearly enough to enable taxpayers to recoup their investments in the companies.
“They are going to get a return based upon principally the ability to generate value in the stock,” Henderson said.
Henderson said he is confident in GM's ability to repay the $50 billion in financial support to the U.S. government. He said GM has a greater ability now to generate value in its stock than it did in the past because it has a stronger balance sheet and fewer liabilities such as health care expenses.
Henderson said: “It's my fervent desire to show that the report was wrong.”
http://www.autonews.com/article/20091105/ANA02/911059992/1231/FRONTPAGE
