GM-VOLT : Chevy Volt Electric Car Site

GM was given 60 days by the White House to solve its financial problems and become viable.

But lets face it, 60 days isn’t a lot of time. GM already had 90 days, since last December to try once and they didn’t make it.

On Tuesday, Rick Wagoner’s replacement as CEO, Fritz Henderson told reporters “We’ll get it done in court or we’ll get it done out of court, but we will get the job done.”

And what job exactly is that? Ridding the company of debt.

Even at sales 50% lower than previous year, GM still brings in a lot of revenue. Not enough though to support a company of its current size, and not enough to pay back the debt it owes, in addition to now more than $16 billion of new government debt. They already owe $27.5 billion to bondholders and $20.4 billion to the union’s health car trust fund (VEBA).

The goal is to reduce all that $48 billion debt down to $9 billion with the rest being exchanged for equity in the company.  Mr. Henderson says he believes he can win this concession in the 60 days.

In addition to that he will have to finally remove Saturn, Saab, and Hummer, close more plants and more rapidly downsize operations and workforce that previously planned. And of course sell more cars that people want to buy and make every one profitable not just the trucks sand SUVs. To that end GM introduced the “G.M. Total Confidence” program which pays back any negative equity when buyers trade in their cars and pays up to $500 per month up to 9 months if the buyer loses their job.

All these tasks are quite the very tall order, the time frame very short, and considering the sorry state of the US economy it looks increasingly likely that the job will get done…in court. In fact Obma is said to believe bankruptcy is inevitble.

The bankruptcy is likely to be unique one in which all of GM’s best assets are sold to a new GM which will be in operation immediately. The would include things like Chevrolet (and the Volt), Cadillac, Buick and GMC. The rest of the bad assets would stay in court being hammered out by creditors.

And so it seems by June 1st not will we only have the first Volt under assembly, we will have the first day of the new GM.

We are bearing witness to an apocalypse of world finance. Square in the eye of the storm is the auto industry.

Its hard to fathom the events of the past 24 hours. The President of the United States fired GM CEO Rick Wagoner, and though he specifically said the government “has no intentions of running GM,” its hard to argue that they won’t be playing a major role. This is reasonable to expect considering how much money taxpayers have already invested and will continue to invest to reorganize the company.

It seems the White House is sincere about its intent to sustain GM either with or without bankruptcy.

But how will the Volt fit in? Certainly one might feel a bit melancholy about the loss of two of the Volt’s main linchpins, Lutz who steps down as vice chairman after today, and now Wagoner who is gone.

The Volt team and its engineers, and other supportive high level VPs remain in place.

The President’s Task Force on Autos issued a brief analysis of GM business operation ahead of Obama’s announcement that explains how they determined viability. In that document the following statement is written:

GM is at least one generation behind Toyota on advanced, “green” powertrain development. In an
attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the
Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled
peers and will likely need substantial reductions in manufacturing cost in order to become
commercially viable.

Since the government now decides what stays and what goes, could the Volt get thrown out with the bathwater? I would think not considering how important the White House views electric cars and energy independence, and their realization that new technologies are always more expensive at first.

“As the White House has said, they do not intend to run a car company, much less make product decisions. They recognize the Volt for the game changer it is. And yes, no kidding, that costs money up front. But, this is a long term play for us.” GM spokesperson Greg Martin told me. “Not to fear, the Volt is safe.”

And to be certain, on his last day I turned to none other than soon-to-be former GM vice-chairman Robert M. (Maximum Bob) Lutz.

“Thanks for your concern. Volt will survive and prosper. We know the numbers better than the Government…we furnished them! First-generation technology is expensive, but you can’t have a second generation without a first generation,” Mr Lutz wrote me in an email. “Common sense and intelligence will prevail, here!”

GM President and COO Fritz Henderson will be replacing Rick Wagoner as CEO who will be stepping down at the Obama administrations request, in order to give GM a new fresh start.

The Auto Task Force decided that they do not believe GM nor Chrysler have met the restructuring goals that were required as of March 31st. GM will be given one more chance. They will receive enough aid to permit them to operate for another 60 days. At that point if sufficient, aggressive restructuring of debt has not occurred, bankruptcy will be enforced. The government is confident though GM with proper restructuring can be a viable successful company. And per President Obama “I’m confident GM can rise again.”

Chrysler not so much. It will be supported for 30 days, but the government has concluded Chrysler is not viable as a standalone company. If they have not completed a proposed merger with Fiat by then, they too will head into bankruptcy. If successful with their merger though, $6 billion in more aid would be given. (Late word has it the merger deal has been achieved.)

The Task Force also found that GMs current plan was not viable even if the economy improved.

Though not the administrations first choice a quick, surgical 30 day bankruptcy appears to be both companies best option for survival. The government could act as debtor-in-possession during the court proceedings.

Obama said bankruptcy would not mean liquidation for GM nor would it mean it would be stuck in courts for years, but rather would mean “using legal structure as a tool,” he said, to allow the rapid formation of a lean mean GM.

The government has also offered full support of any vehicle warranties through this time. As well an auto czar name Edward Montgomery, previous deputy Secretary of Labor, has been appointed help bring all parties to the table and produce effective restructuring.

In the end, the Volt will survive this process though your GM shares may not. GM sources have specifically told GM-Volt.com “the Volt is among the crown jewels of our recovery and is not in jeopardy.”

GM’s new CEO Fritz Henderson issued the following response:

“The U.S. Treasury has said that it strongly believes that a substantial restructuring will lead to a viable GM. Over the next 60 days, we will work around the clock, with all parties, to meet the aggressive requirements that have been set by the Task Force, and to make the fundamental and lasting changes necessary to reinvent GM for the long-term.”

“We have significant challenges ahead of us, and a very tight timeline. I am confident that the GM team will succeed, and that a stronger, healthier GM will play an important role in revitalizing America’s economy and re-establishing its technology leadership and energy independence.”

“The administration has made it clear that it expects GM to expand and accelerate its restructuring efforts. I want the American people to know that we understand and accept this guidance. The road is tough, but the ultimate goal – a leaner, stronger, viable GM – is one we share.”

Full Document of Government Conclusions: (New York Times)

President Obama is set to reveal his plan to help revive the US auto industry on Monday. According to people familiar with the plan, GM’s CEO of 8 years, Rick Wagoner will be stepping down from his position. This was at the direct request of the Obama administration and with the apparent agreement by Wagoner. Other management changes are expected as well. This effectively ends Mr. Wagoner’s 30 year career at GM and illustrates the hard line position the government intends to take going forward.

On Sunday Obama said the US auto industry must be maintained but "it’s got to be one that’s realistically designed to weather this storm, and to emerge at the other end much more lean, mean and competitive than it currently is." He also said “And that’s going to mean a set of sacrifices from all parties involved — management, labor, shareholders, creditors, suppliers, dealers. Everybody is going to have to come to the table and say it’s important for us to take serious restructuring steps now, in order to preserve a brighter future down the road."

Source (Bloomberg )

The Obama administration has made it clear they wish to avoid bankruptcy for GM. “We need to preserve a U.S. auto industry,” said Obama “We will provide them with some help.”

The Auto Task Force has wound down its discussion on Friday icluding meeting with Rick Wagoner and it is expected Mr. Obama will make an announcement on Monday.

Reportedly he will extend more short term aid to GM and Chrysler with a new deadline to break the negotiation deadlock with the UAW and bondholders.  This deadline is expected to be short, a matter of weeks, with the threat of bankruptcy in the event they don’t concede.

An interesting piece spells out a scenario being considered to handle such a bankruptcy.

The premise is to split GM in two. One piece would be the “good GM” containing the most successful and promosing components like Chevrolet (and the Volt), Cadillac, GMC trucks, and Buick. The bad piece would contain failed brands like Hummer and Saturn, and include bondholder debts and UAW VEBA.

The company could then go into bankruptcy court and liquididate ithe bad half while allowing the good half to rapidly emerge from protection. Debtholders could then be given stock in the new company plus proceeds from the liquidated half.

The remaining new company would be politically popular since as the government would be funding the bankruptcy, they could promote the fact to taxpayers that the new GM is viable. Consumers would be assured it is safe to buy vehilces from them.

The setting of bankruptcy court also could force the unions to accept concessions in response to threat of their contracts simply being disposed of.

Either way, Volt it seems is go.

Source (MSNBC) and (New York Times)

The Wall Street Journal is reporting that within days the President’s Task Force on Autos is expected to announce more government aid for embattled automakers GM and Chrysler.

Interviews with Task Force members suggest the administration doesn’t want to automakers to slip into bankruptcy protection. Rather they are expected to say they see viable futures for the companies, but only if management, union, and bondholders make sacrifices. A new “firm timeline” for concessions will be provided.

The Task Force has been charged with a very daunting task that some pundits say they are ill prepared for. The team is led by Steven Rattner, a former journalist, who analogizes saving the auto industry to solving a Rubik’s cube. “It’s like a Rubik’s cube, trying to untwist it and trying to get all the colors to line up,” he said. “So we’ve learned a lot about how car dealers work, and how companies get paid when they sell a car to a dealer, and why there are a certain number of dealers more than are optimal. Have we learned everything? Of course not, but I think we are learning what we need to learn to do this job.”

Besides not yet achieving concessions from the UAW and bondholders, predicting future auto demand is also a big challenge for the team

“The biggest variable the team has had to wrestle with,” he says, is “what the demand for cars will be in five years.”

It appears likely that GM will be receiving the $16.6 billion it is asking for, but is unlikely to be getting it as a lump sum, but rather in a metered fashion as certain negotiating milestones are met.

Looks like we’ll be getting our Volts after all.

Source (Wall Street Journal)