Connect with us

Hi, what are you looking for?

Capital Business
Capital Business

World

Reborn GM vows to rev up

DETROIT, Jul 11 – A reborn General Motors pledged on Friday to drive itself to renewed profitability as the new firm emerged from bankruptcy under a government-backed plan.

The automaker transferred its main assets to a new government-financed company under a plan supported by the administration of President Barack Obama and the Canadian government.

The fast-track plan is similar to the one used to rescue Chrysler, which came out of bankruptcy last month.

"Today marks a new beginning for General Motors, one that will allow every employee, including me, to get back to the business of designing, building and selling great cars and trucks and serving the needs of our customers," said Fritz Henderson, who remains GM president and chief executive.

"Starting today we want to take that intensity, the decisiveness and the speed of these last several weeks and then transfer it from the battlefield triage of the bankruptcy process to the day-to-day operation of the new company."

The "new GM" will be a leaner, smaller company after having shed tens of thousands of workers, eliminated or sold storied brands, shuttered scores of factories and rewritten its labor contracts to slash costs.

GM will keep four key brands — Chevrolet, Cadillac, Buick and GMC — and will have a total of just 34 US nameplates by 2010. Several brands owned by the old GM, including Saturn, Hummer, Opel and Pontiac, have been shed or are being sold.

The chairman of the new GM is Edward Whitacre, who headed telecommunications giant AT&T.

"I intend to play an active role," Whitacre told reporters after the announcement.

Advertisement. Scroll to continue reading.

"I\’ll be more active than most chairmen," said Whitacre, who has no experience in the automobile industry but spent 18 years at the telecom giant.

"I need to make sure value is created … We have to pay the government back."

GM is also removing layers of management — reducing the number of US executives by 35 percent and overall US salaried employment by 20 percent by the end of this year.

"GM is fortunate to get another shot, most likely its last one," said Michelle Krebs, an analyst with the research firm Edmunds.com.

"Its biggest challenge remains the same one it has faced of late; that is, convincing consumers — now also GM\’s reluctant shareholders — that the company truly is changing and understands what type of vehicles the marketplace demands."

Sean Maher at Moody\’s Economy.com said GM "still faces a difficult year."

"The company does not expect to turn a profit in 2009 and is unlikely to do so until US new vehicle sales rise substantially above their current depressed pace below 10 million per year," he added.

Once the world\’s largest corporation, General Motors sold more vehicles than any other automaker from 1931 through 2007, after which it lost the crown to Japan\’s Toyota.

The new GM emerges just weeks after a similar government-backed effort to rescue number-three US automaker Chrysler under a plan that gave Italian automaker Fiat a large stake and operational control.

Advertisement. Scroll to continue reading.

For GM, the new firm will be unencumbered by the bulk of the massive debt load it racked up during years of bleeding balance sheets.

GM entered bankruptcy protection on June 1 with liabilities of 172.8 billion dollars and emerged with 48.4 billion in debt.

The US government — which has provided some 50 billion dollars in financing — received a 60.8 percent stake in the new firm called General Motors Company.

Canada, which provided 9.1 billion dollars in loans, has an 11.7 percent stake and a United Auto Workers union retiree healthcare trust fund holds 17.5 percent.

Canadian Industry Minister Tony Clement said officials are "confident that the company will now be in a position to operate a sustainable and viable business that will keep production, innovation and jobs in Canada."

Creditors holding about 54 percent of GM bonds agreed to a plan that would swap 27.1 billion dollars in debt for a 10 percent stake and warrants allowing them to buy an additional 15 percent stake.

Obama, whose auto taskforce spearheaded the GM restructuring plan, has said his administration has no intention of nationalizing the automaker over the long term and will not be participating in its day-to-day operations.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...