Much of the plan that GM has put forward in its submission to Congress is already underway, with the core elements being increased production of fuel-efficient vehicles, 'rationalization' of brands and dealerships, reduced labor costs, capital asset sales and restructuring and consolidation of manufacturing operations.
The real key, at least in the eyes of Congress, is likely to be the future of GM's product plan. Besides the Volt and Malibu Hybrid (which will be driven to Washington by CEO Rick Wagoner), GM doesn't have a lot on its current slate of efficient vehicles. Future developments are promised, however, with GM stating that over half its fleet will be flex-fuel capable by 2012, with 15 different hybrid models on offer. Further development of hydrogen fuel cell technology, exhibited primarily in its Equinox concept and the Project Driveway test, will also continue.
A three-year window, from 2009-12, focuses heavily on the Volt, however, and other vehicles to be spawned from the Volt's plug-in hybrid drivetrain. An investment of roughly $2.9 billion over that time period in expanding the system to other cars, potentially creating new jobs and - as GM imagines - moving the U.S. to a leadership role in the field.
Cost-cutting measures will become even more harsh, with its four core brands - Chevrolet, Cadillac, Buick and GMC - getting the new models, and Pontiac being relegated to 'specialty' brand status, receiving reduced models. GM has also announced that Saab will be joining Hummer as part of its 'strategic review' of its brand holdings. The Saturn brand is curiously not mentioned aside from an allusion to 'alternatives' being considered with the brand's retailers, possibly foreshadowing a reduction in its models as well. The story of GM's request of aid from the Swedish government yesterday revealed that the brand was likely being prepped for sale, and Ford has announced similar plans for fellow Swedish brand Volvo.
Reduced compensation and dividends for executives and salaried employees will also help save money, but the real life-saver will be the influx of $12 billion in bridge loans to cover the company's operating requirements through 2009. Extremely low vehicle sales forecasts - between 12 and 12.5 million units - mean there will be lean times next year as well, but the turnaround afterward will be brisk - GM plans to have the loans repaid in full by 2012.
A mechanism built into the loans could allow taxpayers to actually benefit from any growth in GM's share price over the course of the loan repayment period as well, should all go according to plan. Once the restructuring, cost-cutting and production changes are made, GM foresees profitable operation at an industry volume of 12.5-13 million vehicles, as opposed to barely scraping by as it did in recent years at volumes closer to 16 million vehicles.
