GENERAL Motor’s President and Chief Executive Officer, Fritz Henderson, took questions at a Detroit press conference on Thursday, November 5th concerning the Magna deal and its collapse.
GM has pledged to make 30 per cent cuts in GM Europe, and its representatives are in London and Berlin this week to spell out just what they require from European governments and trade union leaders.
At the Detroit press conference journalists did their best to grill Henderson as to whether GM had any cash to restructure its European operation and wanted to know which factories it intended to close.
Below is a partial record of the questions and answers.
Q: ‘Can you tell us a little more about the options you have for financing the Opel deal? If the money does not come from Germany or the other countries, what options do you have?’
Fritz Henderson: ‘Well, a couple of things, first, let’s start with what is most important which is restructuring the business and having the operating plan that is viable longer term. I think that we are quite confident we know how to do that. We need to make the presentation . . . We will shortly be making presentations to the respective governments.
‘First and foremost, what is the operating plan? Second issue is, obviously, we will pay back the bridge loan which is due at the end of November. (Current liquidity in Europe) is sufficient to allow us to do that . . . We’ve operated as planned or better than planned. So we have the resources there to basically pay off the bridge loan and . . . re-submit plans for consideration not only in Germany but in various other countries that indicated an interest in providing resources and support.
‘In terms of our expectation . . . we are need about $3 billion euros of financing. That’s number one.
‘Number two, we’re presenting the plan first to our people, including all of our people, labour as well as management involving the entire workforce. Then we are sitting down with the respective governments. We feel confident that the plan will be financeable without any doubt.’
Q: ‘Financeable by the government? Or other sources?’
Fritz Henderson: ‘Part of it is from us.’
Q: ‘When you say us?’
Fritz Henderson: ‘GM.’
Q: ‘GM where? Where would GM get the money from?’
Fritz Henderson: ‘Couple of things. First of all, things have improved there. Our liquidity position is better there. It is important to understand that. That would be our principal source of doing it. On the other hand, in the future, if we need to participate, we can participate via royalty holidays. There’s a number of ways to participate to provide financing and we would certainly look at that. There are ways, perfectly fine, for us to be able to support . . .’
Q: ‘First of all, when can you give a sense of the timing?
‘More importantly, can you talk a little bit about the whole process of how this reflects a change in business? Germany seemed to be the last place of business as usual. Politics govern how things are done. Politics with labour unions, the regions, and so on, and this seems to be a serious clash of old style versus the new way.
‘Either it’s a good business decision or it is not. And politics and friends don’t matter.’
Fritz Henderson: ‘First of all, let me make one point: You’re not going to hear any criticism from me of the German government. Let’s face it, if the bridge loan hadn’t been put into place at the end of May, Opel would have failed.
‘I’m immensely appreciative of the support that was provided so that we could get to this point. And I think it’s really important to understand that.
‘We have the ability now to repay that loan. In fact, what is interesting is we never fully drew the amount of the bridge loan. We already paid back a portion of it. I think there is 900 million euros that is outstanding today. So, first and foremost, the support that was provided in May was crucial to bring us to this point.
‘Second, our situation has changed. GM’s situation has changed obviously. If you flashed forward from whether it is March or May, or even September, the situation has changed. There is a better understanding from our board of our business, our global business.
‘Remember, more than half of our board was new on July 10. That’s number one. Number two, this is a highly complicated situation. Number three, our own financial situation that we’ll detail more specifically here in the middle of the month is better than it was in September . . . So a lot of things changed.
‘And the conclusion, after a very vigorous discussion by the board, was we should go back to retaining Opel, restructuring the business and running the business successfully.
‘The last point I’d make about Europe is what’s required to be successful in Europe.
‘We obviously had a situation in Europe where the market has fallen significantly. It’s important to not walk away from it. The business does need to be addressed and restructured. It has to be. Anybody’s plan, whether it’s ours, Magna, whoever’s, was going to do that.
‘And so, I think it is certainly important that that stays foremost on our list of things to do, because I don’t think anybody wants to be involved in this, whether it’s GM, whether it’s the German government, in any sort of initiative that would leave the business unaddressed. We have to address the business requirements.
‘And, yes, things have changed. But I would say that I think the interest of the German government is also to have a viable Opel and Opel/Vauxhall in Europe. I think, in that vein, our interests are fully aligned.’
Q: ‘Fritz, how many jobs do you need to cut at Opel and how much do you need to downsize it? Who is going to run it for you, going forward?’
Fritz Henderson: ‘The transition team is being pulled together forthwith, and I’m not going to get into who is on that team, but you should anticipate that it will be put together shortly.
‘We’ll be able to talk about it then. I don’t really want to press into that. We’re basically pulling together a team of people. Think of this as measured in days and weeks, not months . . .’
Q: ‘Back to Opel. You have four plants in Germany. Can you tell us how many you plan to keep open?’
Fritz Henderson: ‘No . . .’
Q: ‘Can you tell us what, if any, influence . . . whether you have been pressured by the German government to add a decision in to keep Opel? Whether the European Union had any influence on that or whether (it was) completely internal?’
Fritz Henderson: ‘Well, I would say the decision process was really looking at it in broad terms, rather than narrowly, the question that came from the EU to Germany, from Germany to us, I’ll call it a catalyst, prompted the reconsideration. It wasn’t a principal focus during the discussion. It really wasn’t . . .’
Q: ‘Back to Chevy, if the strategy isn’t changing, then would you have basically been giving away your Western European operations with the Magna deal?’
Fritz Henderson: ‘We would not have been in management control. That is the way that the deal was structured. That was one of the principal tenets of the deal. Next question . . .’
Q: ‘Do you have any idea what plants will be closed in Europe? What Opel plants will be closed and what countries you may go to, to seek loans. Now Klaus is saying that you have lost the trust of the labour movement over there and that . . . Opel should no longer be an appendage of GM. How would you react to that?’
Fritz Henderson: ‘All right. One step at a time. As to . . . which country, it would be the countries that we had talked to before. I don’t think that there would be a change. We’ll present our plan more broadly to any country where we are operating. The big operations are in Germany and Spain and the UK and Poland. Those are the big ones . . . On the question of repairing with trade unions, sure we have work to do. This has been a tough, long, difficult process: 2009 in general, for General Motors, has been a year that I’ll be very glad to have behind us . . . It has been straining on relationships . . . and we have fence mending and repair that needs to be done. So, you know, that is my responsibility and the responsibility of the leadership team. Certainly I’m enthusiastic about getting started doing that . . . I’m not getting into the plants that will be closed.’
Q: ‘About the retention of Opel, you mentioned today that GM is in a stronger position, can you just tell us what that means? Is the business outperforming what you expected when you came out of bankruptcy? Are you generating cash?’
Fritz Henderson: ‘We are out-performing our plan from bankruptcy. I tried to provide at least some insights into that (during the) 90-day update. We’ll provide more details of it . . . in mid-November. You’ll see it directly. I’m not going to get into whether we are generating cash or not generating cash. I would certainly say the situation is more stable than what the outlook was even two months ago. We’ll get into this in a couple of weeks. So hold the question. We’ll have an opportunity to do that.’