President and CEO Fritz Henderson, left, and new Chairman Edward Whitacre Jr., lead a "humbled" GM. (Todd McInturf / The Detroit News)
General Motors Co. began its new corporate life under government ownership Friday, unveiling a major revamp of its management team and vowing a concerted effort to convince consumers to give the Detroit automaker a chance.
GM's rebirth came at 6:30 a.m. at a GM law firm in New York, when the Treasury Department and company officials signed closing documents allowing the best of its assets to emerge from bankruptcy as a new company.
The deal ends a tumultuous period in the automaker's 100-year history, giving newly formed GM Co. a fresh start after its near-collapse last winter before a government bailout. Next week, GM will restart six assembly plants, ramping up production.
The new GM will be much smaller, have far less debt, four fewer brands, 34 nameplates and just 64,000 employees by year's end -- a 30 percent cut. By Aug. 1, GM expects to have cut its executive ranks by 35 percent.
GM President and CEO Fritz Henderson, accompanied at a Friday press conference by new board Chairman Edward Whitacre Jr., vowed to end "business as usual." He said the once-mighty automaker had been "humbled" by its government rescue and bankruptcy.
"There are no third chances," Henderson said, vowing not to seek any more government loans on top of the $50 billion GM has received. But he said the experience was "liberating," allowing GM to fix once intractable problems and get back to focusing on selling cars and trucks.
"We're not going to win by spending more time trying to figure out how to restructure the balance sheet," Henderson said in an interview with a group of reporters. "It's how do we win selling cars and trucks and doing it profitably."
Henderson also is flattening the management. GM is eliminating the position of North American president and other top jobs. It will replace its automotive strategy and automotive product boards with a single, eight-member executive committee that will meet weekly.
GM also will end its regional operating structure. This eliminates the regional president positions and the regional strategy boards. Nick Reilly will be appointed executive vice president of GM International Operations, which will be based in Shanghai.
While the new GM will carry less debt and far fewer liabilities, it faces many challenges and a number of people asking if the company can actually change. GM remains driven by many of the same executives, though Henderson said by month's end some will leave the company or be reassigned to new roles.
GM, like all automakers, still also faces a depressed U.S. auto market that has shown few signs of recovery, and many politicians are protesting its plans to get rid of many of its bad assets, which remain in bankruptcy.
Montana's Gov. Brian Schweitzer on Friday blasted GM's decision to cancel a contract with a U.S. mine for precious metals for use in vehicle production.
The old company -- Motors Liquidation Co. -- could be in bankruptcy for up to five years, funded with $1.18 billion in government money to liquidate the assets.
Late Friday, GM North America President Troy Clarke met with House Majority Leader Steny Hoyer, D-Md., and Michigan members of Congress to try to make a deal to head off a bill that would restore the rights of up to 3,000 dealerships, including 789 Chrysler dealers that closed in June.
Also on Friday, one of GM's smaller unions, IUE-CWA, which represents electrical workers, vowed to appeal the bankruptcy court decision.
GM unveiled a turnaround strategy aimed at getting new products out and finding new consumers, many of whom don't shop GM showrooms before buying a new car.
GM will try an experimental program in California to sell vehicles via auction on eBay. EBay said in a statement it hadn't yet reached an agreement with GM.
Barclays Capital auto analyst Brian Johnson noted that Henderson said the new GM will focus on "three C's: customers, cars and culture" and that fixing the culture is essential. "With the cost-cutting done and the Treasury cash in the till, we believe it is appropriate that GM turn to fixing its culture," Johnson said, comparing the new executive committee to Ford Motor Co. CEO Alan Mulally's approach.
Johnson, who noted that GM was profitable in every year of the Great Depression in the 1930s, "has had no real profit centers in North America or Europe for the past 10 years."
History of dominance
Founded by a high school dropout in Flint in 1908, GM became the largest company in the world and by the 1960s sold more than 50 percent of all U.S. vehicles. By 1979, GM had 618,000 employees in the United States.
In recent years, the company has fallen on hard times..
GM has lost $88 billion since 2005 and seen its market share fall to 19 percent this year. It avoided collapse in December when President George W. Bush agreed a to a $13.4 billion bailout.
Friday's move effectively wipes out many investors. GM shareholders, who in 2000 held GM stock worth $50 billion, along with bondholders who held $27 billion in debt, will receive 10 percent of the equity in the new company, but no cash.
The government, in exchange for agreeing to invest $50 billion in GM, will hold a 60.8 percent stake in the company. It will also have an $8 billion note that GM must repay by 2015. A UAW health care trust fund has 17.5 percent and the Canadian government holds 11.7 percent. "We will work hard to repay the trust and the money that so many have invested in GM," Henderson said.
GM hopes to break even next year and its board of directors will be filled out by the end of the month. GM will have a value of between $63 billion and $73 billion with total debt of $17 billion.
Henderson said some of the government money is held in escrow and that the company will outline more details later this month about its financial plans. A GM spokeswoman said the automaker may make a catch-up payment to its pension plans later this year. GM employees got an e-mail Friday learning that to accept job offers with the new company they only had to cash their next paycheck. GM will still make public financial filings, though it will remain a private company until at least early 2010. "We'll be the world's most public private company," Henderson said.
GM's painful downsizing will continue to have ramifications in Michigan even with GM's decision last month to build a new family of small cars at its Orion assembly plant, which will also keep open its Pontiac stamping plant.
Still, Michigan will feel more fallout as GM cuts 4,000 more salaried jobs by Oct. 1 and closes four more plants.
Lutz stays in new capacity
GM Vice Chairman Bob Lutz, who was to retire this year, will stay with the company, heading the marketing and communications department. He will be responsible for "all creative elements" involving vehicles and customer relationships.
Lutz told The Detroit News that his job is to fix the "perception gap" that exists between consumers and the company's products.
"We win award after award, receive accolade after accolade from the industry journalists," Lutz said. "And yet, the perception among a disturbing percentage of Americans is that we are still the producers of less-than-excellent, undesirable vehicles."
The White House has pledged not to micromanage the company.
"While this restructuring required difficult and painful sacrifices from all of the company's stakeholders -- and the American taxpayer -- it has saved tens of thousands of American jobs," the White House said.
The Republican National Committee, however, called President Barack Obama "both Commander and Carmaker in Chief."
Rep. Gary Peters, D-Bloomfield Township, said the future will show the wisdom of federal intervention: "Decades from now, our nation will be glad we did not let a global credit crisis put an end to the American automobile."