One on One with GM's CEO Fritz Henderson
Monday, June 01, 2009
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SUSIE GHARIB: I talked with GM's CEO Fritz Henderson. My first question: what kind of owner will the government be?
HENDERSON: It's a question I don't have experience with to date. But let me talk about what I think will happen. I think the view is we will get through a bankruptcy process. We will have a 363 process. Our board of directors of the company will be reconstituted, the majority of them will. We'll have a newly constituted board. What the government has said is that they intend to basically only be involved in core governance issues which frequently focus on the board, actually almost always focus on the board. So I think they're going to make sure we have a world-class board and that board is going to hold me accountable.
GHARIB: But Mr. Henderson, we have seen that the Obama administration has been very hands-on. So when it comes to issues like what kind of cars you are going to make or something prickly like whether or not you will build a plant outside the United States, how is the balance of power going to work. Who is really in charge?
HENDERSON: I would say what the government is going to do is hold the board of directors accountable for -- as a shareholder they're going to hold the board of directors accountable for overseeing management of the performance of the company. So I think the operating decisions of the company are going to be responsibility of management.
GHARIB: The real issue here is selling cars. People have a lot of choices. They could buy a Toyota. They could buy a Ford. You said today give us a chance.
HENDERSON: Uh-huh.
GHARIB: Convince us why we should buy a GM.
HENDERSON: We have, let me just talk bay Chevrolet Equinox, for example, the new Chevrolet Equinox, four cylinder engine, six speed automatic transmission. I is relative the first generation, probe vehicle 32 miles per gallon on the highway. This is just a tremendous vehicle. It will provide, it has On Star. It has industry leading warranty coverage. The vehicle is superb by handling characteristics. It is all about making sure we get the product right. And that's what we want people to give us a try. We want them to see our products.
GHARIB: President Obama said today that he thinks that GM can become a viable company. Let's say that this recovery takes longer than expected. Can GM survive a recession when people just aren't buying cars?
HENDERSON: Well, we have over the last five or six months been stable at a low level which is good. At least it's not falling further here in the U.S. And I think we take some comfort from the fact that if we can at least establish stability at the lowest levels of demand we have seen since post World War II, that gives a chance to actually start to see some upside as the economy improves. So we are cautiously optimistic in that regard. But the second thing is the lowering of the break-even level of the company we significantly de-risk the business in terms of addressing continued levels of lower demand. And then finally, capital structure of the company and the claims on the firm whether it was for pensions or post retirement healthcare or interest or debt, we significantly de-levered the balance sheets. So we think that the risk of the company is substantially lower.
GHARIB: So when will GM start making money again? Give us the worst case scenario. Is it three years, four years, five years?
HENDERSON: It always, you always come back to what are your assumptions about demand. We certainly believe that the measures that are being taken to get the economy rolling in the right direction are taking hold. And certainly there are other people who would concur with that. You know, our job is to make sure that we get ourselves structured such that if it stays weak, we break even so that we can make money when it grows.
GHARIB: But when do you see GM making money?
HENDERSON: Well, we did our plan at the end of April. We showed that our plan in 2010 was break even, actually was slightly profitable. At the EBIT level, earnings before income and taxes, and by '11 we were profit at the pretax level. So that was in the document that we filed at the end of April and we are executing to that plan.
GHARIB: Now bankruptcy is a long process and a complicated one and you said today that GM needs to move fast. If things get complicated, drags on a little bit longer, what is the greatest risk?
HENDERSON: Well, time is always the risk in a bankruptcy process I think. But the structure of the 363 transaction, basically the good assets General Motors of being acquired and that process works. We're very well advised. We're very well prepared and we're ready to go. So we start today. And you know we're confident that we will be able to have the new General Motors be purchased and acquired within 60 to 90 days and then the actual wind down of the old General Motors will take some time.
GHARIB: If it does drag on, is it possible that GM is going to have to going back to the government for some more money?
HENDERSON: Look at the amount of financing that was included in the debtor (INAUDIBLE) and the debt financing, it was actually sized for what was necessary to accomplish this on an expeditious basis and we're highly confident we'll get this done.
GHARIB: People watching this tonight are going to be wondering when is the American taxpayer going to get that $50 billion back? What can you tell them?
HENDERSON: Well, I can only tell them that they have our commitment to get the job done, do it right, do it once. And then you know basically what we have seen is that all of the investors have indicated an interest in creating a market for GM stock which needs to be done first before that overtime you can actually sell down your interest. But in the meantime it is about getting the basics right so that when the markets come back, we can create real value in the (INAUDIBLE) stock.
GHARIB: Let's say you don't get it right. Let's say the markets don't come back. Is this GM's last chance?
HENDERSON: Oh, yeah there no second chance to this.
