GM CEO On Automaker's Plan For Survival

Automaker GM, which filed for bankruptcy Monday, has taken a key step toward downsizing. CEO Fritz Henderson discusses his company's plans to restructure itself and says he sees GM's bankruptcy as an opportunity.

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MELISSA BLOCK, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

Here's what passes for good news for U.S. automakers these days. In May, both Ford and General Motors reported their smallest declines in sales against last year's levels in months: Ford sales were 24 percent down from May 2008, GM was 30 percent off last year's pace, Chrysler's year to year decline from May was larger, 47 percent.

BLOCK: In other auto news, GM announced today that a Chinese heavy machinery company, based in Sichuan province, plans to buy GM's Hummer brand. That's one of the divisions the automaker has been eager to sell. We spoke with GM's leader this morning before that buyer had been identified.

SIEGEL: Fritz Henderson is the CEO of General Motors. Welcome to the program.

Mr. FRITZ HENDERSON (CEO, General Motors): Thank you.

SIEGEL: Yesterday, you were speaking of a new GM. And you yourself have been at GM or GMAC for the past 25 years, where have you learned a corporate culture that's any different from the old GM?

Mr. HENDERSON: Well, I've had the benefit of working for General Motors everywhere around the globe, virtually. I've run our businesses in various different regions. I've lived in Brazil, worked in Latin America, Africa, Middle East, Europe, Asia. And so I've had the ability, I guess, within a firm to experience multiple cultures and I think that's of pretty substantial benefit to me, I think, in terms of understanding how different businesses can be run.

SIEGEL: Not a single business culture that has governed GM all these years?

Mr. HENDERSON: The culture of GM is interesting having again worked in all the different parts of General Motors, there are common threads - things like integrity, what our people stand for - there are common threads to the GM culture. But there are distinct differences based on the operations and always have been.

SIEGEL: In this country, GM is currently selling I guess something around 20 percent of the new cars in an economy that's so bad that people are only buying at the rate of, we guess eight or nine million new vehicles a year.

Mr. HENDERSON: We do sell one in five cars in general in the United States. And the market has been running at about nine and half to nine point six million unit annualized rate if you will.

SIEGEL: Let's say that the market recovers, not up to where it was headed - up toward 16 million vehicles - but say 12 million new vehicles a year. Can GM survive and be profitable at one fifth of that?

Mr. HENDERSON: The answer is yes. We are structuring the business to lower our break-even level here in North America to a U.S. market - about 10 million units. And this would be measured on an event basis, earnings before interest and taxes. Given the de-leveraging, our balance sheet will have a fairly modest interest burden for the company. And so the objective is at a 12 million unit market to be able to operate at better than break-even and generate a small profit and obviously significantly reduce the amount of cash burn that we have experienced over the last several years.

SIEGEL: Let me ask about the Chevy Volt, the plug-in electric car that's really only - it's a little more than a year away from launch now. It's touted in some quarters as GM's iPod, the product that can turn the whole company around. How much will the Chevy Volt cost when people get a chance to buy one?

Mr. HENDERSON: First of all, no single product can turn General Motors around. Every one of our products has to succeed for us to win. But let's talk about that, that's always been my philosophy that continues I think to this day.

SIEGEL: Mm-hmm.

Mr. HENDERSON: I think a Volt is as much about a demonstration of what General Motors men and women are capable of doing. I remember when it was first announced, there was widespread disbelief that lithium ion batteries could be the technology. Now, lithium ion batteries are viewed as quite a capable technology. There were a lot of skeptics, but I think we'll prove that the vehicle works, can deliver what the consumer is looking for and just be a technological statement for General Motors in terms of cost, its first generation cost, which generally is quite high. And so the objective of any first generation program is to get learnings to get to the second generation.

SIEGEL: But first generation is quite high. Does that mean that you're going to market this plug-in car that needs virtually no gasoline, or hardly any, for $40,000? Can you get it down to 30? Your predecessor Rick Wagoner told me at the auto show that he couldn't get it down to 30,000 without serious government subsidy.

Mr. HENDERSON: Well, let me - let me just start, first of all the cost. Yeah, Ricks talked about 40,000. Bob Lutz - we've talked about it in that range. There is a $7,500 tax credit that's available for that car, not just for our car but for other cars in that category. So I mean that would help defray the cost to the consumer. In the end, when we launch the vehicle, we'll launch the vehicle properly. We'll price it properly. But the cost of the vehicle is relatively high. But nonetheless, as we said we knew that going in…

SIEGEL: Right.

Mr. HENDERSON: …this is not a surprise to us. And our objective is to actually get the learnings and get to the second generation.

SIEGEL: But is it a car that's going to hit the market competitive with say a Prius, a successful energy saving car by cost, or is it going to be a choice you make if you're not going to buy a Lexus this year?

Mr. HENDERSON: Well, the - well, first of all it's a Chevrolet Volt. And so, I mean in that sense what we've chosen to do is put our foremost technology into our broadest, deepest and most important volume brand. So I think that's why we chose Chevrolet to launch the vehicle. I think the key here is, obviously, get the vehicle launch, prove ourselves. There is, you know, there is a broad category and a broad following for the vehicle that we expect to be able to be the first buyers of the vehicle. We'll have to see.

SIEGEL: I'm just curious, finally, since GM has been hit both by a very dire recession that has hurt every carmaker, on the other hand, GM has also gone from a majority of the cars sold in the U.S. to about a fifth of them in almost the same time that you've been working for the company over that time. How do you in your mind balance the - what's happened here and what led to Chapter 11 between factors in the American economy that have been bad news for a big old company with a big labor contract and things unique to the way that GM has managed its position in the U.S. car market?

Mr. HENDERSON: Well, I've had 25 years in the company working and I've spent time working in staffs and GMAC, again, all over the world. So I've had the, I guess, the benefit of that experience and seeing what's happened in different markets, seeing volatility and then obviously experiencing what we've experienced it the last two years here in the U.S.,. No one would have ever foreseen a U.S. market, for example, running at nine and half million units, certainly it was never in our planning horizon, nor anybody else's that I could see. So, you know I think we need…

SIEGEL: But we did see GM though losing share of the market.

Mr. HENDERSON: Yeah. I would say a couple of things. One, we've made mistakes. There's no question we've made mistakes. We need to learn from those mistakes and we will. I think we have - our products are the best they've ever been. And we're going to be a company that's focused around the customer.

SIEGEL: Well, thanks a lot for talking with us.

Mr. HENDERSON: My pleasure.

SIEGEL: That's Fritz Henderson who is the CEO of General Motors. He spoke to us from New York.

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GM Execs Admit Errors, See Turnaround In 3 Years

General Motors chief executive Fritz Henderson. i 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 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

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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