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GM prepares for 'realignment'

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as seen on FT.com today..

GM prepares for 'realignment'

By Bernard Simon in Toronto

Monday Jul 14 2008 16:00

General Motors (NYSE:GM) will unveil further measures on Tuesday to cope with the dramatic downturn in the north American vehicle market.

The world's biggest carmaker said that the steps, to be outlined at a press conference, are designed "to align the business to current market conditions".

The conference will be attended by Rick Wagoner, chief executive, as well as Fritz Henderson, chief operating officer, and Ray Young, chief financial officer.

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GM announced last month that it would close four north American light-truck plants in the wake of an abrupt shift in demand from big pick-up trucks and sport-utility vehicles to more fuel-efficient cars and crossover vehicles.

It is also reviewing the future of Hummer, its biggest vehicle, and accelerating the introduction of more popular vehicles.

GM's US sales tumbled 18 per cent in June from a year earlier. By contrast, its business in many other countries is performing strongly. It said on Monday that sales volumes in Latin America, Africa and the Middle East jumped 18 per cent in the second quarter to a new record.

International operations now make up about 60 per cent of GM's sales volumes.

Mr Wagoner last week dismissed talk that the company might seek bankruptcy protection or ditch more of its eight US brands.

However, it is widely expected within the next few months to take steps to shore up its liquidity, with analysts projecting that it will raise between $10bn-$15bn.

It currently has about $24bn in cash reserves but analysts estimate that it is burning about $1bn a month.

Himanshu Patel at JPMorgan said that GM had several options to bolster liquidity, including secured debt, delaying the transfer of its blue-collar healthcare plan to the United Auto Workers union, issuing new equity and further trimming capital outlays.

GM shares are currently at their lowest level in more than half a century. They slipped another 5.4 per cent on Monday to $9.38.

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will this have real meat or is it a total PR move? Could just be a dog and pony show to get all the press off their back for awhile. Ah, who needs to go to the theater now, we just watch all the drama created in the news media these days. This might just be Act 3 or something.

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Hopefully this is a real plan, that can be implemented quickly. Not another pledge to cut down on rebadges (the lambdas and epsilons proved that to be a lie) or claim that they are investigating diesels and hybrids while the rest of the industry is building them. Hopefully he isn't conducting a press conference to discuss attractive new lease offers for the full size Chevy Traverse, or the new Hummer H3 pickup and reminding us that the Saab 9-4X and Cadillac BRX/SRX are coming because the General needs some more SUVs.

I am guessing he does some PR spin, says they are considering the sale of Hummer, and are committed to fuel efficient cars in the future, and hope that keeps the stock price from going under $9 by August. I think investors are looking for action and not talk though. We've heard "wait til next year" since they hired Lutz 5 years ago.

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I don't think he'll say they are looking to borrow money, that will make it look like bankruptcy is near. They have enough cash to survive this year and 2009.

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