GM Drops Super Bowl Ads Too

Story first appeared in USA Today.

First General Motors said this week it won't buy ads on Facebook, the big dog of new media, and today GM says it won't buy ads in the upcoming Super Bowl, the tentpole event in old media.

The reasoning was the same: Not worth the money.

GM states that they understand the reach the Super Bowl provides, but with the significant increase in price, they simply can't justify the expense.

CBS is asking for $3.8 million per 30-second ad slot in the Super Bowl, up from NBC's $3.5 million for the last game, according to The  Wall Street Journal.

GM aired Chevy ads and a Cadillac ad in six ad slots in the game this year, plus ads in the pregame show, including ads for Chevy's Sonic and Silverado pickup and Cadillac's new ATS sedan. It also aired the winner of Chevy's Route 66 make-an-ad contest.

An analyst states that it feels premature for GM to make such a big decision regarding Super Bowl, especially since GM will be launching a new line of full-size pickup trucks and full-size SUVs around Super Bowl time. The Super Bowl audience is ideal for those vehicles, and the timing is right.

And results on a car-shopping site showed some bang for the Super Bowl ad bucks this year. In the week after this year's Super Bowl, consideration on Edmunds.com for the Sonic climbed 107%, the third largest shift among vehicles advertised during the big game, behind the Lexus GS350 and the Kia Optima.

Chrysler has advertised in the Super Bowl for the last three years and in the past two used it for big-budget, spots featuring rapper Eminem and actor Clint Eastwood.

The "Imported from Detroit" commercial in 2011 with Eminem is credited with helping to change the image of the Auburn Hills, Mich., automaker. The company's commercial in this year's Super Bowl with Clint Eastwood, while politically controversial, also drew attention to the company's progress.

Ford has not advertised in the last couple of Super Bowls, but has bought time in the pregame show. Ford, however, has aggressively shifted its focus to social media.

GM said earlier this week it stop using paid ads on Facebook, but would continue a major presence with its free pages on the social-network site. Along with its other recent high-profile decision to cut paid advertising on Facebook, GM's new global ad agency Commonwealth is sending the message that there is a new advertising sheriff in town.

Some might even read into this move as a way for GM to cut more costs, boost its share price and make it appealing for the U.S. government to sell its stake in the automaker to allow it to shed its 'Government Motors' moniker".

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GM expects IPO to Reduce Taxpayers' Stake to about 43%

USA Today

 

The initial offering of General Motors stock is expected to raise about $10 billion in a sale that will cut the U.S. government's stake in GM to below 50%, three people briefed on the sale said.

GM common stock is expected to sell for $26 to $29 a share when the IPO takes place, tentatively Nov. 18, according to the three people, who asked not to be identified because they are not authorized to speak on the matter. That would value the company at more than $46 billion, roughly the same as Ford Motor.

U.S. taxpayers, who bailed out GM last year, would see their ownership drop from 61% to about 43%, not including any extra shares bankers could offer if there is strong demand, the people said.

GM has wanted to shed government control, contending that it hurts the company's sales and public image. The government will get most of the $10 billion and recoup another chunk of the more than $50 billion GM rescue.

GM will not make any money from the sale of the 365 million common shares that will make up the IPO but will sell roughly $3 billion in preferred stock that will convert to common stock in 2013, the people said. Preferred shares pay a set dividend and are more like bonds. GM will use that money to repay loans and make pension payments.

Terms of the sale are not final because GM's board could still change them, one of the people said. GM's final registration filing with the government is expected by today.

GM and its bankers then will begin a "road show" to woo investors, primarily pension and mutual funds, but also some large individual investors. Common shares worth roughly $2 billion would be sold to investors in the Middle East, Europe and Asia, one of the people said.

Bankers leading the sale are recommending that the final share price be revealed Nov. 17 and the sale take place a day later, according to the people.

GM is now a private company owned by the U.S. government, a United Auto Workers retiree health trust, the Canadian and Ontario governments and former GM bondholders.

The Canadian governments are expected to cut their stake from 11.7% to 9.6%, while the UAW trust would cut its stake from 17.5% to 15%, two of the people said.

GM has repaid or plans to repay a total of $9.5 billion in government loans, and the government hopes to recoup its remaining $40 billion investment with the initial stock sale and several follow-up sales.

The four owners hold about 500 million shares total, but the total shares for sale in the IPO and subsequent sales will be increased with a 3-to-1 or 4-to-1 stock split, one of the people said. The split, which will take place before the IPO, will create about 1.6 billion shares of GM common stock, one of the people said.

Toyota Buying Tesla Stake for Electric Car Tie-Up

Bloomberg / Business Week

 

Toyota Motor Corp., the world’s largest automaker, is buying a $50 million stake in the Californian electric-car maker Tesla Motors Inc. as automakers compete to offer low-polluting models in the U.S.

Tesla will also buy a closed Toyota joint-venture factory in California to build its Model S and other vehicles, Tesla Chief Executive Officer Elon Musk said yesterday. The companies said they’ll cooperate in developing electric cars, parts, production systems and engineering support.

The deal may help Toyota, the world’s biggest carmaker, compete with Nissan Motor Co. and General Motors Co. in selling electric cars in the U.S., where regulations on greenhouse gas emissions and fuel efficiency are pushing them to offer advanced vehicles. It may also help the Toyota City, Japan-based company’s image, battered by recalls, by reviving the New United Motor Manufacturing Inc. plant in Fremont, California, known as NUMMI.

“This seems like a good deal for both parties, especially Toyota, from being able to avoid the political fallout from shutting NUMMI down to being able to offer a new electric vehicle with just a low initial investment cost,” said Jeremy Anwyl, Chief Executive Officer at auto industry researcher Edmunds.com in Santa Monica, California.

Joining Daimler

The size of Toyota’s stake in Tesla hasn’t been fixed ahead of a share sale by Tesla, Musk said in an interview. Daimler AG in May 2009 invested about $50 million in Tesla, which is supplying battery packs to the Stuttgart, Germany-based company for a test fleet of electric Smart minicars.

In July, Daimler sold a portion of its share of Tesla to the German automaker’s largest investor, Aabar Investments PJSC, reducing its stake to about 5 percent.

Daimler “welcomed” Tesla’s partnership with Toyota, which “likewise has the goal of advancing electric vehicles,” said Brigitte Bertram, a Daimler spokeswoman for the automaker in Stuttgart, Germany. The Toyota-Tesla linkup “doesn’t impede” Daimler’s cooperation with the California automaker.

Toyota fell 1.9 percent to 3,355 yen in Tokyo, while Nissan dropped 3.4 percent and Honda Motor Co., Japan’s second-largest carmaker, declined 2.5 percent.

The tie-up brings Toyota, the world’s biggest seller of hybrid autos, together with Tesla, the only company now selling U.S. highway-legal battery-powered cars. Electric-car technology has been supported by U.S. policy makers including President Barack Obama as a way to reduce the nation’s oil use and dependence on foreign energy sources.

Obama set a goal of getting 1 million plug-in hybrids and electric cars on U.S. roads by 2015.

Nissan, GM

Nissan is preparing to introduce its Leaf electric hatchback, powered by a lithium-ion battery pack, in Japan and the U.S. this year. Nissan Chief Executive Officer Carlos Ghosn has set a goal of leading sales of rechargeable vehicles, which he estimates may make up 10 percent of global auto demand by 2020, and is spending more than 500 billion yen ($5.5 billion) developing electric cars.

GM plans to introduce its Volt plug-in car in October. The car will initially be marketed to drivers in California, which requires large automakers to offer some vehicles that emit little or no tailpipe pollution.

Toyota intends to offer a short-range, “urban commuter” electric car in the U.S. in 2012 and begin retail sales of a plug-in Prius hybrid the same year.

Toyota, which will continue to develop its own electric vehicle, said Tesla’s long-distance models give the Japanese automaker more options. Toyota said hybrids should remain a more practical option for most customers until electric cars become more popular.

Share Sale

Palo Alto, California-based Tesla has 2,000 reservations for the Model S sedan and intends to begin “volume” production of the car in 2012, with a projected annual output of as much as 20,000 a year. The company has delivered about 1,000 of its $109,000 Roadster electric sports cars, while losing more than $230 million.

Tesla hasn’t posted a profit in the six years since it was founded. The company plans to use proceeds from an initial share sale and a $465 million government loan to help produce the Model S, an electric car that is to cost less than $50,000 after a federal tax credit.

Fund Raising

Tesla aims to raise about $100 million from its share sale and has said it may use proceeds to pay for factories and equipment estimated to cost as much as $125 million this year, and for acquisitions.

“I’ve felt an infinite possibility about Tesla’s technology,” said Akio Toyoda, chief executive officer of Toyota, founded by his grandfather. “By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business’ spirit.”

The company is backed by investors including Mountain View, California-based Google Inc.’s co-founders Larry Page and Sergey Brin, and the government of Abu Dhabi. Daimler, the world’s second-biggest maker of luxury vehicles, invested last May. Tesla said Musk told Daimler about the Toyota partnership on May 19.

The revival of NUMMI, for 25 years a joint venture between Toyota and the former General Motors Co., will create 1,000 jobs, California Governor Arnold Schwarzenegger said. The plant closed in April.

UAW Sues GM over Retiree Health Care Payment

 

DETROIT (AP) - The United Auto Workers union has sued General Motors Corp., saying the automaker owes it $450 million for retiree health care.

In the lawsuit filed Tuesday in federal court in Detroit, the UAW said that in 2007, GM agreed to pay $450 million to settle a UAW claim against auto supplier Delphi Corp. as part of Delphi's emergence from bankruptcy protection. Delphi is GM's former parts division.

The UAW said the agreement should still be in effect even though GM went through its own bankruptcy reorganization last year. The UAW said it demanded the payment from GM on Oct. 29.

According to court documents, GM responded with a letter rejecting the union's demand.

The UAW says the money should go to a union-run retiree health care fund.

Ousted GM CEO Is Given Salary, Benefits Deal

By The Wall Street

General Motors Corp. said Tuesday that former Chairman and Chief Executive Rick Wagoner will receive an annual salary of $74,030 for his lifetime and annual benefits of $1.6 million for five years.

Mr. Wagoner's benefits are reduced in line with cuts given other retired GM executives earlier this year. His pension was worth $20 million at the end of 2008, according to regulatory filings.

The Obama administration demanded Mr. Wagoner step down in March because GM wasn't making enough progress in demonstrating it would be viable. He remained on the payroll at $1 a year.

In a filing, GM said Mr. Wagoner will retire effective Aug. 1 and receive benefits based on his 32 years at the auto maker. He will continue to receive liability insurance at a level similar to other retired executives until Jan. 1, 2010. He also will receive company-paid life insurance or its cash value, currently $2.6 million.

GM filed for bankruptcy June 1 and emerged Friday, with the U.S. government owning a 60% stake.

Obama Forces Wagoner Out at GM
Originally Posted to the Detroit News

In a dramatic development on the day before President Barack Obama was to unveil his plan for the auto industry, General Motors Corp. Chairman and CEO Rick Wagoner stepped down after the administration asked him to resign.

Obama has said he wants to help the U.S. auto industry and is offering GM and Chrysler LLC fresh short-term aid, but he faces mounting public opposition to industry bailouts.

"From the government's perspective, they had to show a visible form of sacrifice," said David Cole, chairman of the Center for Automotive Research in Ann Arbor and the son of a former GM president. "At one level I'm surprised, and at another level, not at all."

GM confirmed the management change just after midnight and Wagoner released a statement."Fritz Henderson is an excellent choice to be the next CEO of GM," Wagoner said. "Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts."

Henderson, 50, a GM veteran who has led the automaker's European and Chinese operations, has been carrying out the company's restructuring on a day-to-day basis and knows the leaders of Obama's auto task force.

GM also said that Kent Kresa, chairman emeritus of Northrop Grumman Corp., had been named interim non-executive chairman of the board of directors. Kresa became a GM director in 2003.

Wagoner, 56, was a GM lifer who became the company's CEO in 2000 and chairman in 2003.

Industry experts credit Wagoner with pushing through reforms and a landmark labor contract at the 100-year-old automaker, but he may have moved too slowly.

"If you can criticize Rick, it's that he was incremental by nature," said Jeremy Anwyl, chief executive officer for the automotive research site Edmunds.com. "Step by step they were moving forward but they ran out of time."

After losing $82 billion since 2004, GM is subsisting on federal loans as it struggles through one of the most perilous stretches in its history. It has received $13.4 billion from the government and sought up to $16.6 billion more.

The government said late Sunday it will provide GM with an unspecified amount of working capital over the next 60 days.

There will be no immediate management changes at Chrysler, which will receive aid for 30 days as it moves to conclude an alliance with Italy's Fiat SpA.

Obama is scheduled to publicly outline his strategy for the American auto industry today in Washington.

In his statement, Wagoner said he was asked to step down during a meeting Friday at the U.S. Treasury Department.

"I think the need for something symbolic was pretty strong, and this certainly qualifies," Anwyl said.

In its assessment of GM's restructuring plan submitted on Feb. 17, the task force concluded that the plan was not viable, that GM needed a change of leadership, including changing most of the directors on its board.

It also said GM's plans did not go far enough, and it still has too many nameplates. It also said that while the Chevrolet Volt extended-range electric vehicle looks promising, it will probably be too expensive to be commercially successful initially.

Wagoner, who had agreed to work for $1 a year, is barred from getting a golden parachute or a big severance package under the terms of the government's Troubled Asset Recovery Program.

Earlier on Sunday, on one of the morning news shows, Obama said he believed the U.S. auto sector could be restructured to become a successful industry.

"But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean and mean and competitive than it currently is," he said on CBS's "Face the Nation." "And that's going to mean a set of sacrifices from all parties -- management, labor, shareholders, creditors, suppliers, dealers."

He acknowledged that Detroit's automakers had taken measures to address "longstanding problems in the auto industry and the current crisis, which has seen the market for new cars drop from 14 million to 9 million.

"Everybody's having problems, even Toyota and other very profitable companies," he said.

But GM is suffering more than the overall industry, and some analysts say the talk of government bailouts and even possible bankruptcy is hurting the automaker in the marketplace.

So far this year, GM's U.S. sales are down by more than half, compared with the market's overall 39 percent decline, and GM's market share has dropped to 18.2 percent from 22.7 percent a year ago.

During Wagoner's tenure, GM lost the title of being the world's largest automaker, a position it had held for 77 years.

Accustomed to being treated as one of the country's top business leaders, Wagoner was subjected to intense grilling late last year on Capitol Hill as he sought federal loans to keep GM afloat.

The automaker began to run low on cash even though it has dramatically reduced its North American operations through a series of restructuring plans. The latest calls for the elimination of 47,000 jobs, 14 plant closures and the selling, shrinking or winding down of the Saturn, Saab, Hummer and Pontiac brands.

But the restructurings failed to make GM efficient enough to withstand a severe downturn that knocked auto sales to their lowest levels in 27 years.

In spite of the company's troubles and the stock's recent plunge to a 75-year-low below $2, Wagoner retained the support of the board of directors.

GM CEO Wagoner Forced Out By Obama Administration
Originally Posted to the Wall Street Journal

The Obama administration used the threat of withholding more bailout money to force out General Motors Corp. Chief Executive Rick Wagoner and administer harsh medicine to Chrysler LLC, marking one of the most dramatic government interventions in private industry since the economic crisis began last year.

The administration's auto team announced the departure of Mr. Wagoner on Sunday. In a summary of its findings, the task force added that it doesn't believe Chrysler is viable as a stand-alone company and suggested that the best chance for success for both GM and Chrysler "may well require utilizing the bankruptcy code in a quick and surgical way."

The move also indicates that the Treasury Department intends to wade more deeply than most observers expected into the affairs of the country's largest and oldest car company.

After more than a month of analysis, the administration's auto task force determined that neither company had put forward viable plans to restructure and survive. The verdict was gloomier for Chrysler. The government said it would provide Chrysler with capital for 30 days to cut a workable arrangement with Fiat SpA, the Italian auto maker that has a tentative alliance with Chrysler.

If the two reach a definitive alliance agreement, the government would consider investing as much as $6 billion more in Chrysler. If the talks fail, the company would be allowed to collapse.

Despite the grim view of Chrysler, the task force said it had no intention of replacing CEO Robert Nardelli. Unlike Mr. Wagoner, who had been at the helm of GM since 2000, Mr. Nardelli is considered an auto-industry outsider who has only been in charge at Chrysler since the company was acquired by Cerberus Capital Management LP in 2007.

In addition to pushing out Mr. Wagoner, the task force said GM is in the process of replacing the majority of its directors. Kent Kresa, a longtime director, will serve as interim chairman. Mr. Wagoner will be replaced as CEO by Chief Operating Officer Frederick "Fritz" Henderson.

The administration said it would provide the company sufficient working capital for 60 more days, during which a revamped GM board and top management has to put forward a much more rigorous restructuring plan than it submitted last month.

"The administration is prepared to stand by GM throughout this process to ensure that GM emerges with a fresh start and a promising future," according to term sheets released by the White House Monday morning.

Administration officials made it clear that an expedited and heavily supervised bankruptcy reorganization was still very much a possibility for both companies. One official, speaking of GM, compared such a proceeding with a "quick rinse" that could rid the company of much of its debt and contractual obligations.

The clearest losers appear to be the thousands of bondholders and lenders to both GM and Chrysler. In both cases, administration officials said that the companies were burdened by inordinate amounts of debt that would have to be scrubbed. Chrysler's survival, the administration said, would require "extinguishing the vast majority" of the company's secured debt and all of its unsecured debt and equity.

To assure consumers reluctant to buy GM or Chrysler cars, the government plans to take the unusual step of guaranteeing all warrantees on new cars from either company. These guarantees would lapse back to the companies once they return to health.

Mr. Wagoner had managed the company through some of its most difficult moments. The company hasn't logged a profit since 2004, reporting losses since then of $82 billion. It nearly ran out of money at the end of 2008 before the Treasury Department provided emergency loans. GM's stock was trading above $70 when Mr. Wagoner took over as CEO in June of 2000. The shares closed last week at $3.62, placing the company's market capitalization at $2.21 billion. In Monday-morning trading on the New York Stock Exchange, GM shares were down 89 cents, or 25%, to $2.73.

Mr. Wagoner's tenure came amid extraordinary challenges that weren't entirely of his own making--including costly retiree benefits and union contracts that predate him, and the recent deep recession. Yet GM by most measures performed worse than other auto companies. Among the key decisions that hurt the company: a huge bet on trucks and sport-utility vehicles that piled up on dealers' lots unsold as high gasoline prices drove Americans to look for more fuel economy offered by rival companies.

Mr. Wagoner was asked to step down on Friday by Steven Rattner, the investment banker picked last month by the administration to lead the Treasury Department's auto-industry task force. Mr. Rattner broke the news to Mr. Wagoner in person at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met one-on-one with Mr. Henderson, who will fill in as GM's CEO.

"On Friday I was in Washington for a meeting with administration officials," Mr. Wagoner said in a statement released by GM. "In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have."

GM spokesman Steve Harris declined to comment.

In a statement released by GM Sunday night, Mr. Kresa said: "The Board has recognized for some time that the Company's restructuring will likely cause a significant change in the stockholders of the Company and create the need for new directors with additional skills and experience."

Plan for Viability

President Obama plans Monday to lay out the administration's interim conclusions on the companies' viability and the many steps that need to be taken to return the companies to health. The president will hold off on granting the companies the $21.6 billion in new loans they requested last month.

In remarks Sunday, Mr. Obama said that he intends to extract "a set of sacrifices from all parties involved--management, labor, shareholders, creditors, suppliers, dealers." The industry, he said on CBS's "Face the Nation," must "take serious restructuring steps now in order to preserve a brighter future down the road." The two companies "are not there yet," he added.

Mr. Wagoner's removal shows that the sacrifices could cut deep. The departure of the company's top executive promises to further shake up a company that has already been through considerable change over the past six months. The 56-year-old executive had been scrambling to craft a strategy aimed at maintaining leadership in the global sales chase with Toyota Motor Corp. and making big profits in emerging markets.

But Mr. Wagoner's plans came crashing down in the second half of 2008 as the company ran short of cash and was forced to ask the government for billions of dollars in aid. At the same time, his executive team started dismantling several parts of the company, including a plan to shed several brands, slow the pace of new-product introductions and sell stakes in international operations.

Industry's Outlook

The president's auto task force has spent more than a month digging into the restructuring plans that GM and Chrysler submitted last month. The team has struggled to make two determinations: when will the steep plunge in car sales end and what will the market look like once it revives.

GM has based its revival plans on the U.S. market rebounding to sales of 14.3 million vehicles a year in 2011, up from a rate of about nine million vehicles so far this year. Many analysts now consider GM's short-term forecasts to be overly optimistic.

The two companies received a total of $17.4 billion in government loans in December and have requested another dose to keep them going through this year. Of the $21.6 billion, GM is seeking $16.6 billion more, while Chrysler has asked for $5 billion more.

Among challenges the administration faced leading up to this weekend's decision, foremost were the efforts to draw steep concessions from the United Auto Workers union and from the bondholders.

Attempts to solidify deals with the UAW and bondholders were slowed by disagreements by both parties over how exactly the other party needed to budge. The UAW, for instance, insists it already made health-care concessions in 2005 and 2007, and argues that the bondholders have never been asked to concede anything.

"I don't see how the UAW will do anything until they see what the bondholders will give up," one person involved in the negotiations on behalf of the UAW said Sunday.

Bondholder Factor

The bondholders have said that they are willing to make concessions, but they have wanted to see the union make further cuts. The fact GM raised most of the unsecured debt to fund union health-care and pension costs is also seen as a reason why the union needs to take bigger steps.

With Mr. Obama potentially holding off on new loans until concessions are made, analysts said GM likely has enough cash on hand to weather at least another month before its need for more government aid becomes urgent. Chrysler may need another infusion of cash sooner. Ford Motor Co. hasn't sought federal assistance.

Both GM and Chrysler are negotiating with the UAW to accept a range of cost-cutting measures, including greatly reduced work forces, lower wages and a revamped health-care fund for retirees.

The U.S. auto industry has been reeling from a plunge in car sales over the last six months. Sales in February were down about 40% over the same month last year. The drop has sent shock waves through the hundreds of smaller parts companies that supply the big auto makers. To keep the sector afloat, the administration recently announced a $5 billion financing facility to help suppliers cover their expenses.

"We think we can have a successful U.S. auto industry," President Obama said on Sunday. "But it's got to be one that's realistically designed to weather this storm and to emerge--at the other end--much more lean, mean and competitive than it currently is."

Treasury Secretary Timothy Geithner, who is nominally in charge of overseeing the auto bailout, said on Sunday the government was prepared to lend more money "if we believe it's going to provide the basis for a stronger industry in the future that's not going to rely on government support."

The original December loans were given under the agreement that all sides would strike a compromise deal by March 31, but the administration is taking advantage of a clause allowing all sides another month to negotiate. "It was unrealistic to renegotiate a new labor agreement and the unsecured debt in so short a time," said Sean McAlinden, chief economist with the Center for Automotive Research, in Ann Arbor, Mich. "That has never happened before."

GM and Chrysler are meant to submit by Tuesday assessments of where their restructuring efforts are heading. In February, both companies put forward plans for paring their operations, reducing their work forces and eliminating vehicle models.

GM and representatives for its bondholders remained in talks over the weekend about a deal that would force these investors to turn in at least two-thirds of the value of the debt they hold in exchange for equity and new debt.

This arrangement would force GM to issue significantly more stock than what is currently being traded in the market. In addition, the government is being asked to guarantee the new debt with federal default insurance in order to entice bondholders who otherwise wouldn't be interested in participating in the swap.

If GM can't eventually forge a deal with the ad hoc committee representing the bondholders, the company may be forced to issue a debt-for-equity swap without the blessing of some of its biggest and most influential unsecured investors. This would heighten the possibility of the company eventually needing to file for Chapter 11 bankruptcy protection.

What's Good for GM Could Be Good for America

Rick Wagoner, this could be your moment.

When you appear before Congress later this week, you will no doubt have left behind the Gulfstream jet that attracted so much unwanted attention the last time you testified as chairman and chief executive officer of our nation's largest car company, General Motors.

You know that corporate jets are among the least of Detroit's problems. You know too that among the greater threats to your industry are the overly generous health-care promises made by various managements and union leaders to their workers and retirees. Most of all, you know that these promises will not be kept, for the simple reason that there isn't enough money to fund them.

Given this reality, Detroit needs two things today. First, it needs a restructuring that would allow auto workers to own their own health care -- and take it with them if they leave. Second, it needs someone like you to stand up and say so.

It would take guts. After all, senators and congressmen view hearings like those they will hold this week as opportunities to hop on the populist train and take a few corporate scalps on camera. That, of course, will do nothing to address the costly and unfair system of health-care coverage that makes American companies less competitive and leaves American workers more vulnerable. If you would only use your platform to point out how Congress could change this by making our tax laws more equitable and our nation's health plans more portable, you'd be worth a whole fleet of Gulfstream planes.

Now, health care is not the only reason Detroit is in trouble. But you have rightly noted that it's a big contributor. GM, for example, provides health benefits for a million people today -- only a fraction of them actual workers. Three years ago, you told GM shareholders that these health-care expenses added $1,500 to the cost of every GM vehicle. Which explains the old joke that GM is no longer a car company that provides health benefits, but a health-care company that happens to make cars.

In the past, efforts at reform foundered because workers with employer-provided care had an interest in preserving advantages that gave them more generous health coverage. But today's economy may be testing that proposition. In 2005 and 2007, these same workers watched as you reached deals with the United Auto Workers union (UAW) to cut back on GM's health-care obligations.

In other words, whatever the old health-care plans might say on paper, you know the reality is a future where the Big Three's workers will be renegotiating givebacks with a gun pointed at their heads (the threat of their company going bankrupt). Retirees will have even fewer options as they find themselves paying more than originally promised.

Mr. Wagoner, you could point to a better way forward, one that helps both companies and workers. Thanks to reforms pushed by this president, Americans can now own health savings accounts they can use to build savings and cover day-to-day expenses. Used in combination with a catastrophic health plan, they would also be protected from financial ruin.

For companies, such an arrangement would help shift the responsibility for health care from employers to employees. And because these plans give health-care consumers more control over spending decisions, they also help restore some price-discipline to the market.

For employees, benefits that might not have been as obvious when times were fat are now easier to see. A worker who owned and controlled his own plan would not be trapped at a job simply because of its health benefits. A worker who owned and controlled his own plan would not be at the mercy of business managers and union leaders who agree to cut health benefits as part of a corporate rescue. And a worker who was unfortunate enough to be laid off wouldn't have to worry about his family losing their health coverage along with his job.

For too long, much of Big Business and Big Labor seem to have shared the assumption that the "solution" to the health-care mess is to dump their problems on the American taxpayer. This in fact has long been the message of Lee Iaccoca, the business leader who was so successful in lining up Chrysler for an earlier bailout. So it will be interesting to review the fine print of any bailout to see how much American workers who have no health-care coverage at all will be taxed to fulfill the generous promises made to the UAW.

Mr. Wagoner, if you were the voice that prodded Congress to eliminate the perverse incentives eating away at the benefits of both GM workers and their company, you'd be a hero. At a time so many are singing the death of capitalism, Americans could stand to hear from a corporate chief singing a different tune.

Pencils? Wall Clocks? No Cost Cuts Are Too Small at GM

Too Little Too Late

Over the past several weeks, engineers and technicians working at General Motors Corp.'s sprawling proving grounds west of Detroit started noticing a curiosity: an increasing number of wall clocks had the wrong time, or stopped working altogether.

The reason: As part of a drive to cut $15 billion in costs, GM is no longer keeping the 562 clocks in working order, which will eliminate the expense of replacing and disposing of the clock's batteries and the cost of resetting them twice a year for daylight-saving time.

It's not the only new measure GM is taking to save every last nickel. In its Renaissance Center headquarters, employees working late have to climb stairs when navigating its labyrinth of lower floors -- the company now stops the escalators at 7 p.m. In designated cleanup areas of certain offices, the company has changed the type of wipe-up towels it buys. In a memo to employees, a staffer explained this will lower GM's "cost per wipe."

Like GM, Ford Motor Co. and Chrysler LLC are slashing costs. Earlier this month, Ford said it will cut its North American salaried work force by approximately 10%, and is trimming its capital spending, manufacturing, information-technology and advertising costs. GM and Chrysler have both halted or slowed work on new vehicles to cut development expenditures. Neither company held news conferences at the Los Angeles Auto Show last week, a standard function at such shows.

At GM, though, the penny-pinching is visible at the microscopic level, from cheaper pencils to elimination of voice mail in the plants.

Next year, GM isn't giving out its "Mark of Excellence" awards to its top-selling dealers. And it used to maintain a sizable fleet of cars for reporters to test drive, but has cut that back.

At the same time, GM has felt the heat for cutbacks it hasn't made. Last week Chief Executive Rick Wagoner flew on one of the company's corporate jets to Washington to ask for a bailout from taxpayers, a fact that raised the ire of some lawmakers. "There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands," Rep. Gary Ackerman (D.,N.Y.) said. "It's almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. ... I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here?"

While Mr. Wagoner was able to travel on the corporate jet, GM has tightened its travel policy for thousands of employees in North America, telling them no air travel is allowed without written approval from senior managers.

Ford and GM scrambled to blunt the public-relations damage. Ford said it was exploring the sale of its five aircraft and GM, which leases the planes, said it had decided to get rid of two of its five remaining jets before last week's hearings. Tom Wilkinson, a spokesman, said GM has eliminated half the workers who staff its Detroit-based hangar and planes.

In view of their companies' dire finances, Mr. Wagoner and the CEOs of Ford and Chrysler were also asked on Capitol Hill last week if they would share in the sacrifice their employees have to make, and cut their salaries to $1. Mr. Wagoner and Ford's Alan Mulally declined. "I think I'm good where I am," said Mr. Mulally. Chrysler's Robert Nardelli said he would accept that, although he isn't paid a salary right now and he likely will be compensated if Chrysler's owner, Cerberus Capital Management LP, makes a return on its acquisition of the auto maker.

At GM's metal-fabricating plant in Grand Blanc, Mich., Steve Bean, a union committeeman, said he recently had to tell workers they would have to wait until at least next year to get $270 stipends they were promised in order to buy T-shirts, hats or coats emblazoned with their union local.

In addition, no settlements over grievances will be paid until next year. Grievance settlements are deals the company cuts with the union when a worker feels he or she wasn't properly paid or if the company violated work rules. Hundreds of such grievances are settled each year as a normal course of business.

"Someone might be owed eight hours of pay," he said. "All I can say is, 'If you're owed that money I'll get it to you, but not until Jan. 1 -- if we're still afloat.'"

Voice mail at most of the company's plants has been eliminated, a move that GM spokesman Tony Sapienza said saved something like "a million" dollars. Now, the only way to get union representatives or officers on the phone is to catch them at their desk or station. Recordings that used to say, "please leave a message," now say "please call back." "It's all good business practices, but now it's extreme business practices to the point where we're not wasting anything," Mr. Sapienza said. "We're cutting to the bare minimum."

At the proving grounds in Milford, Mich., where the clocks are now frozen in time, GM has switched to regular Ticonderoga No. 2 pencils instead of the more expensive mechanical pencils that used to be freely available in storage closets, known in GM-speak as "pull stations." Many of the moves have left employees scratching their heads. "Is this the best they can do to save money?" asked one engineer recently while checking the drawers at one pull station near his desk. "There's a lot of rubber bands but not much else -- a handful of pens and Post-It notes," he said.

Bill Jordan, president of UAW Local 599 in Flint, Mich., where GM builds engines, said he has noticed that the copy machines and printers that used to be spread out throughout the massive facility have disappeared. "They're doing their best to combine anything and everything they can to make it through the next few months," Mr. Jordan said.

Why Bankruptcy is the Best Option for GM

General Motors is a once-great company caught in a web of relationships designed for another era. It should not be fed while still caught, because that will leave it trapped until we get tired of feeding it. Then it will die. The only possibility of saving it is to take the risk of cutting it free. In other words, GM should be allowed to go bankrupt.

Consider the costs of tackling GM's problems with some kind of bailout plan. After 42 years of eroding U.S. market share (from 53% to 20%) and countless announcements of "change," GM still has eight U.S. brands (Cadillac, Saab, Buick, Pontiac, GMC, Saturn, Chevrolet and Hummer). As for its more successful competitors, Toyota (19% market share) has three, and Honda (11%) has two.

GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000. These fewer and larger dealers are better able to advertise, stock and service the cars they sell. GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. It would cost GM billions of dollars and many years to reduce the number of dealers it has to a number near Toyota's.

Foreign-owned manufacturers who build cars with American workers pay wages similar to GM's. But their expenses for benefits are a fraction of GM's. GM is contractually required to support thousands of workers in the UAW's "Jobs Bank" program, which guarantees nearly full wages and benefits for workers who lose their jobs due to automation or plant closure. It supports more retirees than current workers. It owns or leases enormous amounts of property for facilities it's not using and probably will never use again, and is obliged to support revenue bonds for municipalities that issued them to build these facilities. It has other contractual obligations such as health coverage for union retirees. All of these commitments drain its cash every month. Moreover, GM supports myriad suppliers and supports a huge infrastructure of firms and localities that depend on it. Many of them have contractual claims; they all have moral claims. They all want GM to be more or less what it is.

And therein lies the problem: The cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time.

GM's solution is to ask the federal government for the cash that will allow it to do all of this piece by piece. But much of the cash will be thrown at unproductive commitments. And the sense of urgency that would enable GM to make choices painful to its management, its workers, its retirees, its suppliers and its localities will simply not be there if federal money is available. Like AIG, it will be back for more, and at the same time it will be telling us that it's doing a great job under difficult circumstances.

Federal law provides a way out of the web: reorganization under Chapter 11 of the bankruptcy code. If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM's viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn't be easy but, unlike trying to bail out GM as it is, it wouldn't be impossible.

The social and political costs would be very large, but if GM fails after getting $50 billion or $100 billion in bailout money, it'll be just as large and there will be less money to soften the blow and even more blame to go around. The PBGC will probably need money to guarantee GM's pensions for its white- and blue-collar workers (pension support is capped at around $40,000 per year, so that won't help executives much). Unemployment insurance will have to be extended and offered to many people, perhaps millions if you include dealers, suppliers and communities dependent on GM as it exists now. A GM bankruptcy will make addressing health-care coverage more urgent, which is probably a good thing. It would require job-retraining money and community assistance to affected localities.

But unless we are willing to support GM as it is indefinitely, the downsizing and asset-shedding will have to come anyway. Even if it builds cars as attractive and environmentally responsible as those Honda and Toyota will be building, they won't be able to carry the weight of GM's past.

GM CEO Rick Wagoner says "bankruptcy is not an option." Critics of a bankruptcy say that GM won't be able to get the loans it will need to guarantee warranties, pay its operating losses while it restructures, and preserve customers' ability to finance purchases. While consumers buy tickets from bankrupt airlines, electronics from bankrupt retailers, and apartments from bankrupt builders, they say consumers won't buy cars from a bankrupt auto maker. But bankruptcy no longer means "liquidation" or "out of business" to a generation of consumers used to buying from firms in reorganization.

GM would guarantee warranty support with a segregated fund if necessary. And debtor-in-possession (DIP) financing -- loans that provide the near-term cash for reorganizing companies -- is very safe, because the DIP lender has priority over all other claimants. In normal markets, it would certainly be available to a GM that has assets to sell, including a viable overseas business. Such financing is probably available even now.

In any event, it would be lined up before a filing, not after, so any problems wouldn't be a surprise. As a last resort, we could at least consider a public DIP loan to support a reorganizing GM with a good chance to survive -- as opposed to subsidizing a GM slowly deflating.

The fate of Daewoo -- the Korean auto maker that collapsed in 2000 after filing for bankruptcy, leaving about 500 dealers stranded in the U.S. -- is often cited as "proof" that a GM bankruptcy won't work. But Daewoo was headquartered in a part of the world where bankruptcy still carries a major stigma and usually means liquidation. Daewoo's experience is largely irrelevant to a major U.S. company undergoing a well-publicized positive transformation, almost certainly under new management.

GM as it is cannot survive without long-term government life support. If it gets that support, it can't change enough and won't change fast enough. Contrary to Mr. Wagoner's brave declaration, bankruptcy is an option. In fact, it's the only option that merits public support and actually has a chance at succeeding.

U.S. Working on Billions in GM Loans

The Bush administration is working to release to General Motors Corp. a portion of the loans Congress approved for the auto industry, according to a person familiar with the matter, a move that could help ease the way for the company's discussed merger with Chrysler LLC.

WSJ Detroit Bureau Chief Neal Boudette and WSJ reporter John Stoll discuss the very real possibility of a General Motors Corp.-Chrysler LLC merger amid increasingly poor sales that could send the automakers to the poorhouse. (Oct. 27)

GM and Chrysler's majority owner, Cerberus Capital Management LP, have been negotiating a complex deal in which GM would end up owning its smaller Detroit rival, but the parties have struggled to line up financing. The combined entity would need about $10 billion in new equity to cover the cost of laying off workers, closing plants and integrating the two companies, say people involved in the talks.

The government loan, which may total around $5 billion, would come from the $25 billion in low-interest loans approved by Congress and being administered by the Energy Department. The funds are aimed at helping Detroit retool plants to meet new fuel-efficiency standards. It isn't clear how quickly the money could be made available or whether it would come with strings.

Although the loans are supposed to speed the availability of fuel-saving technologies, the money could help steady GM's finances and make it easier for the struggling auto giant and Cerberus to persuade investors to back a merger. Any transaction would involve both Chrysler and GMAC LLC, which loans money for car purchases and other purposes. Cerberus owns 51% of GMAC and GM owns the rest.

Both GM and Chrysler are losing money. Analysts believe each company could start to run short of cash within 12 months.

The auto makers and Michigan's congressional delegation have proposed at least three plans in recent weeks to unlock federal money for a GM-Chrysler merger. One is to seek an equity investment from the government. Another would draw money for the auto makers from the $700 billion Troubled Asset Relief Program, or TARP, set up ostensibly to help financial firms. A third possibility is accelerating the $25 billion in loans that the Energy Department is managing.

An Energy Department spokeswoman said Monday the agency is "in the process of developing the rules for the loan program" and that it would be "premature" to set a timetable for when funds will be available. The agency has come under criticism from prominent Michigan figures in both parties after initially saying in September it could take "at least six to 18 months or more" to disburse loans.

On Monday, Moody's Investors Service lowered its ratings on GM and Chrysler. Even with the government loan program, Moody's said in a statement, "GM's liquidity profile will continue to erode in 2009" and Chrysler's ability to cover cash requirements may come under stress in 2009. Both GM and Chrysler had their ratings lowered one notch to Caa2. That's eight notches below investment grade. Moody's said it outlook for GM is negative and that it may cut Chrysler's rating again. With all the cuts they can afford to buy kids shoes and childrens shoes.

Ford Motor Co. is rated B3, six levels into "junk," or non-investment grade, territory. Its rating is on review for possible downgrade, Moody's said.

GM Shifts Into Overdrive on Small Cars

General Motors Corp., still unable to meet demand for fuel-efficient small cars, will keep its sole U.S. compact-car factory running on overtime for the remainder of this year, the auto maker said Friday.

GM is running short on Chevrolet Cobalt cars despite adding a third shift this summer at its Lordstown, Ohio, assembly plant.

GM spokesman Chris Lee said the company hopes the weekend work at Lordstown will deliver sufficient supply by next year. The factory will run two shifts every Saturday for the rest of the year, except for the Thanksgiving and Veterans Day holiday weekends, he said.

Cobalt sales fell 17% last month from a year earlier, a drop GM attributed to short supply. Still, Cobalt sales for the year are up 6%, while GM's sales overall have fallen 18% in a weak U.S. auto market.

Sales of the compact Toyota Corolla and Honda Civic models also fell last month.

Dealers across the U.S. have fewer than eight weeks' worth of the Cobalt, Corolla and Civic in stock, according to Wardsauto.com. The industry norm is to have at least a 10-week supply. The Ford Focus, with roughly a 13-week supply according to Wards, saw a 5% bump in sales last month.

"The increased availability is still kind of out in front of us," GM's global sales analyst Mike DiGiovanni said during a sales conference call, referring to Cobalt production.

GM and many of its rivals have been racing to retool U.S. manufacturing operations that had been geared toward building large trucks and sport-utility vehicles, which are falling out of favor with Americans pinched by high gasoline prices and a sputtering economy.

The compact-car segment had been an afterthought for Detroit auto makers, and the companies made little or no profit on U.S.-built passenger cars because of high labor costs and an inability to command the high sticker prices of Japanese rivals.

But the segment has become increasingly attractive as consumers downsize their vehicles and become willing to pay more for small cars.

To address the market shift, GM had said it would close four truck plants by 2010. The auto maker said Friday that on Dec. 23 it will close one of those factories, a Moraine, Ohio, plant that builds SUVs. Dramatically reduced demand for midsize SUVs, such as the Chevrolet Trailblazer and GMC Envoy, led GM to close the plant more quickly than expected.

GM has no plans to build car-assembly plants or convert truck factories and instead will manage increasing demand for cars by adding shifts at existing locations.

Ford Motor Co., however, plans to convert some of its truck plants to car factories. Toyota Motor Corp. has said it plans to begin building its Prius hybrid in the U.S. And Honda Motor Co., which already had a portfolio geared toward passenger cars, is opening a plant to build four-cylinder engines in Canada with a capacity of 200,000 units.

GM is building a small-engine plant in Flint, Mich., scheduled to open in 2010. An engine shortage at GM's Tonawanda, N.Y., plant forced the auto maker to cancel overtime shifts at the Lordstown factory last month, according to United Auto Workers officials.

By: Sharon Terlep
Wall Street Journal; October 6, 2008

GM Presses Ad Agencies on Costs

As Suffering Detroit Looks for Savings, Local Media Are Feeling the Pinch, Too

In its latest attempt to save money, General Motors has asked its advertising agencies to slash their fees by as much as 20% this year and next, according to several people familiar with the matter.

The owner of Cadillac and Chevrolet works with dozens of agencies around the country, including Publicis Groupe's Leo Burnett and Interpublic Group's McCann Erickson and Campbell-Ewald.

Several ad executives familiar with GM say the cuts could translate into more than $20 million in total savings for General Motors, but likely will mean layoffs for the agencies involved.

GM also has pulled out of September's Emmy broadcast on Walt Disney's ABC; it has advertised on the star-studded program for about a decade.

GM's push shows how Detroit's pain -- caused by a sharp drop in U.S. car sales due to soaring gas prices -- is creating ripples in other sectors. The fallout is expected to be particularly harsh for companies reliant on car makers' massive marketing dollars.

It's not just ad agencies being whacked by the belt-tightening.

Auto makers account for more than 12% of all ad spending in the country -- more than any other single industry. Media companies such as CBS, Viacom and News Corp. have all taken significant hits.

"The collapse in U.S. automobile consumer demand will materially damage the advertising growth rates of traditional media owners," said Michael Nathanson, a senior analyst at Bernstein Research, in a report to investors this week.

Bernstein predicts U.S. auto advertising will fall to $15 billion in 2008 from $18 billion last year -- a noticeable drop from $24 billion in 2004.

Ford Motor's U.S. ad spending for the first five months plunged 37%, while ad outlays by Chrysler in the period sank 31%, according to the latest data from ad-tracker TNS Media Intelligence. TNS figures don't include search advertising.

GM declined to give details on its request that agencies lower their rates, but a spokeswoman says the car maker has "asked our agency partners to work with us to eliminate low-value work and find creative solutions to go to market more efficiently."

Chrysler wouldn't comment on the TNS numbers, but a spokeswoman says the company is shifting marketing dollars to the Internet and to mobile, two areas not included in the TNS data.

A spokeswoman for Ford says the company doesn't comment on TNS data, but notes that Ford said in July that it cut $200 million from its marketing budget in the second quarter.

The media sectors most vulnerable to the pullback in automotive advertising include local television stations, local newspapers and local radio. Local TV stations get about 28% of their ad dollars from the automotive sector, and it accounts for 18% of ad spending in local papers, Mr. Nathanson says.

They are working overtime to find new sources of ad revenue. Tribune's WPMT FOX43, which broadcasts in central Pennsylvania, says it saw the cuts coming and offered its sales force more financial incentives to tap other ad-spending categories. Telecom company ads and a bit of political ad spending have helped. Still, automotive has represented 35% of the station's business in the past. "Automotive is huge," says John Riggle, the general manager. "Are we struggling without it? Yes."

Others stations are scrambling for other sources of revenue, too. "This is the worst I have seen it in my career," says Wayne Simons, vice president and general manager of Fort Myers Broadcasting's WINK-TV in Fort Myers, Fla. Mr. Simons, who has been in the business for 41 years, says the only group spending more on ads these days is lawyers. "They are advertising like crazy, saying that they can help you with foreclosures," he adds.

Auto accounts were once the most profitable pieces of advertising business, but auto giants, like other marketers, have squeezed their agencies enormously over the past few years. FCB, now part of Interpublic's DraftFCB, in 2000 had profit margins in the 20% range for its work on Chrysler. Now, profit margins on auto accounts are typically between 8% and 12%, according to ad executives.

Though ad executives say car accounts remain a vital and profitable piece of business -- in part because the agencies, after years of such work, have created effective economies of scale -- Detroit's retrenchment is another blow for Madison Avenue.

By: Suzanne Vranica
Wall Street Journal; August 7, 2008

GM to Crack Down On Health Coverage

General Motors Corp., looking to trim its nearly $5 billion-a-year health-care tab, is cracking down on workers who are collecting medical benefits for which they aren't eligible.

The auto maker is giving its 67,000 hourly workers until Aug. 20 to voluntarily remove dependents who shouldn't be covered from their health policies. After that, employees must prove that covered family members are eligible.

If GM paid for Michigan health insurance it shouldn't have, workers may be forced to reimburse the company, a GM spokeswoman said. GM has audited its health-care rolls before, but the new effort is more extensive than in years past, she said.

"GM spends $4.6 billion on health care and we want to make sure our employees who are eligible for the best health care are receiving it," she said.

Michigan health insurance plan audits like the one GM is conducting are becoming increasingly common as employers look to offset soaring medical expenses, said Paul Fronstin, director of health research and educational programs for the Employee Benefit Research Institute in Washington, D.C.

Trimming ineligible dependents from health plans can reduce medical costs by 2% to 5%, according HRAdvance, a Dallas human-resources company that conducts audits for employers. It estimates 5% to 10% of dependents covered on health plans shouldn't be enrolled, including divorced spouses, grown children and boyfriends and girlfriends.

GM last year spent $1.3 billion on health-care benefits for active hourly and salaried workers.

By: Sharon Terlep
Wall Street Journal; August 13, 2008

Wagoner Says GM Won't File For Bankruptcy or Reduce Brands

General Motors Corp. Chief Executive Rick Wagoner dismissed the notion that the auto maker may soon file for bankruptcy, and he also said the company has no plans to sell or shutter more of its brands.

"Under any scenario we can imagine, our financial position, or cash position, will remain robust through the rest of this year," Mr. Wagoner said Thursday while in Dallas to speak to a business organization. He said the company has plenty of options to shore up its finances beyond 2008, although he declined to outline them.

The comments failed to boost investor sentiment as GM shares fell 6.2% to $9.69 in 4 p.m. New York Stock Exchange composite trading Thursday. The stock has been trading at its lowest levels in more than 50 years as concerns mount about the company's financial position amid a steep decline in U.S. sales.

GM and other U.S. auto makers are reeling as the slow U.S. economy depresses sales and as high gasoline prices push many would-be buyers to small, more-fuel-efficient vehicles and away from the higher-margin SUVs and trucks. Through June, for instance, GM's U.S. sales slipped 16%, more than offsetting strength in overseas markets.

GM has about $24 billion in cash but is burning an estimated $3 billion a quarter, prompting talk that it will need a significant cash influx to get to 2010.

"We have no thought of [bankruptcy] whatsoever," Mr. Wagoner said in response to an audience question during the Dallas event.

But he noted the widespread discussion of such a possibility could itself hurt sales, because consumers may balk at buying a vehicle from a company they think could go under. "The rumors of it don't help anything and are completely inaccurate," Mr. Wagoner said.

Meanwhile, Mr. Wagoner said GM has no plans to further reduce its number of brands. The company recently put its iconic Hummer division up for sale.

GM sells vehicles under eight different brands, but most -- including Buick, Saturn and Saab -- struggle to attract buyers.

Mr. Wagoner said GM has plenty of initiatives under way to develop more fuel-efficient vehicles, such as the Chevrolet Volt, a plug-in hybrid he said should be in showrooms by the end of 2010.

By: Bob Sechler
Wall Street Journal; July 11, 2008