If all goes to plan, the New GM is expected to launch in about 60 to 90 days as a separate and independent company from the current GM, with two distinct advantages: it will be built from only GM's best brands and operations, and it will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure than before.
The New GM will focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC - with fewer nameplates and a simplified marketing campaign. It will also benefit from lower labor costs and more efficient North American production, as well as lower structural costs from reduced debt servicing costs and retiree health benefits. The restructured company will also have a more focused U.S. network of approximately 3,600 dealers.
The end result is an expected break-even point of approximately 10 million vehicles sales for the entire U.S. market, which is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007.
A critical element of GM's reinvention is to achieve a significantly stronger and healthier balance sheet. On March 31, 2009, GM reported consolidated debt of $54.4 billion, along with additional liabilities, including an estimated $20 billion obligation to the UAW Voluntary Employee Beneficiary Association (VEBA) fund.
In order to aid the bankruptcy progress and keep GM running, the U.S. Treasury also pledged $30 billion in bridge financing, which is on top of the $23.4 billion already loaned to the struggling automaker.
The New GM will have approximately $17 billion in total consolidated debt, including $6.7 billion of debt owed to the U.S. Treasury, $1.3 billion of debt owed to the Canadian and Ontario governments, $2.5 billion of notes issued to VEBA and roughly $6.8 billion of other debts.
$9 billion of stock with a 9% annual dividend will be issued, with $2.1 billion going to the U.S. Treasury, $0.4 billion going to the Canadian and Ontario governments, and $6.5 billion going to the New VEBA. This will see 60.8% of the New GM go to the U.S. Treasury, 11.7% to the Canadian and Ontario governments, 17.5% to the New VEBA, and 10% reserved for unsecured bondholders and other unsecured creditors of GM.
In the meantime, GM dealers will continue to service vehicles and honor warranties with the backing of U.S. and Canadian government guarantees. Importantly, none of GM's operations outside of the U.S. are included in the U.S. court filings or court-supervised process, and these filings have no direct legal impact on GM's plans and operations outside the U.S. GM confirmed that all business operations are continuing without interruption in its European, Latin American, African, Middle Eastern and Asia Pacific regions.