Article
Rolling towards recovery
The US auto industry, led by GM was called “an emblem of the American spirit”. Yet the one time industry No.1 is about to go bankrupt in the face of the financial crisis. The multi-million dollar health care trust for United Auto Workers, GM’s Union, as well as bondholders’ calls for returns, left GM in what seems like a hopeless situation. At the end of 2008, GM asked for government help and got its first loan of 9.4 billion dollars. In return, GM had to submit a survival plan last month, which was rejected by President Obama.
Q: Let’s talk about GM situation in the US a bit, a lot of people are interested in knowing where the company is heading towards.
R: Obviously, the company has been through some serious difficulties in the US, and it’s not exactly clear yet how it’s going to be resolved. While our preference is to resolve it outside the court, and we are very close to doing that, we have a very aggressive future plan, which has been approved by the US government. We are still working with our unions to finalize a deal with them and in particular the bondholders have to agree to a restructuring. We hope that will be done in a next couple of weeks. If not, we may have to go into the court process. But either way, the government of the US, as well as ourselves has made it very clear that we have a plan and we are going to emerge from this among stronger company. We have maintained our investment in product and what this process is doing is making us more cost competitive and restructuring. So, GM is going to be here for a long time and it’s going to be a leading company in the automotive business. We just have to get through this restructuring.
J: I don’t think we see any scenario, any realistic scenario that would have an impact on our operations in China. There’s no reason for that to have an impact. What needs to be done to restructure of US situation is something that the experts will take care of in that market. In doing so, for sure, the successful operations will be protected.
Term Asset-Backed Securities Loan Facility, or TALF is part of the US Federal Reserve’s massive infusion of cash into markets to try and revive lending and help pull the economy out of the painful recession. The Fed, in mid March, opened lending under TALF to securities backed by loans or leases relating to business equipment and vehicles fleets. Just one month later, the US Treasury Department announced that GM had launched supplier support programs backed by up to 2 billion dollars in US government funds. The programs will guarantee money owed to auto parts suppliers for any good shipped after March 19.
Q: Is the Federal Reserve’s TALF program and also GM’s supplier program going to help get the company out of trouble. Is it sufficient?
R: Yes, it is sufficient. We have laid out what sort of financial help we need to get through this current serious economic downturn, plus to do some restructuring in the US. And the government’s playing a very important role, but I think equally important is listening to what they are saying. You listen to President Obama or the task force; they have said that they want GM to emerge as a very strong company. They have said that there’s no need to worry about warranty and service that would be guaranteed by the government. They have already given loan 13.4 billion, so they are not in this to see GM fail, they are in this to see us come out of the problems.
But the Obama Administration was not happy with the GM proposal?
R: Actually, what they were saying was we went 90% in their view, that was their view, and I think they asked us to go 110%. Because you never know what a 100% is, right, at this time. So that’s fine, they clearly said that they wanted us to go deeper and faster in the plan, and that’s what we’ve put together now.
GM announced Fritz Henderson, former GM President and COO would replace Rick Wagoner, after he stepped down at Obama’s request at the end of March. Will the new CEO be able to bring GM above water?
R: Yes, Fritz Henderson is a tremendous businessman, he actually had this job that I’ve got now a few years ago, he’s been in Europe, he’s been in Latin-American, he’s now back in the US. And he understands the business very well and he’s got the full support of everybody in the company.
A US oversight report said Tuesday the Obama Administration would come up with 5 billion dollars through May to help GM’s restructure outside of bankruptcy. The United Auto Workers Union, which represents 62000 workers at GM, is under pressure along with bondholders and banks to help GM slash its debt so it can restructure. The Union has urged its members to lobby the White House to ensure workers and retirees and treated fairly in negotiations on new concessions, which are considered vital for the automaker to survive.
R: Frankly, it’s difficult for the Union; they are having to give things up that they had bargained for over the years. And they are having to give those things up, that’s not an easy thing to do. On the other hand, you look what is the alternative, the alternative is a huge number of jobs loss if we can’t find a solution. So I’m quite sure that we will find a solution with the union.