General Motors Corp. CEO Fritz Henderson, speaking to journalists from inside a New York skyscraper that once helped define the auto maker's financial muscle, reminds Americans the company remains open for business despite a historic bankruptcy filing earlier in the day.
"We're in business, we're servicing customers, we're taking care of customers, we're in the market with outstanding offers and we've got great product," Henderson says from the law offices of Weil, Gotshal & Manges LLP, the auto maker's primary bankruptcy counsel.
The offices occupy space within the GM Building, a 50-story tower on Fifth Avenue covering an entire city block, its marble exterior rising high over Central Park to dominate the neighborhood's skyline.
A onetime symbol of corporate might passed from the auto maker to new owners more than a decade ago, the building now serves as headquarters for a bankruptcy Henderson calls the only means available to address GM's uncompetitive operating structure and overly leveraged balance sheet.
"In the end, this was the best tool to address both of those issues and do it in a thoughtful way," he says during a conference call.
Henderson says GM is banking on a speedy bankruptcy – it expects to exit Chapter 11 within 60 to 90 days – but also admits fear customers will shy away from the auto maker's showrooms. "Yes, we're concerned about the impact on sales during our bankruptcy. We are doing everything we can," he says, reiterating several times, "We are open for business."
A bankruptcy proceeding at cross-town rival Chrysler LLC shows sales need not fall off a cliff, a scenario GM repeatedly warned about while testifying before Congress to win the billions of dollars in taxpayer loans that kept it afloat during the first six months of 2009.
Speaking just prior to Henderson, President Obama said Chrysler sold more cars in May than in April. Chrysler delivered 76,234 units in April, down 48.2%, compared with year-ago, according to Ward's data. But a similar performance in May would refute claims that bankruptcy amounts to a death sentence on the showroom floor. Auto makers report May sales tomorrow.
Chrysler filed for Chapter 11 protection May 1 and the sale of its best assets to Fiat Auto Group could happen as early as this week, with the auto maker exiting bankruptcy in the same timeframe.
Henderson says GM hopes to win new customers when it emerges with a focus on four core brands – Chevrolet, Cadillac, Buick and GMC – rather than eight. Too often, he says, the eight brands stretched GM resources too thinly, leading the auto maker to launch 15 new vehicles and "count on five or six being hits and the rest of them OK.
"We promise to offer nothing less than the absolute best-in-class cars and trucks, and even better service than before," he says. "And to those who have never tried a GM vehicle, or tried and given up on us, we look forward to the chance to win your business and earn back your trust. Give us a chance. The GM that let many of you down is history."
While today is not the first time GM has promised better quality and greater value to its customers, Henderson says the auto maker now has the depth of concessions it needed from the United Auto Workers union and a way to wipe out its mountainous debt.
"We're getting the issues on the operations behind us, we're getting the issues within the balance sheet behind us; so the leadership team can spend time where it needs to spend the time, which is on the product and the customers," he says.
"Share of mind, share of time, in a day is an extremely important thing for a leadership group, and I think what this does is allow us to permanently address problems that we've not been able to thoroughly address until today."
Henderson also reiterates Obama's remarks regarding the government's minor influence in the day-to-day operations of the new GM.
The government reportedly will provide GM with another $30 billion of capital to see it through bankruptcy after lending the auto maker $19.4 billion over the year's first six months. GM will exchange most of the debt for equity in the new GM, with the U.S. Treasury Dept. owning 60.8% of the company.
"They only want to be involved in the most core of governance decisions, which probably wouldn't include whether we do a next-generation coupe or sedan," Henderson says. "I don't think we're going to see that situation. We've not seen that through task-force process."
Henderson expects the government ownership in the new GM, which is expected to remain a private company for about 18 months, could last "years, not months." He declines to speculate on when GM might see profitability – the auto maker has not posted an annual profit since 2004 – saying the company will be structured to break even at industry volumes of about 10 million units annually.
While none of GM's foreign operations were pulled into today's filing, Henderson does indicate for the first time that GM's restructuring will end its New United Motor Mfg. Inc. joint venture with Toyota Motor Corp. GM earlier said it was in talks with Toyota, because killing the Pontiac division would eliminate the Pontiac Vibe compact car built there.
GM also reveals today it has reached an agreement with Delphi Corp. to buy back some of the supplier's steering operations as it emerges from bankruptcy today.
GM, which spun off Delphi in 1999, will receive the supplier's plants in Grand Rapids, MI; Lockport, NY; Rochester, NY; Kokomo, IN; and its steering operations based in Saginaw, MI, with additional location outside the U.S. The auto maker receives the assets in return for $250 million bankruptcy funding. "We need the parts. We need to support Delphi," Henderson says.
Since Delphi filed for bankruptcy in October 2005, GM has pumped $12 billion into the company to keep important auto parts flowing into the auto maker's assembly plants. The Los Angeles-based private equity group Platinum Equity Capital Partners II will acquire the remainder of Delphi's assets in return for $3.6 billion in bankruptcy funding.
Regarding the timing of GM's bankruptcy, he says GM was unable to file earlier because it did not have the debtor-in-possession financing for the process. Former GM Chairman and CEO Rick Wagoner, pushed out by Obama 60 days ago, repeatedly resisted bankruptcy as an option.
"Last fall, (filing for bankruptcy) wasn't available," Henderson says. "The truth is…it wasn't in cards. It wasn't on the table at that point."
Henderson closes the conference call by pledging to deliver value with the new GM and re-establish leadership in the U.S. market.
"There are no second chances, and we won't need one," he says. "It's our job to deliver."