GM Hopes To Be Revitalized After Bankruptcy

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GM's decision to file bankruptcy is expected to help the troubled automaker reorganize and emerge stronger, albeit smaller. Ray Young, GM's Chief Financial Officer, talks with Steve Inskeep about the bankruptcy proceedings and future of GM.

STEVE INSKEEP, host:

And this morning we've called up Ray Young. He is General Motor's chief financial officer. And he's on the line from New York. Welcome to the program.

Mr. RAY YOUNG (Chief Financial Officer, General Motors): Good morning. Thank you for the invitation.

INSKEEP: Now, we know GM is going to get smaller, but I wanted to understand how small. Are you never again going to be the world's largest automaker?

Mr. YOUNG: Well, our objective really is not to be the largest. Our objective is to be the best. You know, when we look at our plan, we recognize that we clearly will be a smaller company in the future, with four core brands instead of eight brands right now, 34 nameplates instead of 48. A smaller dealer network, a smaller manufacturing footprint. At the same time, when we execute this plan, we will clearly be a leaner and more profitable company, which will allow us to repay the investment, which we're very, very appreciative of the American taxpayers to help us through this downturn.

INSKEEP: Although I imagine you're going to have to write off a lot of that $172 billion of other kinds of debt that you've got out there.

Mr. YOUNG: With the recapitalization, which the government is helping us through, and through the bankruptcy process that we will go through, clearly the amount of liabilities will come down dramatically.

INSKEEP: How soon, if can ask - I'm sorry, but time is short, forgive me for interrupting - but how soon do you think, how many years do you think it'll take before GM is actually making a profit?

Mr. YOUNG: Our estimates - we bring down the cost structure and we execute a product plan - there's no reason why we can't become profitable over the next two to three years.

INSKEEP: Two to three years?

Mr. YOUNG: That's correct.

INSKEEP: Even if the economy does not bounce back strongly?

Mr. YOUNG: Again, if the economy bounces back, then clearly we will be able to become profitable in a shorter period of time.

INSKEEP: Now, I want to ask - go ahead.

Mr. YOUNG: Because that's one of the biggest variables, is to understand how the path of both the U.S. and global economic recovery will progress. Our projections right now assume a more conservative path of recovery.

INSKEEP: Mr. Young, in Scott Horsley's report just a moment ago, we heard that a deal was made for GM to build fuel-efficient vehicles in the United States rather than China. The union pushed hard for that, but it seems that GM's judgment had been that it'd be more profitable to build them in China. Is politics going to get in the way of returning to profitability?

Mr. YOUNG: Well, from our perspective, it actually makes good sense for us to build this vehicle in the United States, especially if the volumes are going to be significant. We reached an agreement with the UAW - it's going to be a competitive labor contract - for us to build this vehicle. So from our perspective, this is both good for General Motors and good for America.

INSKEEP: Although you know, we just hear about the pressure on GM to restructure and save American jobs and invest in energy-efficient vehicles, which can cost a lot of money upfront and may not make it back right away, and also try to make a profit. All reasonable goals, but can GM do them all?

Mr. YOUNG: We have to do it all. We do believe gasoline prices will increase in the future. We do believe consumers will demand more fuel-efficient vehicles and greener vehicles. From our perspective, we're going to make that commitment, make that investment in order to allow us to have these products in great quantities in the future.

INSKEEP: Couple of other questions, Ray Young of GM, top executive there: who do you report to? By which I mean not literally, Fritz Henderson, the current CEO, but in a larger sense, who do you think your boss is? Who's running this company?

Mr. YOUNG: Clearly, I report to Fritz, but now, you know, we all report to the board of directors of General Motors. We're accountable to shareholders of this company. And we have a board that's actually quite active. I mean, we get on the phone call at least two to three times a week in order to talk about the business. We feel very, very comfortable with that. We've got good oversight on the management team in terms of where we're going.

INSKEEP: Although aren't you going to understand that on some level, even though the government says they'll keep their hands out of the business, the government is the boss?

Mr. YOUNG: Well, we haven't seen that yet. We'll have to see what happens when we move forward. Clearly, you heard the words of President Obama, who indicated that the government has no interest in the day-to-day activities of General Motors.

INSKEEP: And the final thing: you said you want to start paying back the $50 billion that the U.S. government is putting into this company. Do you expect to pay it all back?

Mr. YOUNG: Our intent is to provide the American shareholder with a good return on this investment. We will repay the loans. I mean, it will be about $8 billion of loans after we go through recapitalization. And then the American public will have a significant equity ownership of General Motors.

Our job is to make the shares of the new General Motors very, very profitable for the American investors. And we're off and running right now with a cumulative plan to help the American taxpayers accomplish that.

INSKEEP: Mr. Young, thanks for taking the time of what I am sure is a very busy time for you.

Mr. YOUNG: Thank you very much.

INSKEEP: Ray Young is chief financial officer of General Motors. And you heard him this morning right here on MORNING EDITION from NPR News.

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GM Execs Admit Errors, See Turnaround In 3 Years

General Motors chief executive Fritz Henderson. i

General Motors chief executive Fritz Henderson says the sale of Hummer likely will save more than 3,000 U.S. jobs in manufacturing and engineering, and at various Hummer dealerships. Stan Honda/AFP/Getty Images hide caption

itoggle caption Stan Honda/AFP/Getty Images
General Motors chief executive Fritz Henderson.

General Motors chief executive Fritz Henderson says the sale of Hummer likely will save more than 3,000 U.S. jobs in manufacturing and engineering, and at various Hummer dealerships.

Stan Honda/AFP/Getty Images
GM Chief Financial Officer Ray Young i

GM Chief Financial Officer Ray Young says a "leaner and more profitable company" would provide taxpayers a return on their investment. Stan Honda/AFP/Getty Images hide caption

itoggle caption Stan Honda/AFP/Getty Images
GM Chief Financial Officer Ray Young

GM Chief Financial Officer Ray Young says a "leaner and more profitable company" would provide taxpayers a return on their investment.

Stan Honda/AFP/Getty Images

In Focus

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General Motors chief executive Fritz Henderson said Tuesday that the sale of the Hummer brand will save jobs, as another senior executive said the automaker can return to profitability within "two to three years."

Henderson and Chief Financial Officer Ray Young spoke to NPR a day after GM was forced to file for bankruptcy amid a government plan to infuse an additional $30 million to help recapitalize the struggling company.

GM announced Tuesday that it had reached a tentative agreement to sell its gas-guzzling Hummer brand but did not name the proposed buyer or the price.

"We are pleased to be able to find this solution," Henderson said. "We think we will be able to bring this to closure and protect the Hummer brand."

He said the sale likely will save more than 3,000 U.S. jobs in manufacturing and engineering, and at various Hummer dealerships.

GM sought court protection from its creditors Monday under Chapter 11 of the U.S. bankruptcy code. The company said it hopes to reshape itself within a month and emerge from reorganization in 60 to 90 days as a profitable entity with fewer employees, factories and dealers.

Henderson took over from former CEO Rick Wagoner two months ago after President Obama made it clear that he expected a shakeup at the top in exchange for government bailout money. Henderson had been vice president of GM and has been with the automaker in posts around the world for the past 25 years.

"We've made mistakes, there's no question we've made mistakes," Henderson acknowledged. "We need to learn from those mistakes, and we will.

"We have fantastic products, and we will be a company focused around the consumer," he said.

Young said he expects the company to stage a complete turnaround "within the next two to three years."

"If the economy bounces back, we will clearly be able to become profitable in a shorter amount of time," he said. "With the recapitalization, which the government is helping us through, and … the bankruptcy process that we will go through, clearly the amount of liabilities will come down dramatically."

GM is grateful for taxpayers' assistance, Young said, adding that a "leaner and more profitable company" would provide taxpayers a return on their investment.

Asked how the company could balance restructuring with the desire to produce environmentally friendly cars with better gas mileage, Young said GM must "do it all."

"We do believe that gasoline prices will increase in the future; we do believe that consumers will demand more fuel-efficient and greener vehicles," he said. "From our perspective, we're going to make that commitment, make that investment to allow us to have these products in great quantities in the future."

GM is pressing ahead with models such as the all-electric Chevrolet Volt despite the bankruptcy filing.

Pressed for pricing details, Henderson said the company had discussed something in the $40,000 range for the Volt, which is expected to roll off assembly lines next year.

"The key here is to get it launched," he said, saying a price point had not yet been set. "This is a technology that we feel very strongly about and we have market leadership in, and we want to try to preserve that."

GM also has experimented with vehicles that use hydrogen fuel cells, a technology that still has a long way to go, Henderson said.

"The company will continue its research in hydrogen fuel cells," he said. "We have demonstrated it can work. What is far away is the commercialization of the technology."

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