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Fritz: GM Can Hit the Goals

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Wall Street Journal

New GM Chief Says Company Can Hit U.S. Goals

The new head of General Motors Corp. said Tuesday the company could reach the goals set by the U.S. auto task force ahead of a June 1 deadline.

Fritz Henderson, installed Monday as interim chief executive, said GM remained focused on restructuring out of court and understood the tasks needed to avoid a "quick rinse" bankruptcy.

Mr. Henderson told reporters that GM had made "a good down payment" on a new restructuring plan after the federal task force said Monday GM's existing efforts were insufficient, and turned down a company request for fresh loans.

The government will provide GM with working capital until June 1 as GM develops the plan and tries to thrash out deals with unions, creditors and other stakeholders.

"More time isn't going to help the process," said Mr. Henderson, admitting the company would be forced to seek court protection if it failed to deliver by June 1.

GM has made contingency plans for "a quick rinse" bankruptcy process. Mr. Henderson said the car maker will look to accelerate it existing restructuring efforts and identify ways to "go deeper, go faster."

He said the task force did not specifically identify new targets for cost and debt reduction, but it was clear the company had to do more, and do it more quickly.

Mr. Henderson added that the task force had not set a timetable for his tenure as interim CEO.

The company failed to meet an internal target of deciding whether to sell its Hummer brand by March 31, though he said there were "several" interested parties, with a decision expected "within weeks."

Meantime, Ford Motor Co. said Tuesday it is offering a new incentive plan, including 0% financing and a job-loss assurance program, to try to jump-start slumping vehicle sales and boost consumer confidence.

The auto maker will offer 0% financing through its finance arm and will cover payments for up to 12 months on any new Ford, Lincoln or Mercury vehicle if customers lose their jobs. The offer will run through June 1.

Just hours later, GM weighed in with its own plan, which provides payment protection for the first 24 months of ownership. If a buyer loses his income, the company will make up to nine months' worth of payments for up to $500 a month. GM will also help protect the retail value of a new vehicle at trade-in time for a customer's next GM vehicle.

Ford's shares were recently down 1.8% at $2.71 while GM's were down 7.8% at $2.49. Ford's stock is up 18% so far this year but has still lost 52% of its value in the last year, while GM's is down 22% so far this year and has lost almost 90% of its value in the past 12 months.

Rival Chrysler LLC began offering 0% financing, along with rebates, employee pricing and discounts up to $6,000 in January as it looked to clear out dealers" inventories and boost sales. So far, the moves haven't seemed to help Chrysler as it struggles to stay afloat. The Big Three--Ford, Chrysler and GM--have been slammed by the recession. Chrysler and GM in particular are faltering, and President Barack Obama's administration said Monday that the two auto makers' plans don't show a "credible path to viability."

Ken Czubay, Ford's vice president of sales and marketing, said the company wanted to help rebuild faith in the marketplace as consumers remain anxious about the economy.

As consumer confidence has been falling, consumers have been cutting back their spending, and are particularly averse to buying big-ticket items such as cars and trucks. The tight credit markets also make it difficult for would-be buyers to get the financing they need to make a purchase.

Last week, market-research firm J.D. Power & Associates said retail new-vehicle sales continued to tumble in the first part of March and said the rest of the year is an open question. Auto makers are expected to report March sales Wednesday.

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GM will also help protect the retail value of a new vehicle at trade-in time for a customer's next GM vehicle.

This is interesting. I wonder how they plan on doing this.

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