Strickland: Cruze still on course
GM’s CEO said the company is working on further employee and plant cuts.
STAFF/WIRE REPORT
General Motors is looking to close more plants, but Gov. Ted Strickland has received assurances that the automaker remains committed to building the Chevrolet Cruze at its Lordstown complex.
“There was no change in those plans,” the governor told Statehouse reporters after meeting with GM officials this week. “They were a little surprised that I asked them to once again confirm that.”
Strickland noted that the Cruze already is being built in other countries, and he was told that plans are on track to launch the new compact car from Lordstown next April. Chris Lee, a GM spokesman, confirmed that production plans for the Cruze are on schedule.
GM is completing a $350 million upgrade of the complex for the Cruze.
The governor was looking for assurance, as much uncertainty swirls around GM.
The automaker needed federal loans to keep operating late last year and will be forced to file for bankruptcy protection if more loans aren’t approved. To receive more funds, GM must convince federal officials that it has a viable turnaround plan by June 1.
Strickland, who was in Detroit onThursday to meet with executives from GM, Ford and Chrysler, said GM officials seemed confident they would succeed in restructuring.
Frtiz Henderson, GM chief executive, said in a teleconference with reporters Friday that GM is developing two turnaround plans at once — one that would include a bankruptcy and one that wouldn’t. GM would prefer to reorganize without declaring bankruptcy, but it wants to be ready for both options, he said.
The company would either file a prearranged bankruptcy in which stakeholders agree to take cuts, or use a section of the federal code that allows companies to sell off bad assets and keep good ones.
Experts say there are many reasons why the quick, “surgical” bankruptcy that GM may seek won’t be as smooth or as fast as the company and U.S. government expect.
“It would be a mammoth undertaking,” said Jon Groetzinger, a visiting law professor at Case Western Reserve University in Cleveland. “It has been done, not on a scale quite as big as GM.”
For it to go quickly, GM would have to gain agreements from creditors to wipe out debts, unions to change contracts, and perhaps dealers to alter franchise agreements, experts said. There could be thousands of claims from employees, retirees, parts suppliers and others that would have to be heard by the court.
“The only way it would be speedy was if they had all the agreements in advance. But then why would you need it?” asked Doug Bernstein, a lawyer with Plunket Cooney PC in Bloomfield Hills, Mich.
It’s overly optimistic to think GM can go in and out of bankruptcy for a “quick rinse” of its troubles in as little as two weeks to four months, according to Bernstein. The process, he said, could drag on because creditors could object to contract changes and be heard in court. Experts say six months would be considered quick.
To avoid bankruptcy, GM needs to persuade bondholders and the United Auto Workers to accept company stock instead of cash for much of what they are owed. The UAW debt involves funding a trust fund for retiree heath care.
Henderson said the pace of talks with the UAW will pick up in several weeks. Right now, the UAW is focusing on talks with Chrysler, which has been given a May 1 deadline to reach a merger agreement with Fiat, an Italian automaker. Without a deal, the government said it will cut off further loans, which could force Chrysler to liquidate.
Henderson said GM’s talks with the bondholders run parallel with the UAW negotiations, so not much is expected to happen for several weeks.
The CEO affirmed that the new GM will be smaller. He said more cuts in hourly and salaried employment will be coming before June 1 and more plant closings will be announced. GM also is looking at how to accelerate the reduction of its dealer network, he said.
Henderson also took on press reports this week that GM was considering trimming its brands to only Chevrolet and Cadillac.
He said GM continues to think it can succeed with four core brands — those two plus Buick and GMC, with Pontiac operating as a niche brand. He declined to elaborate further on plans for Pontiac.
He said he thinks the speculation about Buick and GMC started because executives are “taking apart” all of the brands and rebuilding them to make sure all of their products are justified.
Three of the brands that won’t be part of GM’s future are Hummer, Saturn and Saab.
Henderson said he expects three bids from potential buyers of Hummer next week, with a decision coming in May.
He said GM continues to work with Saturn dealers about a resolution for that brand, which will be discontinued after 2011. An Oklahoma City private-equity group said this week that it hopes to use Saturn locations to distribute GM cars for a while and then switch to smaller, fuel-efficient models from foreign automakers. GM said other groups are interested in Saturn as well.