DETROIT — General Motors has 60 days to fix a set of problems that have been decades in the making.þþFor all of G.M.’s deep cuts in recent years — closing plants and shedding tens of thousands of jobs because of steep losses and declining market share — President Obama’s task force has described its moves as little more than a warm-up act.þþIn its “viability determination” for the company, the task force said G.M. had been “far too slow” to adapt, and that a “substantially more aggressive restructuring plan” was required.þþThe mandate for G.M. to change was made clear by President Obama on Monday. þþ“The plan in its current form is not strong enough,” he said, adding that he is “absolutely confident that G.M. can rise again.”þþBy the end of May, G.M. has to convince the administration that it can strip its operations to the essentials, creating a sustainable auto company.þþThat means fewer models, brands and dealers, as well as more job cuts and huge concessions from its two biggest creditors — the United Automobile Workers union, and thousands of bondholders who hold its $27 billion in unsecured debt.þþMr. Obama said that even if the company could streamline its business, it might still need a trip through bankruptcy to rid its balance sheet of long-term liabilities. The sense of urgency at G.M. was undoubtedly heightened by the task force’s decision to push its chairman, Rick Wagoner, to resign.þþ“They were going in the right direction for a lot of things, but they were doing it too slowly,” said Bruce Belzowski, an analyst at the Transportation Research Institute at the University of Michigan. “The task force really laid it on their doorstep.”þþOnce proud of its status, now lost, as the world’s biggest automaker, G.M. must confront its weaknesses. For too long, it sold too many models, under too many brands, in too many markets — with too few customers.þþIf a new G.M. emerges, it is likely to be a company that trims health care for retirees, has the U.A.W. and former bondholders as its biggest shareholders, and is run by executives and a board chosen by the White House.þþAbove all, G.M. will have to cut far more than the 47,000 jobs it promised in its plans submitted to the government last month.þþInstead of cutting eight brands down to four in the United States, G.M. may be left with Chevrolet and Cadillac. G.M.’s huge European business could be jettisoned to save the company.þþG.M. might even be split, with its promising international operations segregated from its North American business, which is essentially broke.þþ“The old G.M. is dead, and that just needs to be said,” said James Womack, chairman of the Lean Enterprise Institute, an organization promoting efficiency in manufacturing and commerce, based in Cambridge, Mass. “That big thing that was the most successful and largest commercial enterprise for decades just doesn’t exist anymore.”þþMembers of the task force are looking at G.M. more as a collection of assets — factories, research centers, distribution networks — than as the formidable, 100-year-old giant that once sold half of all cars in the United States and was present in nearly every market in the world.þþUnder Mr. Wagoner’s leadership in the last six years, G.M. has staked its future on growing in China, India and other emerging markets, while slowly trying to streamline its unprofitable North American business.þþBut that plan collapsed last year, when sales of new cars and trucks plunged to their lowest levels in the United States in more than 25 years.þþDespite having cut more than 100,000 jobs in the United States since 2005, G.M. must wring more costs out of its core business and accelerate closings of plants and other facilities.þþThe task force also said Monday that G.M. had to drastically pare the broadest lineup of products offered by any car company.þþ“G.M. has retained too many unprofitable nameplates that tarnish its brands, distract the focus of its management team, demand increasingly scarce marketing dollars, and are a lingering drag on consumer perception, market share and margin,” the task force said in its report. þþThe company has announced plans to sell its Saab and Hummer divisions, phase out its Saturn brand and turn Pontiac into a niche brand. It may also have to downsize or eliminate other units, like Buick and GMC.þþA bankruptcy proceeding would allow a judge to void G.M.’s contractual obligations to dealers under state franchise laws, and speed the elimination of hundreds, if not thousands, of G.M. showrooms across America.þþ“It’s pretty clear the curtain is going to get drawn in 60 days,” said John McEleney, chairman of the National Automobile Dealers Association.þþG.M.’s corporate structure could also look considerably different in a couple of months.þþWhile the U.A.W. and bondholders are still resisting big concessions, the threat of bankruptcy creates an incentive for them to negotiate.þþBondholders will now be asked to take stock in G.M. in exchange for more than two-thirds of the money they are owed. The union appears to have little choice but to accept G.M. stock for at least 50 percent of the cost of financing retiree health care.þþ“Some of the creditors and bondholders are going to have to step up here,” said Senator Carl Levin, Democrat of Michigan. “They have a pretty stark choice in working something out.”þþAny deal to take stock from G.M. in lieu of cash will, virtually overnight, make the U.A.W. and bondholders two of G.M.’s largest shareholder groups.þþThe task force will further recast G.M.’s corporate structure by replacing at least half of its board members and possibly changing its management again.þþMr. Wagoner’s right-hand executive, Fritz Henderson, will become interim chief executive. On Monday, Mr. Henderson said G.M. would not shirk the task set by the president.þþ“The road is tough,” he said. “But the ultimate goal — a leaner, stronger, viable G.M. — is one we share.”þþ
Source: NY Times
