GM details turnaround progress; outlines priorities for 2008

18 January 2008

Detroit: General Motors Corp. Chairman and CEO Rick Wagoner, and Vice Chairman and CFO Fritz Henderson spoke to automotive analysts at a GM conference on 17 January, providing detailed reviews of the company's turnaround progress, and outlining the company's priorities for year 2008, along with a preview of improvement opportunities for 2010 and beyond.

''We're delivering on the turnaround plan we established in 2005, and have exceeded expectations on virtually all counts,'' Wagoner said. ''We've set a strong foundation that we can truly build on. We're encouraged by our progress in revitalising our product portfolio, strengthening our brands, reducing structural cost and growing the business globally. At the same time, it's clear that we'll face some challenging headwinds in 2008. To continue driving the company's transformation, we'll remain steadfast in our efforts to introduce great cars and trucks and new advanced propulsion technologies, take full advantage of growth markets around the world, and accelerate our efforts to reduce structural costs to even more competitive levels in North America.''

Turnaround Progress
According to a press release by GM, since the introduction of its North America turnaround plan in 2005, GM has delivered significant progress in its massive restructuring, including:

Product excellence – Dramatically improved vehicle design and performance is gaining broad recognition, demonstrated by robust sales of recently launched vehicles and numerous industry awards, including 2008 North America Car of the Year for the Chevrolet Malibu, 2008 Motor Trend Car of the Year for the Cadillac CTS, and 2007 North America Car and Truck of the Year awards for the Saturn Aura and Chevrolet Silverado;
Revitalise sales and marketing strategy – The company has fundamentally changed its 'go to market' approach, resulting in stronger brands, re-alignment of its brand distribution channels, stabilised retail market share, significant reductions in daily rental sales and higher average transaction prices;
Intensify the focus on cost and quality – GM reduced annual structural cost in North America from 2005 to 2007 by $9 billion, driven by the 2005 hourly healthcare agreement, revisions to US salaried healthcare and pension programs, capacity reduction actions, special attrition programs for 34,000 hourly employees, and efficiencies achieved in other activities. Significant improvements also continue to be made in vehicle quality, as measured by both internal and industry metrics;
Address healthcare/legacy cost burden – Reflecting the impact of historical agreements with the United Auto Workers union (UAW) and several other key initiatives, GM anticipates that its spending on US hourly and salaried pension and healthcare will be reduced from an average of $7 billion per year over the last 15 years, to approximately $1 billion per year beginning in 2010.

Despite continued pressures in the German market, GM has also made significant progress in its Europe (GME) operations, driven by strong new products, successful implementation of its multi-brand strategy, especially the rapid growth of the Chevrolet brand, which contributed to record GME unit sales of over 2 million in 2007. Rapid expansion in Russia and Eastern Europe, and further structural cost reductions have also contributed to the improvements.

GM's total automotive results have demonstrated strong progress since 2005, marked by significant improvements in both adjusted net income and adjusted operating cash flow through the first three quarters of 2007. GM continues to have strong liquidity, with 2007 year-end gross liquidity estimated to be more than $27 billion, up from $20.4 billion at year-end 2005.

2008 Outlook
Acknowledging headwinds facing the industry, including weak US auto industry sales volumes, high fuel prices, high commodity and steel prices, and mounting regulatory requirements, Wagoner outlined the following focus areas for 2008 designed to continue the momentum and achieve improved financial results:

Continue to execute great products
Build strong brands and distribution channels
Execute additional cost reduction initiatives
Take full advantage of growth in emerging markets
Build GM's advanced propulsion leadership position
Maximise the benefits of running the business globally