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I’m calling the “plan” posted today on GM’s website revision 1 because we all know that it will change. Additionally, I’ve used quotes on the word “plan” because, frankly, this isn’t as much a plan as it is a justification of their current position and a general sets of future goals. There is some planning in there, but not a huge amount.
Rev. 1 on Saab:
First things first. Yes, Saab is mentioned as being up for “strategic review”. What that means, we don’t know. Fritz Henderson has apparently said that they will look to sell Saab. That is certainly a potential outcome. But how about this little snippet?
Importantly, 22 of 24 new vehicle introductions in 2009-2012 will be cars and crossovers. Twenty of these models will come from GM engineering centers having a long history of designing vehicles for $6-$8 per gallon gasoline.
Hmmm…. only Opel/Vauxhall, Deawoo and Saab can make this claim, correct? Doesn’t Saab account for three of these models in the pipeline? (2010 9-5, 2009/2010 9-4x, 9x/9-1x) This seems to be a little in conflict with the idea that Saab will be sold.
Rev. 1 on Brand and Dealer Attrition
Interesting that 83% of GM’s sales are from these four, but this makes complete sense in desperate times to focus on the market makers that sell the volume.
Today, General Motors competes in the United States with 8 brands. Chevrolet, Cadillac, Buick, and GMC represent the company’s core brands, accounting for 83% of current sales. The company will focus substantially all of its product development and marketing resources in support of these brands. This will result in improvements in awareness, sales, and customer satisfaction for these 4 core brands.
I believe that the following statements are more or less true — GM’s real overlaps are in metropolitan areas and their rural locations are a competitive strength.
…the Plan focuses the company’s resources in the U.S. around a smaller, more profitable set of nameplates (40 by 2012) with further consolidations in GM’s dealer network planned to get to a more profitable and stronger dealer network.
…the number of GM retailers is expected to decline to 4,700 by 2012. This will occur primarily in metropolitan and suburban areas where GM has too many dealers to serve the market. In the Plan, it is projected these dealers will be reduced by 35%, increasing annual throughput for the remaining outlets to a more competitive level with other high-volume manufacturers. GM’s distribution strength in rural areas, which is a significant competitive advantage, will be largely preserved. GM intends to have the right number of brands, sold by the right number of dealers, in the right locations to obtain maximum profitability for GM and the retailer network.
Rev. 1 on profitable models
Swade, here’s the real reason for Cadillac…
The company’s increasing success with new model introductions is, importantly, being rewarded in very tangible ways. Specifically, contribution margins are improving significantly on our new models. As examples, the new Cadillac CTS and Chevrolet Malibu are generating contribution margin improvements of more than 30% and 50% respectively, with significant improvements in residual values as well.
And here’s what they plan to do to get buyers back into the showrooms.
While remaining a full-line manufacturer, GM will substantially change its product mix over the next four years, and launch predominately high-mileage, energy-efficient cars and crossovers.
Rev. 1 with contrition
GM is certainly eating some humble pie with this plan.
While GM acknowledges that it has made mistakes in the past, the company has been pursuing a major transformation of its business model for the past several years, and accelerating its plans to produce more fuel-efficient vehicles. This transformation has consumed a substantial amount of resources and accounts for a major portion of GM’s current financial leverage
GM has made mistakes in the past — in now-untenable provisions from prior collective bargaining agreements, and insufficient investment in smaller, more fuel-efficient vehicles for the U.S.
Rev. 1 on Bankruptcy
I think that GM is taking a little poetic license with this one, because I don’t think that people are as afraid of GM bankruptcy as they are afraid of GM as it is right now!
General Motors is requesting the loan facilities outlined above (term loan and committed credit facility) because recent significant declines in dealer orders are now adversely affecting first-quarter production schedules and revenue forecasts. This drop in dealer orders reflects both continued, abnormally low auto industry sales, due to the general economic decline, and mounting consumer fears about a GM bankruptcy. According to very recent market research (conducted by CNW Marketing Research), more than 30% of consumers who considered a GM vehicle and purchased a competitive product instead cited the possibility of GM bankruptcy as the top reason for not buying a GM product. This is more than double the percentage of the next highest reason.
Some have suggested that bankruptcy is a reasonable option. The plain fact is bankruptcy of an auto company is markedly different and much riskier than that of a steel company or an airline, with the potential for: lengthy delays, given the number of stakeholders; significant administrative costs; the very real risk of the lack of funding while in bankruptcy; and the stigma attached to our products in the eyes of consumers. On this latter point, it cannot be emphasized strongly enough how much a bankruptcy will depress sales of an auto manufacturer’s products due to consumer fears of long-term warranty, resale value and service-related issues. The company, as noted above, is already experiencing the effects of such speculation today.
Rev. 1 on Labor Cost reductions
Interestingly, it seems that the biggest benefit cuts have been made to salaried personnel packages rather than to hourly wage earners.
Most notably, GM agreed with the UAW to shift the liability of paying for health care for hourly retirees from GM to an independent trust (VEBA), scheduled to occur on January 1, 2010. Additionally, GM and the IUE-CWA have recently agreed to a similar arrangement to become effective January 1, 2012, for their retirees. For the salaried population, those hired on or after January 1, 1993, receive no healthcare benefit in retirement, and for those who retain coverage GM has capped retiree health care spending at 2006 levels. In addition, effective January 1, 2009, GM will no longer provide supplemental healthcare coverage to salaried retirees at age 65.
As for pension costs, GM no longer provides a defined benefit pension plan for salaried employees hired on or after January 1, 2001, and no longer provides a traditional pension plan for new UAW hourly employees. In addition, GM suspended matching contributions for salaried active defined contribution participants effective November 1, 2008
And, true to form, GM doesn’t directly address the UAW cuts that certainly must take place now, instead preferring to imply that they will come about due to attrition.
Reflecting labor negotiations completed over a year ago, General Motors’ total cost per hour for new hires can now be as low as $25, growing to $35 over time, significantly below the average fully-loaded labor cost for Toyota, which public sources indicate is between $45 and $50 per hour. With the recently negotiated wage rates, turnover expected in our workforce, planned assembly plant consolidations, further productivity improvements in the Plan, and additional changes to be negotiated, GM’s wages and benefits for both current workers and new hires will be fully competitive with Toyota by 2012.
Rev. 1 on Executive Benefits
Well, I’m not sure that I take all of this at face value, but it’s in the report, and so here it is:
It is longstanding GM policy for senior executives to have most (80% or more) of their compensation at risk based on the company’s performance to align with shareholder interests. For the past five years, executives have not received the majority of the value from this at-risk compensation as: all stock options are underwater; long-term plans based on relative total shareholder return have not paid out; and other equity-based compensation has significantly declined in value. GM’s Chairman and CEO and Vice Chairmen made voluntary reductions in their salaries by as much as 50% in 2006 and 2007, and are willing to make further sacrifices for 2009. Such sacrifices are as follows:
· The Chairman and CEO will reduce his salary to $1 for 2009. He will not receive an annual bonus for 2008 and 2009.
· Consistent with this action, members of the GM Board of Directors will reduce their annual retainer to $1 for 2009.
· The next four most senior officers (Executive Vice Presidents and above) will reduce their total cash compensation by approximately 50% in 2009, which includes no bonus paid for 2008 and 2009 and a 30% salary reduction for the President and COO, and 20% salary reductions for the remaining three.The company believes the above actions on senior officer and performance-linked compensation recognize its obligations to both protect taxpayer interests and retain employees vital to a successful restructuring, and deliver maximum value to our shareholders.
And, of course, after the PR debacle last month, the aircraft must go.
GM is immediately ceasing all corporate aircraft operations, unfortunately impacting approximately 50 hourly and salaried employees. GM is currently exploring options for transferring the aircraft to another charter service operator and/or pursuing disposal of the aircraft. These actions are in addition to recently announced decisions to reduce the total number of corporate aircraft.
17 responses so far ↓
1 swade
// Dec 3, 2008 at 9:06 am
Eggs, you addressed this bit to me in particular….
…hence I feel compelled to respond.
Note 1 – I’m not fussed about the existence of Cadillac. I’m concerned about the existence and success-at-all-costs approach to Cadillac in Europe. I think that’s been a pretty consistent line from me.
Note 2 – What they’ve done here is build a new car, a good car, and one that makes money. They’ve invested heavily in designing it, engineering it, and promoting it and now they’re reaping a reward for that.
That’s great. I just wanted them to do the same with the 9-5, or the 9-4x, or a 9-1, or the next 9-3. They could make money on those new vehicles just like they are now with the CTS. Great for everyone.
I don’t see what’s wrong with calling for them to invest in a brand with heaps of untapped potential, especially now when they’re touting that brand’s ethos of 4 cylinders, flex-fuel and turbocharging as one of their aims for the future.
I do see plenty wrong with their push for Cadillac in Europe but I’ve spouted enough about that in the past.
2 ctm
// Dec 3, 2008 at 9:10 am
OK, so I’m trying to make sense of this… In the “Plan”:
- Saab is mentioned once as being up for a “strategic review”
- Opel is mentioned once as having the Insignia model
- Vauxhall is not mentioned at all
- GM Europe is not mentioned at all
Strategic review… Well, it is easy to say to satisfy someone, but what does it really mean? If I were on the GM board I would sure as hell constantly reviewing the brands for strategic reasons. Just a smoke-screen to satisfy US politicians?
If they really wanted to sell Saab, then what about Opel… Can they make it alone? Isn’t Saab and Opel a good match as brands both in R&D and manufacturing, and for dealerships in Europe? They just gonna leave the whole premium segment in Europe to competitors?
So, GM Europe (the division of GM that is probably the most profitable – or less un-profitable) is not mentioned at all. So they understand that GM Europe is not really the problem, but they know damn well they just have to mention that some part of it will be looked into in a “strategic review”?
Are they just putting those names there to satisfy politicians while spending the rest of the Plan actually talking about the real problem (the US brands)?
I know that Fritz Henderson said that they wanted to sell Saab, but that is not the same that is stated in the Plan. Why didn’t Wagoner himself commented on that? And frankly, seeing that brands like Nissan, Toyota, and Hyundai posted massive drops in sales figures today, who exactly would be the buyer and what would it bring financially to GM when Saab hardly is a dent in their figures?
I don’t get it…
I’m waiting for Swade to clarify everything.
Goodnight!
3 Johnny Aero
// Dec 3, 2008 at 9:14 am
This is a great day for SAAB. GM has ruined our once great auto maker. New ownership could only be an improvement. Can anyone actually see a situation were a new owner could make the current lineup worse? The 9-5 has been out for a billion years for god sake! (and I own one). It is a great car, but getting pretty dated. You can’t even get side airbags!!!!!! The is a company founded on safety.
4 Tompa
// Dec 3, 2008 at 9:26 am
Well not much regarding Saab is clear in the pressrelease.
Could the meaning of Global, but not in the US, be that almost all future development of Saab vehicles will go to Asia and Daewoo or that Opel and Saab grows tighter and will be seen as one unit with total mutual development and see it move to Germany? Saab becoming a factory only? Or will we see Saab in fewer low figure markets? Nowhere is it stated that Saab dealers in the US should be prepared for shutdown like in the, probable, case of Saturn. The only thing stated is that GM will only construct/develop vehicles for certain core brands IN the US. It might be that Saturn come to get Opels program of vehicles instead of a mix of German/American.
Is Saab realy up for sale.. is Henderson totaly clear on that?
I believe Saab IS up for sale though. But when? How?
Unions in Trollhattan are positive that there will be a new owner.. But the whole thing is still worying. And what kind of info have they been given?
And there is stil not a buyer for Volvo.. And that owner will have to take on Lots and lots of different vehicles.. some that realy never should have been built. The Volvo business is very alarming.
Confused and dazed/Tom
5 eggsngrits
// Dec 3, 2008 at 9:29 am
I’m really only kidding, Swade!
It does speak to the driving force for Caddy in Europe. It’s a vehicle that has better margins than other American cars, hence the interest.
6 tksaab
// Dec 3, 2008 at 9:33 am
OK, I guess you could call that a plan…from a banking perspective.
Now what are they going to do about their inability to make cool cars that people actually want to purchase because they like them and not because they’re cheaper than the Jap/Euro competition?
What about their seemingly impossible to shake perceived quality issues. Despite showing strong gains in various rating services, people still automatically assume that when you buy a Japanese car, you bought it for its reliability. Narrowing the gap when it comes to quality statistics means nothing if companies like GM and Ford are going to continue to let the car buying public assume it’s a no-brainer to get Japanese if you want reliability.
7 eggsngrits
// Dec 3, 2008 at 9:41 am
TK: I so have an example that will blow your mind. It’s going to take a lot of effort to reveal it the right way, but it’s there.
8 Eduard
// Dec 3, 2008 at 9:52 am
This is a rubbish plan, or better indeed, isn’t a plan………..37 pages??? WTF!!! we are talking about one of the biggest corporation in the world and they only speak about a plan that concerns about GM USA, the rest of the world isn’t mentioned and that money is going to be used in whole GM not onlye GM USA.
This is the first question I would do to GM if I am one of those political morons………Another thing.
this is a good detail………..page 6,
According to very recent market research (conducted by CNW Marketing Research), more than 30% of consumers who considered a GM vehicle and purchased a competitive product instead cited the possibility of GM bankruptcy as the top reason for not buying a GM product. This is more than double the percentage of the next highest reason.
with the uncertainty with Saab, and other brands…..but basically with Saab, because with 15 words in the whole document isn’t quite serious. When tomorrow every European TV or newspaper is going to talk about……….SAAB FOR SALE!!! this is gonna hurt a lot to Saab sales.
regards
9 Bernard
// Dec 3, 2008 at 10:05 am
TK,
You’ve identified the main issue.
Saturn is not the problem, Pontiac is not the problem, and Saab is not the problem. Even the number of dealers is not the problem.
The main problem with GM in North America is that they’ve been selling junk cars year after year and seeing their market share go down, even though they are the least expensive option in almost every market segment.
GM talks about the JD Power version of “initial quality,” but not about real quality. Here is one specific example: GM’s replacement brake parts are of significantly lower quality than the stuff that gets fitted on the assembly line, often to the point of not fitting properly. What that means to the consumer is a brake job every year after the first three years, frustration, and ultimately a new Honda in their driveway. AC Delco makes huge margins on brake parts, but they do so in a short-sighted way that has driven the company to the brink of bankruptcy. I’ll bet the manager who came-up with that plan got a huge bonus and a promotion.
10 David Blumberg
// Dec 3, 2008 at 10:08 am
It makes no sense for GM to sell Saab. They have invested so much money into the brand over the years with all the concepts & stuff. But most importantly, the way that GM want to go – small, fuel-efficient, flexi-fuel etc. is EXACTLY what Saab is already doing! Ethanol engines were just the first step, and Saab has been using small-engines/high power forever. Not like its american cousins who insist on 20-cylinder, 60L/kms cars that have no place in the modern world.
Hopefully, “under review” is deliberately put vague so the politicians will be happy but GM don’t have to commit to anything. There’s the chance of that. BUT if GM sells Saab then GM has lost all attractives (for me) and if they do go bankrupt after that I couldn’t care less.
Saab doesn’t really fit in anyway. GM’s philosophy and Saab’s are very different. I reckon Saab needs an owner that understands Saab’s individuality, not an owner that wants to turn Saab into a mainstream throw-away car.
I’m still optimistic… And I agree that we, the Saab people, need to make our voices heard. We should try and convince the american politicians, GM, and any potential buyers of our view! As soon as my workingday is over, I’m gonna start sending emails to the states…
11 Canoe
// Dec 3, 2008 at 11:12 am
Here the real “plan” of the plan; SATISFY CONGRESS!
Remember Congress? The people who have trouble running a country, yet pontificate about errors of the American auto industry? The plan is meant to give congress the feeling that it done “something” in return for the loan.
Congress
Demand: “You have too many brands”
GM (Internal monologue: Ya we do! But who do we eliminate? Chevy and Caddy, no way! GMC is super profitable. Buick does well in China. Sell Hummer…we can’t give it away. Saturn..maybe..no new products. Saab…we have all these new product coming…but these guys don’t care, since it a foreign brand)
Answer: We’ll concentrate on ChevCadBuickGMC, and the rest are under “strategic review”
What does this really mean? Hummer is probable gone (duh), Pontiac will stop (thank god!) making the G3 and G5, Saturn will wither away… and Saab…
…well Saab… there are still working the new models..
12 Mailr
// Dec 3, 2008 at 12:50 pm
Canoe, your probably right on the money about satisfying congress. What else could they say if there is a question about feeding US taxpayer money to plug a hole in a non-US company?
13 Olav
// Dec 3, 2008 at 7:15 pm
Off topic, but I can’t resist:
Johnny Aero said (quote): The 9-5 has been out for a billion years for god sake! (and I own one). It is a great car, but getting pretty dated. You can’t even get side airbags!!!!!! The is a company founded on safety.
Maybe I am getting you wrong here, but the 9-5 has always had side airbags……. And it is still among the world’s most safe cars. Also one of the best cars to drive
So, back to the GM plan:
Johnny Aero again (quote): This is a great day for SAAB. GM has ruined our once great auto maker. New ownership could only be an improvement. Can anyone actually see a situation were a new owner could make the current lineup worse?
I think I’ll second that! SAAB needs another owner than GM. OK, GM has put some money into SAAB the last couple of years, but I really don’t think an american automaker is what SAAB needs. Just take a look at the US lack of understanding about what cars Europe wants. It’s enough just to look at Caddy BLS. US cars don’t attract europeans, and now (according to CNN
) not even the americans.
Off course, compared to nothing GM is the one that might keep SAAB alive in the long term (at least they had the money) There also might be a risk that SAAB will disappear if GM collapses, but I doubt it. I think SAAB as a brand is of such a great value out there that it hopefully will be bought by a serious buyer sooner or later, hopefully before GM collapses. The Swedish government has said it will try to protect it’s car industry and that’s a good start while we are waiting for the GOOD and SERIOUS buyer that hopefully will show up.
One of the biggest problems SAAB might be facing right now is that SAAB is too integrated in GM and therefor will be less attractive for potential buyers.
And finally, this corporate aircraft issue should have been solved a long time ago. Keeping this corporate aircraft fleet alive more or less into what might be the end of GM tells me alot about the management culture (wasn’t there a similar issue over at Chrysler just recently?):
And, of course, after the PR debacle last month, the aircraft must go.
GM is immediately ceasing all corporate aircraft operations, unfortunately impacting approximately 50 hourly and salaried employees. GM is currently exploring options for transferring the aircraft to another charter service operator and/or pursuing disposal of the aircraft. These actions are in addition to recently announced decisions to reduce the total number of corporate aircraft.
Oh well, time will show. It’s indeed changing times and the whole world is now really in bad weather after the US economical collaps, and that weather won’t change tomorrow.
Rgds
-Olav-
Still on the longest way home when out there with my SAAB. I love you, SAAB!
14 Johnny Aero
// Dec 3, 2008 at 10:52 pm
To Olav,
I need to be more specific. You cannot get SIDE CURTAIN AIRBAGS on a 9-5. I know the car is safe and fun to drive (which is why I own one, a 04 Aero Sportwagon) but the lack of this most basic of safety features is simply unacceptable. The rear seat passengers are left completely vulnerable in a side collision without side curtain airbags. I challenge anyone to fine another luxury car, or any car for that matter that in 2008 that does not have side curtain airbags available even as an option!!!! My reason for sharing this is to underscore just how far GM has let SAAB fall. Any new owner, and I mean ANY will be an improvement.
15 Jeff
// Dec 3, 2008 at 11:45 pm
I can’t believe GM considers GMC a core brand. Bottom-line sales figures aside, they sell Chevys with different grilles and a few extra guys on the assembly line making sure all the parts fit together.
I still think GMC should only sell to business customers.
16 Bernard
// Dec 4, 2008 at 12:32 am
GMC is a core brand because they sell light and medium duty trucks, i.e.: stuff that’s smaller than an 18 wheeler but bigger than a pickup truck.
These could conceivably be rebranded as Chevrolet, but why loose many decades of goodwill and pay to redecorate hundreds of dealerships? Commercial truck buyers are very conservative, so GM could conceivably loose a few accounts in the process.
17 Olav
// Dec 5, 2008 at 5:03 pm
Johnny Aero said:
To Olav,
I need to be more specific. You cannot get SIDE CURTAIN AIRBAGS on a 9-5. I know the car is safe and fun to drive (which is why I own one, a 04 Aero Sportwagon) but the lack of this most basic of safety features is simply unacceptable. The rear seat passengers are left completely vulnerable in a side collision without side curtain airbags. I challenge anyone to fine another luxury car, or any car for that matter that in 2008 that does not have side curtain airbags available even as an option!!!! My reason for sharing this is to underscore just how far GM has let SAAB fall. Any new owner, and I mean ANY will be an improvement.
Well, then we are agree. You see, I met a guy a couple of months ago and he wasn’t aware of that his 9-5 had side airbags. So I thought maybe…… :/)