General Motors, on the brink of bankruptcy, may sell a stake in its Opel division as it attempts to cut costs and focus on its core brands back in the United States. The company confirmed in its recent viability plan that it will sell Hummer, downsize Pontiac, and stop building new products for Saturn beyond the 2012 model year.

Until now, however, there haven’t been any solid details concerning the future of GM's European brands, Opel (Vauxhall) and Saab. GM has announced that it is seeking to reduce costs further in Europe without resorting to firings and plant closings, and one of the options under consideration is selling a stake in the brands.

The information comes from GM Europe President Carl-Peter Forster, who told Automotive News that management is willing to consider strategic third-party partnerships, alliances and equity stakes in case such an approach is seen as beneficial for a viable and sustainable future.

There have also been reports that GM may sell its entire Vauxhall division, but a GM spokeswoman revealed that any sale would only concern Opel and even then it would likely be only a portion sold to the German government.

As for Saab, a bankruptcy announcement is expected to come tomorrow and production at the company’s Trollhättan has already stopped. The only activity that is expected to remain will be the fulfilment of servicing and warranty claims, which GM and Saab must comply with by law.

GM confirmed in its viability plan that it would pull out all financial support for Saab by the end of this month and yesterday the Swedish government also rejected requests from the Detroit carmaker to help prop up the company until it could function as a standalone firm.

General Motors' loss-making carmaker Saab Automobile on Friday sought legal protection from creditors to allow it to restructure and seek new funding for continued production.

Faced with mountainous debts, parent GM is itself restructuring, and in a plan submitted to the U.S. Treasury this week it said Saab would become an independent business as of Jan. 1, 2010.

Saab made a loss of about 3 billion Swedish crowns ($340.1 million) in 2008, according to documents filed by the company with a Swedish court.

It expects a similar loss this year, blaming falling demand, ageing products, excess capacity and high costs.

"We explored and will continue to explore all available options for funding and/or selling Saab, and it was determined a formal reorganization would be the best way to create a truly independent entity that is ready for investment," Saab Managing Director Jan-Ake Jonsson said in a statement.

Saab said its reorganization plans included concentrating production and that it would seek funding from public and private sources during the reorganisation process.

In its court filing, Saab said GM has said it "would not fund further the projected losses of the company (Saab)," but would provide liquidity for the company to pursue a reorganization.

It was not immediately clear whether GM would cover this year's projected loss.

Saab will hold a press conference on Friday at 1 p.m. London time.

The court will now assess whether Saab's turnaround plan is viable.

AID Swedish daily Dagens Industri said on Friday that Saab parent GM is prepared to pump in $400 million to help make its Saab car unit profitable if the Swedish state guarantees a further loan of $590 million to Saab.

The aim is for annual sales of 120,000-130,000 vehicles and profitability in 2011 or 2012, the newspaper said, quoting unnamed sources.

The firm sold just over 93,000 cars in 2008.

Many analysts believe Saab would need much more money pumped into it to turn it around and question whether the brand has a realistic future.

Sweden said late last year it would provide its vehicle industry with up to 25 billion crowns in aid to help it through the current global crisis.

The government said this week its talks with GM over state aid for Saab lacked a realistic basis, but a senior Swedish official told Reuters on Friday the state had not closed the door to providing loan guarantees to the carmaker.

"That will depend on what the plans look like," said Joran Hagglund, state secretary at the Swedish Industry Ministry. "If you provide loan guarantees to someone, you must be sure the company has a future."

Saab and Volvo have helped shape Sweden's image abroad with a focus on safety, family motoring and high engineering standards.

However, the current economic crisis has plunged the auto industry worldwide into crisis, adding to problems for carmakers in countries with high production costs like Sweden.

Volvo Cars has been put up for sale by owner Ford Motor .

Saab and Volvo employ more than 20,000 people in Sweden with thousands more jobs at suppliers tied to the two companies.

Well it's safe to say the GM will be a state run company. Lets look at the history of state run car companies...mainly in Russia. Nuff said.

Feb 21, 2009 04:30 AM

David Olive
business columnist


The future of the North American-based auto industry, the underpinning of the southern Ontario economy, has never been less clear than today.

General Motors Corp. and Chrysler LLC, each on the brink of bankruptcy, yesterday submitted their long-awaited Canadian turnaround plans to Ottawa and Queen's Park, three days after filing their global restructuring scheme with the U.S. Congress and the Obama administration.

It would be an exaggeration to say these plans aren't worth the paper they're printed on. But with their lack of detail – the Canadian plan doesn't even place a dollar figure on the bailout sum sought from Ottawa and Queen's Park – they betray the automakers' own uncertainty in how they propose to rescue themselves.

Ottawa's response yesterday was a sigh of relief that GM and Chrysler don't plan any further Canadian plant closings or layoffs, beyond the thousands of jobs they've already lost in the past two years.

That's false hope. GM and Chrysler also say they expect a further drop in North American vehicle sales this year, on top of the stunning 18 per cent drop in 2008 sales. How much bigger a drop?



They don't say. Because no one can say. For a Canadian vehicle industry overwhelmingly reliant on U.S. exports, everything depends on a recovery in U.S. consumer confidence. Americans have to start buying cars again. The speed with which that happens depends greatly on the impact of the $787 billion (U.S.) economic stimulus package and the $275 billion homeowner-rescue plans President Barack Obama signed into law this week.

To be sure, there is a revolutionary government intervention in the U.S. economy underway that in some respects is even more ambitious than Franklin Roosevelt's New Deal. But with U.S. jobless numbers rising at an accelerating rate, and housing prices continuing to plummet more than a year after the collapse of an unprecedented U.S. housing bubble, there's simply no telling when Obama's bold moves will take effect.

We do know that if this year's projected sales of only 11 million North American vehicles becomes the new normal, down from the average annual level of 18 million or so units earlier this decade, the industry will have to shrink by at least 20 per cent to become viable again.

Detroit still doesn't seem to understand that.

GM said earlier this week it was trying to sell its Saab brand, but events are moving too quickly: Saab abruptly filed for bankruptcy protection yesterday. The dealership network for Saturn, another brand GM vowed this week to shed, is scrambling to find a foreign buyer for the division, and GM is promising to help secure one.


The Hummer brand GM pledged this week to dump has in fact been on the auction block for months. And Pontiac, the fourth brand GM now says it will abandon, it can't seem to part with, insisting it wants to retain the name for a lineup of vehicles, even though Pontiac has long since lost its showroom appeal.

What all that says is GM and its divisions are still in denial about their grim prospects. GM persists in its ludicrous plans to revive the 1970s muscle car Camaro, to resume production in Oshawa.

GM has told Washington and Ottawa it will approach European governments for funds to bail out its Adam Opel division in Germany and its Vauxhall operations in Britain. But the reaction to that notion in both Berlin and London this week was tepid at best.

The problem, in a nutshell, is that Detroit has made these same promises for at least two decades. That it will cut an overcapacity of brands, plants, employees and dealers that has only grown as the North American market share of GM and Chrysler has relentlessly shrunk – in GM's case, from 28 per cent in 2000 to a current 19 per cent.


This makes a repetition of these familiar vows, even now with the two firms' backs to the wall, lack credibility.

Much depends on Obama, who in his Ottawa press conference with Prime Minister Stephen Harper acknowledged the "integrated" nature of the North American auto business, and that his actions on this crisis will be taken "in concert with" Canadian officials. That's encouraging, since a Motown renaissance overseen by the Obama administration would likely retain the Detroit's Canadian operations, which boast above-average productivity and quality.

Obama will almost certainly approve a Detroit bailout rather than put hundreds of thousands of workers at GM, Chrysler and their suppliers and dealers out of work amid a downturn that already has cost 3.6 million U.S. jobs. But the task force Obama has created to oversee a Detroit bailout will likely impose a reinvention of a century-old industry that has long proved itself incapable of changing with the times.

That might mean, for starters, a folding of Chrysler into GM. During its nine-year ownership by Daimler AG, Chrysler was stripped of most of its design and engineering abilities.

One U.S. auto analyst, who said yesterday that GM shares are overpriced even at the 1934 level they dropped to yesterday, pronounced GM's rescue blueprint "worthless" for its failure to deal with reduction of debt, legacy costs (retiree pensions and other benefits) and labour costs higher than those of foreign automakers operating in the U.S.

The Obama task force, in protecting the total $30 billion of taxpayer funds that GM has received and is seeking, would impose on GM a more rapid resolution of those issues. There has long been no cachetin owning a vehicle made by a North American-based firm. That could change if the Obama administration uses its bailout leverage to force a transformation of Motown's mission.

GM – and Detroit – could re-emerge as a global leader in fuel-efficient vehicle technology if Obama's task force clears out its senior and much of its nostalgia-enslaved middle management. The precedent was set when FDR threatened a Detroit reluctant to convert to war production with nationalization unless it did his bidding.

Once again, the heavy hand of outside intervention is Detroit's best, and perhaps only, hope of salvation.

Warns that `total obligations no longer sustainable;' says it's working with CAW, governments to fill gap

Feb 21, 2009 04:30 AM
James Daw
Business Columnist

General Motors of Canada Ltd. says it can no longer afford its pension and medical benefit plans.

The struggling automaker is aiming to renegotiate labour contracts by the end of March as it turns to Ontario and the federal government for money to help it restructure – and thus pay pension and medical benefits earned to date.

GM says it is waiting for actuaries to calculate how many billions of dollars would be required to secure pensions earned so far by 56,000 employees and retirees.

But it warns in a vague outline of its survival plans "the total obligations (or debt) represented by GMCL pensions as they are currently structured are no longer sustainable.

"GMCL is working with the CAW and the governments to explore options to address this challenge."

The company does not spell out how it proposes to secure pensions for retirees while cutting compensation costs for employees. All it says is it is proposing to follow its U.S. parent by transferring money to a union-administered trust fund that would pay for future medical benefits.

Starting in 2007, salaried employees had the formula for earning future pension entitlements cut from an average of their pay in the final years of their careers to an average for their remaining careers.

GM plans to cut its total workforce in Canada to 7,000 by the middle of 2010. The job reductions would leave it with five retirees for each active worker.

"It is becoming increasingly difficult to service GMCL's legacy cost (or pensioners' benefits) due to an increasingly large retiree population, high health-care cost, health-care inflation and poor pension asset returns stemming from a recessional market," the company says.

An operating company cannot legally cut pension benefits earned to date. Pensions may only be cut to the extent the pension is short of money when the sponsoring company is forced into bankruptcy. Pensioners then become unsecured creditors.

Ontario has a Pension Benefits Guarantee Fund intended to cover any shortfall for the first $1,000 of a monthly pension. But the insurance plan is now in deficit.

GM Canada notes it had $10.2 billion in pension commitments as of Nov. 30, 2007 and only $8.8 billion in assets. But it would owe more if it were to cease operations. With about 69 per cent invested in stocks, the assets in the plans for hourly and salaried worker would have shrunk dramatically since then.

Last August, former CAW union president Buzz Hargrove told the Star the risk of pension reductions was "so remote a possibility it's not worth speculating on."

Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors Corp. and Chrysler LLC, in case the two auto makers need it, said several people familiar with the matter.

While acknowledging the grimness of the task, administration officials involved in the auto talks said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings. They stressed the latest efforts were "due diligence" on the part of the government advisers, and that bankruptcy financing may not be necessary.

Still, people involved in talks with senior Obama administration officials said that the administration believes that the option of Chapter 11 filings by the two auto makers needs to be seriously considered.

"Everything is on the table right now," one person involved in the matter said, adding that President Barack Obama doesn't want to see more massive job losses in the auto industry. His administration also doesn't want to anger the United Auto Workers by appearing to push for bankruptcy, this person added.

The initial discussions call for private banks to provide the financing -- known as a debtor-in-possession, or DIP, loan -- with the government guaranteeing or backstopping the loan. In this scenario, some of the financing would be used to pay back the $17.4 billion the government lent GM and Chrysler late last year.

Treasury advisers are handling the effort and keeping GM and Chrysler informed of the steps through back-door channels, said the people familiar with the matter. The interplay between the government, auto makers and the markets is proving to be complicated.

Auto team drives imports
Fed task force has few new U.S. cars
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- The vehicles owned by the Obama administration's auto team could reflect one reason why Detroit's Big Three automakers are in trouble: The list includes few new American cars.

Among the eight members named Friday to the Presidential Task Force on the Auto Industry and the 10 senior policy aides who will assist them in their work, two own American models. Add the Treasury Department's special adviser to the task force and the total jumps to three.

The Detroit News reviewed public records to discover what many of the task force and staff members drove, but information was not available on all of the officials, and records for some states were not complete.

At least two task force members don't own a car, and there are still two open slots on the 10-member panel that will be filled by the secretaries of labor and commerce, who have not yet been appointed.

The co-chairs of the task force -- Treasury Secretary Timothy F. Geithner and White House National Economic Council Director Lawrence Summers -- both own foreign automobiles.

Geithner owns a 2008 Acura TSX, registered in New York. He once owned a 1999 Honda Accord and a 2002 Acura MDX, according to public records.

Geithner is the president's designee for purposes of enforcing loan agreements with GM and Chrysler and must approve or reject any proposed transactions by either company that would cost $100 million or more.

His maternal grandfather, Charles Moore, was a vice president at Ford Motor Co. from 1952-63, according to Peter Geithner, the secretary's father. But Geithner wasn't very interested in cars growing up -- in part because he graduated from high school in Asia, his father said.

Summers owns a 1995 Mazda Protege that's registered in Massachusetts. He previously owned a 1996 Ford Taurus GL.

What other task force members drive:

• Office of Management and Budget Director Peter Orszag owns a 2008 Honda Odyssey and a 2004 Volvo S60. He previously owned a 1997 Jeep Grand Cherokee and 1982 Datsun.

• Carol Browner, the White House climate czar, said earlier this month at the Washington Auto Show that she doesn't own an automobile. Public records show she once owned a 1999 Saab 9-5 SE.

• Energy Secretary Steven Chu doesn't own a car, his wife, Jean Fetter, said in a telephone interview on Sunday. Cabinet officials are typically transported to and from work by security officials in government vehicles.

• Environmental Protection Agency Administrator Lisa Jackson owns a 2008 Toyota Prius and a Honda Odyssey minivan, she said Sunday. "It's great," she said of her Prius.

• Vehicle information was not available for Transportation Secretary Ray LaHood or Christine Romer, head of the Council of Economic Advisers.

Here's what task force policy aides drive:

• Austan Goolsbee, staff director and chief economist for the White House Economic Recovery Advisory Board, owns a 2004 Toyota Highlander.

• Joan DeBoer, the chief of staff to LaHood, said in an interview Sunday she drives a 2008 Lexus RX 350. She doesn't consider herself "a car buff" and views her car as a way to get around town.

• Heather Zichal, deputy director of the White House Office of Energy and Climate Change, owns a Volvo C30, according to public records and officials.

• Gene Sperling, counsel to the Treasury Secretary, owns a 2003 Lincoln LS, and previously owned a 1993 Saturn SL2.

• Edward B. Montgomery, senior adviser to the Labor Department, owns a 1991 Harley-Davidson and previously owned a 1990 Ford Taurus L station wagon, public records show.

• Lisa Heinzerling, senior climate policy counsel to the head of the EPA, owns a 1998 Subaru Legacy Outback station wagon, according to her husband.

• Diana Farrell, the deputy National Economic Council director, doesn't own a vehicle. Her husband, Scott Pearson, owns a 1985 Peugeot 505 S.

• Dan Utech, senior adviser to the Energy Secretary, owns a 2003 Mini Cooper S two-door hatchback.

• Rick Wade, a senior adviser at the Commerce Department, owns a 1998 Chevrolet Cavalier and previously owned a 1998 Toyota Corolla.

• Jared Bernstein, Vice President Joe Biden's chief economist, owns a 2005 Honda Odyssey.

The White House declined to comment.

President Barack Obama traded in his Chrysler 300C for a more fuel-efficient Ford Escape hybrid during the 2008 presidential campaign.

Joe Biden, the son of a car dealer, owns a 1967 Chevrolet Corvette -- a wedding present from his dad. He primarily commuted from Delaware to the Senate on Amtrak.

Ron Bloom, a special adviser to the Treasury Department who is also advising the task force, owns an aging Ford Taurus.

Feb 27, 2009 06:42 PM
Reuters

DETROIT – Chrysler LLC, which is seeking US$5 billion in additional federal aid to survive, has lowered the thermostat, dimmed the lights and stripped the clocks from the walls of its sprawling headquarters to save cash.

The automaker's headquarters in Auburn Hills, Michigan includes a 15-story office tower and a technical center covering 121 acres, making it the second-largest office complex in the United States, behind only the Pentagon.

To cut costs, Chrysler has removed half of the fluorescent light bulbs in overhead lighting fixtures (projected annual savings: $400,000), dropped the temperature in the building by four degrees ($70,000) and stopped clearing snow from roof-top parking decks ($310,000).

Details of the cost savings efforts were posted on a Chrysler blog (http://blog.chryslerllc.com) this week.

The company did not specify a total cost savings target for the steps it has taken at its headquarters.

Chrysler's larger rival, General Motors Corp, has taken similar steps to cut costs, dimming lights and turning off escalators in its Detroit headquarters.

Chrysler, about 80-percent owned by private equity firm Cerberus Capital Management, had earlier shut down its Auburn Hills office complex between Christmas and New Year's, a move it estimated had saved over $250,000.

The No. 3 U.S. automaker has been rocked by a steep downturn in sales and has been kept in operation since the start of the year with $4 billion in federal loans.

Chrysler is seeking another $5 billion to restructure as it also looks toward clinching an alliance with Italy's Fiat SpA .

Chrysler shut all 30 of its U.S. plants at the start of this year to run down inventory and save cash and is pressing its major union to accept a lower cash payout for retiree health care.

In the meantime, Chrysler has also removed hundreds of clocks from the walls of its headquarters, telling workers to check the time on their watches, phones or computers.

By taking down the clocks last year, maintenance staff no longer have to reset them twice a year, when the time changes to daylight saving time and back.

William Wolf, Chrysler's facility operations director, said in a posting on the Chrysler blog that would save $10,000.

"Everybody has to make adjustments during tough economic times," Wolf said. "Now I just have to figure out what to do with a closet full of clocks."

"Everybody has to make adjustments during tough economic times," Wolf said. "Now I just have to figure out what to do with a closet full of clocks."