GM’s bankruptcy is viewed by many as a failure of historic proportions. GM’s chief financial officer says he views it as a once in a lifetime opportunity. GM CFO Ray Young spoke to Kiran Chetry on CNN’s “American Morning” Tuesday.
Kiran Chetry: Under the restructuring plan, the government will give the company $30 billion additional in taxpayer money, amounting to $50 billion so far. It's the largest amount, besides AIG, dolled out by the government. In a nutshell, can you explain what went so wrong for General Motors?
Ray Young: Kiran, we admit there have been errors in the past that we’ve made at General Motors. We’ve had a lot of extra excess costs, excess capacity over the years. We’ve got…defined benefit obligations that have really hurt us in the balance sheet. But going forward, Kiran, we're going to learn from our mistakes. And we’ve been given a once in a lifetime opportunity to restructure the balance sheet, to shed a lot of our extra capacity, extra costs, and move forward with a profitable new General Motors that’s going to be smaller but more focused with four core brands and with a cost structure that is very, very efficient.
Chetry: Can you explain to the American public how you're going to do that? How you're going to get back on track. Do you plan on being able to eventually return the billions in taxpayer money?
Young: Well clearly, with four core brands, we’re going to be very focused in terms of our product development and our marketing dollars. We're going to shed our extra capacity or our excess capacity in order to bring down the break-even level of our cost structure. But we're going to be very much focused as a product and customer oriented company…a lot of investments in this area, in terms of advanced technologies. Our intent is to return this investment by the American taxpayers both in terms of the loan they’re providing to us as well as the shares that the American public will initially own in the new General Motors.
Chetry: How do you convince people who doubt GM’s ability to compete and to get people to buy your cars in the future?
Young: Well, if you take a look at the last 60 days after President Obama gave us the June 1st deadline, it’s an example of how fast the new General Motors could move. In the last 60 days, we negotiated a historic UAW labor contract. It gets the labor costs in the United States close to the transplant levels here in the United States. We did the same thing up in Canada with the Canadian autoworkers. We basically negotiated with the bondholders and worked with them on an arrangement that we could emerge from bankruptcy…with their support. We negotiated an arrangement over in Europe, an MOU with Magna, in order to restructure the European business. We were able to accomplish a lot in the last 60 days, which is indicative of what the new General Motor is all about. We’re going to move quickly, we’re going to fast, and we’re going to take a lot of risks.
Chetry: Speaking of risks, one of them could possibly be the Chevy Volt. This is the plug-in hybrid you guys are touting. Reportedly, the retail price is $40,000. If you contrast that with the Toyota Prius, that’s selling for $25,000. One "Washington Post" columnist said it's a lot to pay for altruism. How do you stay competitive with a car like the Prius if your Volt is going to be several thousand dollars more?
Young: Well Kiran, we haven't talked about the selling price of the Volt yet. What we're working on is the battery technology, bringing down the cost of the vehicle, going through the learning cycles. We think the Volt is going to be a revolutionary vehicle. It's not a hybrid vehicle. It's an extended-range electric vehicle. We have a lot of confidence in this product, a lot of confidence in this technology. We actually think it’s going to be revolutionary in both the U.S. and global markets.
Chetry: When you start firing up these new cars, the new models, are you going to use these shuttered U.S. plants or are you going to continue to make a lot of the models overseas?
Young: Well right now, 2/3 of the vehicles that we sell in the United States are built in the United States. We made a commitment in the last UAW negotiations that we would reopen one of these stand-by or idle facilities in the United States to build a new small car for the United States. We have a commitment here to build in the United States. Going forward, we'll see a new small car here. This is an example of our commitment to the United States, a commitment to America.
Chetry: Do you have details about the sale of Hummer?
Young: We've been negotiating with three potential buyers of Hummer. The Hummer brand and some of the Hummer assets. We've reached an MOU. We're actually very, very pleased with this arrangement because we will be able to continue the Hummer brand with this purchaser and also maintain production here in the United States.
Chetry: Will you tell us who?
Young: We're not disclosing the name of the purchaser at this point in time.
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