GM installs new CEO, announces new incentives for consumers
To stay competitive with other automakers, it launches payment protections for buyers.
New York — General Motor’s new CEO, Frederick “Fritz” Henderson, says he gets President Obama’s message: that the troubled automaker has a very short window – 60 days – to fix itself or go into bankruptcy.
“We need to go deeper, go harder, go faster,” said Mr. Henderson in his first press conference as GM’s CEO. “We need to reinvent General Motors in the next 60 days.”
What this might mean is that General Motors will cut its operations further. Some plants that don’t have enough business could be shut down or combined with other plants. Yet more layoffs are possible as well.
GM is also trying to sell some of its brands. Henderson had hoped to have Hummer sold by Tuesday but now says any sale will take longer. He has yet to make a decision on what to do about the Saturn operation.
At the same time, GM is scrambling to keep its marketing plans competitive with other automakers, announcing payment protections for buyers and a guarantee in the retail value of vehicles.
No matter what, Henderson says, the goal is to make GM profitable in any type of economic scenario.
As part of that effort, GM says it will try to “clean up” its balance sheet. Henderson says he agrees with the Obama administration that the company has too much debt. GM is already in the process of negotiating with its bondholders about taking a “haircut” on their holdings. The deadline of 60 days will give those negotiations an even greater sense of urgency.
Henderson has not ruled out the possibility that GM may need to accomplish some of these goals through bankruptcy. “It is clear we will either do it in or out of court, but we will get it done,” he said.
More immediately, however, GM is rolling out new marketing initiatives. On Tuesday, it announced it would offer payment protection to a buyer for the first 24 months of ownership, in case the owner loses his or her job. The protection means that GM will make up to nine payments for up to $500 a month.
GM has also announced that if a car owner wants to trade in his or her vehicle within the first two years, it will guarantee the retail value. The declining value of used cars has meant that some car owners owe more than the value of their vehicle. GM will thus guarantee that won’t happen.
In addition, GM is making its popular OnStar emergency alert system standard for new-car buyers to use for one year.
On Sunday, the Obama administration forced out Rick Wagoner, who led GM during this tumultuous period. And Mr. Obama’s auto task force said it had doubts about the economic viability of Chrysler Corp., suggesting it might have to go into bankruptcy. The task force gave Chrysler 30 days to return with a revised business plan.
Any new plan by Chrysler may well include an investment by Fiat, which in January said it wanted to take a 35 percent stake in the company. However, according to press reports, the Obama administration wants to limit the Fiat stake to 20 percent.
“This alliance does have a real industrial rationale, as Fiat has a good product portfolio that is complementary to Chrysler’s,” writes Josh Whitford, a Columbia University professor who specializes in global manufacturing, in an analysis. “Fiat would give Chrysler access to distribution networks in other parts of the world, particularly Europe.”
As the auto industry tries to right itself, one key issue is how the auto unions will respond to various moves. The unions were key Obama supporters during the election campaign.
Obama has taken several steps that could resonate with the unions. On Monday, he said he directed government agencies to accelerate federal fleet purchases. He also said the Treasury would work with the auto finance companies to increase the flow of credit to consumers and dealers. And he said the Internal Revenue Service would begin to promote a new tax benefit for consumers who bought a car after Feb. 16 or will buy one before the end of the year. The benefit will allow car buyers to deduct sales and excise taxes for the vehicle on their federal tax return. The benefit may grow: Obama has said he wants to work with Congress to find a way to expand it without increasing the federal budget deficit.