Tag Archive | "General Motors Co."

GM Drops Request for Loans


DETROIT – General Motors Co. is withdrawing a request for $14.4 billion in low-cost Department of Energy loans, a move the auto maker hopes will win goodwill among consumers while furthering a strategy to end its practice of borrowing.

The auto maker said Thursday it doesn’t need the loans, which it requested in 2009 as part of a Department of Energy program designed to help auto makers build more fuel-efficient vehicles, The Wall Street Journal reported.

GM hopes the move will help put to rest the “government motors” stigma created by the federal government’s $49.5 billion bailout in 2009. The auto maker plans to advertise its decision, a person familiar with the matter said.

The U.S. government cut its GM stake to 26.5% from 61% in last year’s initial public offering of stock. But, GM has said, the government’s involvement has remained a turnoff to some potential customers and investors.

Ford Motor Co. has capitalized on its standing as the only Detroit auto maker to avoid bankruptcy court and not ask for a bailout. Ford received $5.9 billion in DOE loans under the same program.

The low-interest loans were an attractive option for GM, which first applied for the aid amid its financial troubles in 2009. GM’s financial position has improved dramatically and the company has promised investors it would eliminate virtually all debt over the next few years.

GM has since made it a top goal to get out of the practice of borrowing. The auto maker, when pitching itself to investors as part of last year’s IPO, promised to operate virtually debt free. On Thursday, the company said that goal drove the decision to pull out of the loan program.

The auto maker and the Energy Department had been negotiating loan terms under the $25 billion lending program.

GM’s board approved the decision to withdraw the loan application last week and executives made the final decision in recent days, according to the person familiar with the matter. The projects that would have been funded by the government loans will now be funded by GM’s available cash, therefore the auto maker won’t go to the private financing market to get loans, this person said.

Since 2008, the Energy Department has awarded about $8.5 billion in loans, which includes the $5.9 billion to Ford and $1.4 billion to Nissan Motor Co. Chrysler Group LLC applied for loans under the program, but the department hasn’t made a decision on whether to lend.

Separately on Thursday, GM said it will speed up the nationwide launch of the battery-powered Chevrolet Volt so that it is available to customers in all states starting this summer. Previously, GM had said the Volt would go on sale nationally by 2012.

GM Chief Executive Daniel Akerson is pushing hard to increase production of the Volt. It already is on sale in the Washington, D.C. area, California, New York, Connecticut, New Jersey and Texas. It is scheduled to go on sale in Michigan this spring.

“This is the right thing to do for our customers and our dealers who are seeing increased traffic onto their showroom floors,” Rick Scheidt, head of Chevrolet marketing, said in a written statement.

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Chrysler Badly Needs Cheap Loans GM Spurns


GM withdrew its application for $14 billion in low-interest loans from the U.S. government on Thursday, saying it had enough cash to fund vehicle development as fuel economy standards tighten over the next five years, Reuters reported.

But Chrysler, which reports fourth quarter earnings on January 31, has made it clear the same Department of Energy loans GM has spurned are crucial to its turnaround.

In 2009, both GM and Chrysler applied for loans through a Energy Department program designed to spur the development of more fuel efficient cars.

Chrysler’s $3 billion loan application is still pending, denying the automaker a chance to refinance its pricey bailout loans before an expected initial public offering this year.

“It just underlines the special challenges for Chrysler,” Sean McAlinden, chief economist for the Center for Automotive Research, said of GM’s decision to withdraw its application.

“They’ve got another really tough year and they need the money.”

Adding to Chrysler’s challenges is the fact the federal loan approval process appears to have bogged down over collateral that could be pledged by Chrysler.

Chief Executive Sergio Marchionne, who expected the money by the end of 2010, said last week he still expected Chrysler would receive the loans.

“Am I concerned with the fact that this thing is taking longer than I thought? The answer is absolutely yes,” Marchionne told reporters.

He added that a “tripartite” discussion between Treasury, the Department of Energy and Chrysler would be needed to sort out the issue.

‘BEHIND THE EIGHT BALL’

At the height of the financial crisis, U.S. government officials hotly debated whether Chrysler was worth saving. The company ultimately filed for bankruptcy and is now managed by Italy’s Fiat SpA (FIA.MI).

Chrysler’s latest vehicles, such as its 2011 Jeep Grand Cherokee, have been well received, but its 2010 lineup ranks last in terms of fuel economy among major automakers, according to the Environmental Protection Agency.

“They’re way behind the eight ball and technology keeps changing,” said Patrick O’Keefe, a financial transactions consultant in the auto industry with O’Keefe and Associates. “It’s hard to play catch up.”

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GM Says Chevy’s Small-Business Sales Gain, Signaling Job Growth


General Motors Co. said sales by its top-selling Chevrolet brand to small businesses accelerated in the fourth quarter, signaling job growth may hasten this year, reported Bloomberg.

Deliveries of Chevrolet vehicles to small businesses rose at more than double the rate of the brand’s overall sales in October and November, the Detroit-based automaker said today in a statement. Sales to small businesses surged 54 percent from a year earlier in December, faster than the 9.1 percent gain in overall brand deliveries, GM said.

The gain points to “an increasing likelihood that small businesses will begin hiring in the near term” after owners put off spending during the recession, Don Johnson, GM’s vice president of U.S. sales operations, said in the statement.

GM, the largest U.S. automaker, said earlier this month that 2011 auto sales in its home market may be as much as 13.5 million when including medium-and heavy-duty trucks.

Deliveries of light vehicles may rise to 12.9 million vehicles, the average of 17 analysts’ estimates compiled by Bloomberg earlier this month. Sales rebounded to 11.6 million vehicles last year from a 27-year low in 2009, according to researcher Autodata Corp. in Woodcliff Lake, New Jersey.

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GM to Drop Daewoo Logo


Tired of negative publicity stemming from the defunct Daewoo Group, General Motors Co. has decided to drop the Daewoo name from its South Korean unit, a remnant of the ill-fated Daewoo Motor conglomerate it took over in 2002, The Wall Street Journal reported.

GM has decided to brand all new and upgraded models with the Chevrolet badge, discarding the “GM Daewoo” brand on vehicles made by GM Daewoo Auto & Technology. The rebranding strategy is expected to enhance its presence in Asia’s fourth-biggest economy and boost domestic sales.

Those who remember the boom years of Daewoo Group in the 1990s may be saddened by the decision, but car buyers in their 20s and 30s who own or plan to buy a GM Daewoo car often pay to change the nameplate to Chevrolet from GM Daewoo. In South Korea, GM Daewoo cars have been less preferred than models from its bigger rivals such as Hyundai Motor Co. and Kia Motors Corp., which together controlled 78.4% of the domestic automobile market as of Dec. 31.

“We believe new models carrying the Chevrolet badge will make a strong appeal to such young customers, in particular,” company spokeswoman Lim Young-mi said. GM Daewoo will complete the name change by the end of March.

All of its eight models to be launched this year will carry the Chevrolet brand badge except for three cars—the Alpheon upper-midsize size sedan and the Labo and Damas mini cars—which GM will keep as “independent” brands.

GM Daewoo’s domestic sales fell to an “unacceptable” level in 2009 following the economic downturn that began in late 2008. Competition became tougher when the country’s dominant car maker, Hyundai Motor Group, came up with a series of competitive new models. Analysts say import brands are set to place more new models with lower price tags to woo South Koreans.

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GM Promotes First Female Head of Vehicle Development


General Motors Co. Chief Executive Officer Dan Akerson named human-resources head Mary Barra senior vice president of global product development, going outside the current vehicle team for his new leader on future models, Bloomberg reported.

Barra replaces Tom Stephens, who was named the top technical officer yesterday. Before she became vice president of global human resources in July 2009, Barra had been vice president of global manufacturing engineering since February 2008, GM said in a statement today.

Barra’s manufacturing background gives her deep knowledge of GM’s network of 171 factories that stamp steel, make engines and assemble vehicles for sale in 120 countries, said Jim Hall, principal of 2953 Analytics Inc., an auto-industry consulting firm in Birmingham, Michigan. This may let Detroit-based GM more quickly deliver models catered to regional tastes.

“The challenge is going to be executing on a timely basis and communicating with management that has zero experience in the industry about the process of bringing product to market,” Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan, said in a telephone interview.

Akerson and Ed Whitacre, a former CEO at AT&T Inc., spent their careers mostly in telecommunications and were made GM directors by President Barack Obama’s Automotive Task Force in 2009. Chris Liddell, GM’s chief financial officer and former Microsoft Corp. executive, is another executive without automotive experience who joined GM after its 2009 bankruptcy.

Executive Changes

The promotion marks the third round of executive changes by Akerson since he replaced Whitacre as CEO Sept. 1 and led an initial public offering in November. Akerson promoted Joel Ewanick, formerly vice president of U.S. marketing, to global chief marketing officer in December and named a new president of GM’s OnStar communications technology unit on Jan. 18.

The new product development chief’s job will be to work closely with Stephens and global Chief Marketing Officer Joel Ewanick to get a consumer voice in GM’s future models and decide which technologies should be used in those cars, Barra, 49, said in a telephone interview. The three will work as a team to develop GM’s product strategy, she said.

“My job is to work closely with those two to make sure we’re working from the customer’s perspective and leveraging technology,” Barra said. “We will look to make sure the product is right and get vehicles to market as quickly as possible.”

Coordinating Efforts

When Barra was running global vehicle engineering, one of her jobs was to get vehicles and plants coordinated so the company can modify models from different regions for sale in other markets, she said. Barra worked on the Opel Insignia in Europe, which went on sale late last year in the U.S. and China as the Buick Regal.

Barra went to all of GM’s global engineering centers before taking over human resources and said she wants to “step up and accelerate the process” of bringing new products to market.

“Dan said this is an opportunity to strengthen the way we go to market,” said Barra. “Job number one is we have several vehicles that we’re going to launch this year that we’ve announced, and others we haven’t yet.”

GM has only a few critical holes in its lineup, said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Michigan.

“They have work to do in the midsized truck, they have weakness in the Impala full-sized car that needs to be updated fairly quickly, and they have to accelerate the replacement for the full-sized pickup truck,” he said.

First Woman

She is the first woman to lead product development at GM.

“Every individual brings different perspectives,” Barra said of being a woman in a job traditionally held by male executives. “If this motivates young women to pursue math and science, that would be very fulfilling.”

Akerson, the 62-year-old former CEO of Nextel Communications Inc., is modeling GM’s leadership structure after a technology or telecommunications company, said Stephens, who has worked at GM for 42 years.

“This is somewhat different than you typically see in our automotive industry, but commonplace in telecommunications or other high-tech industries,” Stephens said yesterday in an interview. “We’re kind of copying that model.”

Stephens said his responsibilities will include positioning GM to meet fuel-economy and emissions rules, developing advanced propulsion technology such as what is used in GM’s Chevrolet Volt, and improving safety and connectivity features.

Stephens, 62, had succeeded Vice Chairman Bob Lutz as product chief in April 2009.

Appointing Barra, a longtime manufacturing engineer, to run product development could also help get the different areas of the company working together, Hall said.

‘Nuking The Fiefdoms’

“Managing GM is about getting rid of fiefdoms,” Hall said in a telephone interview. “Cross-breeding executives could be a way of nuking the fiefdoms.”

Including former CEO Rick Wagoner, who was fired in March 2009, GM has had four CEOs in less than two years. Whitacre reassigned more than 35 managers during his eight-month tenure running the company.

Promoting Barra is a risky move for Akerson, because GM hasn’t replaced leadership in product development with the kind of expertise that Lutz brought to the company, said Maryann Keller, founder of Maryann Keller & Associates, a consulting firm in Stamford, Connecticut.

“The appointment is strange,” Keller said in a telephone interview. “Why does GM have anything that people are excited about? Because of Bob Lutz. I’m not sure that she has the background for this job.”

GM fell 22 cents, or 0.6 percent, to $37.18 at 4 p.m. in New York Stock Exchange trading. The shares have gained 13 percent since the IPO.

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General Motors Puts $2.32 Billion of Stock Toward Funding U.S. Pensions


General Motors Co. contributed 60.6 million shares, valued at $2.32 billion at yesterday’s closing price, to U.S. pension plans that the automaker wants fully funded as soon as 2013.

The 40.4 million shares contributed to the plan for hourly workers and 20.2 million shares for salaried pensions completes a $6 billion contribution that the company announced in October, the Detroit-based automaker said today in a statement.

GM’s pension obligations could be funded as soon as 2013, Chief Financial Officer Chris Liddell said in a Jan. 11 interview at the Detroit auto show. Reducing debt and pension obligations will help the largest U.S. automaker to maintain spending on vehicle development through downturns, Bloomberg reported.

“You can’t have this huge tail wagging the small dog,” Liddell said. “You can’t be a $100 billionpension plan with a car company attached to it. The value of the company should be driven by the quality of the vehicles and the margins we make on them, not what the discount rate is.”

The U.S. plans were underfunded by $17.1 billion at the end of 2009. Calculations of pension liabilities are sensitive to assumptions about interest rates used to calculate the present value of projected future expenditures.

Liddell said it is “reasonable to think we’re in an interest rate-increasing environment over the next three to five years,” which would help GM to fund its pension. He said GM “is not relying on that.”

The “first call” on GM’s cash is engineering and marketing, he said, while repaying debt and making pension plan contributions are secondary.

GM has gained 16 percent since the automaker’s $33 initial public offering in November. The shares fell 35 cents yesterday to $38.27.

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