GM North America President Troy Clarke Reacts To The Bailout Proposal
Tuesday, December 09, 2008SUZANNE PRATT: Still no deal tonight on a government bailout of the U.S. auto industry. The Bush administration and congressional Democrats spent the day working out the final details of a rescue plan. But many Republicans on Capitol Hill are still opposed to the measure. They're concerned it doesn't protect taxpayer money or do enough to cut labor costs and promote management reform. And today, Chrysler's legendary former CEO Lee Iacocca said shaking up top management at General Motors would be a big mistake. Earlier today, I spoke with Troy Clarke, president of GM North America about the proposed bailout plan. I began by asking him what happens to GM's turnaround plans if the economy worsens next year.
TROY CLARKE, PRESIDENT, GM NORTH AMERICA: What we have done is, based upon what we thought was a very conservative market and market-growth assumption, asked for $12 billion of term loans that we would begin to repay in 2011, but we also asked as we returned to Congress last week for a $6 billion line of credit. The basis for the $6 billion line of credit is if the market conditions stay like they are today for all of next year, for an extended period of time, then access to that line of credit might be necessary to again, stave off real liquidity issues for General Motors.
PRATT: So if conditions stay as they are, when would you expect you would have to come back and ask for additional funds?
CLARKE: Well, I would think -- I think what the circumstance would be then, we would probably have to ask for another amount in the February time frame and it's questionable whether we would in March or not, but I wouldn't rule out that possibility. But all within the $12 billion framework and access to the $6 billion would be something that would be certainly later in the year, as of yet unspecified depending upon where the market rolls out.
PRATT: How much would you say of the current situation at GM is due to the financial crisis and how much would you say is due to poor management? Could you possibly quantify your answer? Is it 50-50, 70-30? What would be your best guess?
CLARKE: Yeah, I would tell you -- I'll just preface this by saying I guess I kind of have a biased view but --
PRATT: Naturally.
CLARKE: We had announced in July, revisions to our - what we would call that point, up to that point in time a turnaround plan. This was a turnaround plan that started in 2005 and we had made tons of progress on it. We carved $9 billion out of our cost structure, award-winning products had been introduced since that point in time, moving to the top of the quality list. I mean we were doing everything that you would need to do and of course, there was a cost and it brought our balance sheet into a weaker condition in doing all of that stuff. But looking at the market in July, we saw a significantly weaker market. And then the market really fell off in an unprecedented manner, absolutely unexpected by any of the experts or analysts in the industry in this October-November time frame, so I would say the most recent circumstance, the actual having to go to Washington, having to look for taxpayer assistance is really a function of the last two months in the market, which is a credit crisis, the credit markets don't function right now and also this record-low consumer confidence.
PRATT: What do you think it's going to take to bring the market back?
CLARKE: That's kind of the third leg of the stool. We can fix a lot more with regards to our cost structure and we can focus our resources more, but at the end of the day, the market needs to grow again and all the elements there are for it to grow, but what's needed is people got to be able to get car credit loans -- or loans to buy cars.
PRATT: So you would say economic conditions, primarily credit conditions.
CLARKE: Yeah, credit conditions and then of course credit conditions are very closely linked with consumer confidence and those are really the two key factors. There is no shortage for desire of some of the products that we can produce and in fact, are producing. It's just people sitting on the sidelines right now because quite frankly they're concerned and they're kind of watching their own balance sheets, if you know what I mean.
PRATT: I think we're going to have to leave it there, Mr. Clarke. Thanks so much for joining us today.
CLARKE: Suzanne, thanks for having me.
PRATT: My guest, Troy Clarke, president of GM North America.
