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As General Motors begins paying back its loan from the U.S. government, Margaret Warner talks to a reporter with the Detroit News about the auto giant's prospects for recovery after last year's government bailout.
Finally tonight: the road back for General Motors.
Margaret Warner has a look.
Last year, in the wake of the financial crisis, the U.S. government poured $52 billion into GM to help the company survive and then emerge from bankruptcy.
Today, GM finished paying back the loan portion of that money, $6.7 billion. The loan repayment came five years ahead of schedule.
CEO Ed Whitacre announced the news today at an assembly plant in Kansas City, Kansas.
ED WHITACRE, chairman & CEO, General Motors: When GM accepted taxpayer loans last year, we pledged to use those funds to restructure this company, to reinvest in our people and our plants, to create jobs, and to bring outstanding new vehicles to market. GM's ability to pay back our loans ahead of schedule is a sign that our plan is working.
The federal government still owns 61 percent of GM stock, which was issued in return for the other $45 billion of last year's bailout.
For more on all this, we are joined now by David Shepardson of The Detroit News.
And welcome back, David.
DAVID SHEPARDSON, The Detroit News:
So, why is GM so eager and able to repay at least the loan portion right now?
I think it is two things.
One, it is the perception gap. They really want to move beyond the bailout. I mean, this was deeply unpopular, bailouts in general. And the auto bailout, outside of the Midwest, is really unpopular. So — and they lost some sales to Ford Motor Company, which didn't accept federal loans.
So, this is about shifting the tenor, and also about the fact that things have gone better during their bankruptcy restructuring. Auto sales across the board are better. And they don't need this $6.7 billion for a rainy day between now and June 30.
So, what does this say about the fundamental health of General Motors?
Well, they're in much better shape than they have been in — in decades, really. During bankruptcy, they were able to wipe out a lot of debt. They shrunk to a much smaller size, so they can make a profit selling far fewer cars.
I mean, they were in a race to fill the factories for years. They added more incentives. They did more fleet sales. And, as a result, they just got to a point where they weren't making any money.
And they shed some important costs associated with their labor force and retiree force, too.
And the big issue there — well, one is, they have wiped out all of their retiree health care benefits for hourly workers. They made a one-time nearly $3 billion payment. They can now start hiring tier two workers, which are workers who will make much less than the old — older UAW workers.
Now, we heard Ed Whitacre say that, we promise to use this money to fundamentally restructure.
So, how much of their improved health is due to the cost-cutting you have described and the product line cutting, and how much to fundamental restructuring or re-engineering of the company or the kinds of things it produces?
I think it is a bit of both.
Ed Whitacre took over in December. And he has basically retooled the entire management team. They brought in a new CFO from Microsoft. But, as a result, we're not seeing any new products yet from this new management team. That will take two or three years.
But what they are doing is focusing on the vehicles, getting consumers to go back to the showrooms and look at GM vehicles, because too many Americans don't even go to a GM showroom when they're thinking about buying a car.
But, I mean, how are they doing that?
Well, one thing is, they have gotten rid of half their brands. They're focusing on these four key brands of GM, Cadillac, Chevy, and Buick. They dropped their other four brands, like Hummer, and Saab and Saturn.
And they're putting more marketing resources into these four brands, and they have put more money into research and development and interiors, to — to basically compete better against the foreign imports.
And they have this new Volt, Chevy Volt, coming out, right?
That's — that's the halo car. That's going to be…
What do you mean halo car?
Well, I mean it's a vehicle that they're only going to sell 8,000 or 11,000 the first year.
What they want to do is get someone to come in and look at that vehicle that will get 40 miles on electric power, and maybe buy Chevy Cruze or another one of the high-mileage, traditional cars that's a lot cheaper.
But it's a lot like the Toyota Prius. The Prius gets a lot of people to go into Toyota showrooms, but a lot by a Camry or a Corolla.
Well, now, how much did he change the management culture? I mean, when he came in, in December, he pretty much ousted a longtimer, Fritz Henderson, I mean, a company insider.
And he doesn't — Whitacre doesn't come from autos. He comes from telecom, as you said.
So, did he really change the culture? Did he live up to his promise to — we want to eliminate the bureaucracy of this company?
Oh, he absolutely is.
I mean, he — for example, GM was known for the executives having private elevators that went to top of the Ren Cen. He didn't interact a lot with the rank-and-file workers.
Ed Whitacre goes down to the cafeteria at the company's headquarters, and mixes with average workers. And I really think it's about — he is not a car guy. He did very well at AT&T. He understands the numbers. He gives executives assignments, say, get it done, or I'm going to move you out.
And, as a result, we have seen a lot of places where he's replaced a specific executive two or three times already. So, he is not going to put up with failure.
And how much do you think the news today reflects, again, GM, vs. improved fortunes for the U.S. auto industry as a whole?
Well, the good news is, people are buying cars again. I mean, people…
Any cars, right.
I mean, people are finally going back out. The auto sales rate has gone up substantially, about two million units a year over last year. And, as a result, we have even seen Chrysler, which has — also got a government bailout, report some good news today. They had a first-quarter operating profit of nearly $200 million.
And I think it also reflects across the board that people are feeling better about buying vehicles and about, you know, the economy as a whole.
And there was a new poll today showing that Americans now have a more favorable view of American cars again…
Isn't that surprising?
… over Asian.
Well, I mean, a lot of that is driven by Toyota's problems with sudden acceleration and their P.R. disaster. But I think it also reflects about people giving American auto companies a chance.
Last quick question: When do you think GM will actually be able to sell their stock publicly, so that the government can begin to unload its — our huge share in General Motors?
Right. Probably not until next year. And, remember, it's going to take the government probably two years to sell all that stock in separate sales. So, we're going to be part of GM, as taxpayers, for a while to come.
David Shepardson, thanks so much.
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