Six weeks after announcing a considerable shift in its product strategy, General Motors today revealed a series of cuts and changes aimed to improve its financial standing.
The restructuring, which affects everything from product planning to retiree healthcare, will attempt to improve GM's liquidity by approximately $15 billion.
"We are responding aggressively to the challenges of today's U.S. auto market," said Rick Wagoner, chairman and CEO of GM. "The plan we're announcing today is really an aggressive plan to generate cash flow using methods that GM has control over in the next eighteen months."
GM's present liquidity stands at $23.9 billion, and the company reportedly has access to an additional $7 billion of loans, if needed. Should the new plan succeed, the automaker could see its reserves jump to $38.9 billion before tapping its line of credit.
Many of the changes come from refocusing product efforts. GM has pledged to focus on developing new car and crossover programs, all while slashing truck production. The automaker previously planned to reduce truck volume by 150,000 units, but today doubled that reduction to a whopping 300,000 vehicles.
Simultaneously, engineering programs pertaining to large vehicles (including the next full-size pickups and SUVs) and V-8 powertrains are now on indefinite hold. Troy Clarke, president of GM's North American operations, also suggested tremendous cuts in corporate marketing, placing even company-sponsored events and motorsports in jeopardy.
Bob Lutz, GM's vice chairman of global product development claimed most brands are safe and guaranteed product in the near future, leaving Hummer the only division that's currently in doubt. Corporate management is investigating selling the maligned off-road brand - and, according to Wagoner, they've heard from multiple interested parties. Other assets, including GM's stake in GMAC, stock in foreign divisions, or real estate, could also be up for grabs.
Other changes will affect both past and present GM employees. Salaried employees won't see their annual pay increases during 2008 or 2009; nor will executives receive any cash bonuses. GM will also delay paying $1.7 billion to the UAW's voluntary health care fund until 2010, a delay of nearly two years. Retirees over 65 who are eligible for Medicare will also be booted from corporate health care in 2009, although they will receive increases to their pension plans.
Such widespread changes will likely have a profound impact on both the company and its culture, but Wagoner says it's high time these revisions happen.
"We've talked for years about legacy costs, usually in terms of retirees," he said. "But parts of our business may have spending patterns that are more based in the past than where we need to go in the future.
"Now's the time we really have to dig in and work differently in order to move forward."