General Motors Corp. is undertaking an in-depth review of its
product portfolio that could include eliminating or selling a brand,
but most likely will result in the Detroit automaker purging
overlapping models and shifting its emphasis to more fuel-efficient
cars, according to a source familiar with the plans.
The
automaker also is considering further cuts to its salaried work force
and is assessing options to access cash, the source said. The plans
likely will be discussed at a GM board of directors meeting in early
August.
GM would not comment specifically on the possibility of
cutting more white-collar jobs or eliminating brands, but reiterated
that Hummer is the only brand now under review and that actions could
be taken to conserve cash if current economic or industry conditions
persist.
Additional measures could include further reducing structural costs,
selling noncore assets, and retiming or eliminating other capital
spending," spokesman Tom Wilkinson said. "In addition, we will consider
opportunistically executing financing transactions in the global
capital markets, although we have nothing to announce."
The possibility of GM slashing more jobs or cutting brands was first reported Monday in the Wall Street Journal.
Plummeting
vehicle sales have hit GM's truck-heavy lineup more than its foreign
rivals as consumers worried about high gas prices turn to more
fuel-friendly models. GM is burning through cash at a rapid rate,
leading some analysts to speculate that bankruptcy is possible.
Last
week, JPMorgan said GM will need to raise more money before the end of
the year, which could prove challenging given tight credit markets and
the low value of GM's stock, which closed at $10.24 Monday, up 12
cents.
To turn around financially, GM must raise more money
while limiting expenses through moves such as cutting staff, closing
plants and pulling back on product development, analysts say.
GM
is reshaping its vehicle lineup, which likely will include scaling back
on SUVs and pickups and adding more small cars and ultra-fuel-efficient
models, such as the Chevrolet Volt range-extended electric vehicle. GM
now sells 12 vehicles it describes as SUVs among its eight U.S. brands
and just four compact or subcompact cars. GM last week said it's
considering bringing in a vehicle smaller than the subcompact Chevrolet
Aveo to the United States.
Consumers are likely to see fewer GM
models overall as it eliminates those that closely overlap, said
analyst Jim Hall of 2953 Analytics LLP in Birmingham.
"There
will be less duplicated sheet metal at dealerships ... and clearly some
current products don't have a place in the larger scope of things,"
Hall said, specifically naming the Saab 9-7X SUV.
Eliminating a
brand, rather than individual models, could yield additional savings
through reduced product development and marketing costs. And if a brand
could be sold -- as GM is trying to do with Hummer -- it could generate
cash, although analysts say the value of most GM brands is relatively
low compared with what the company needs to fund its turnaround.
JPMorgan said GM needs $10 billion in added capital, although not
immediately.
However, selling or killing a brand, as GM did
with Oldsmobile, could open the automaker up to lawsuits and discontent
from its dealers and erode sales if customers shun a dying brand. With
sales down 16.3 percent so far this year, that's a scenario GM can ill
afford, said David Cole, chairman of the Center for Automotive Research
in Ann Arbor. "I don't think cutting a brand is in the cards because
it's not something they could do quickly," he said.
Most GM
brands have limited value to an outside buyer, but killing one could be
a smart move, said Todd Turner, president of California-based brand
consulting firm Car Concepts Inc.
GM is spending on engineering
and marketing for multiple vehicles but achieving sales comparable to
competitors with fewer models in the same segment, he said. "How many
brands do you need between Chevrolet and Cadillac?"
GM's less
integrated Swedish Saab brand could generate some interest among
international firms, and Buick could be attractive to buyers looking to
improve their stake in the fast-growing Chinese market, where the brand
is popular, Turner said.
GM is reconsidering its product lineup as it moves to cut costs.
In
June, the automaker said it would idle four truck plants and delay the
redesign of its next generation of full-size trucks. The company also
scrapped plans to quickly refresh the Saturn Aura sedan -- a
capital-saving move that led some to speculate Saturn could be axed.
In
cutting more jobs, GM would follow its Detroit rivals. Ford Motor Co.
is reducing salaried costs by 15 percent, and Chrysler LLC will cut
2,400 factory jobs later this year by closing one plant in Missouri and
eliminating a shift at another. To increase its liquidity, GM has
several options, including leveraging its European assets, getting a
bank loan or issuing more stock.
A stock sale is unlikely
because at its current low value GM would have to significantly dilute
its shareholders' stake to raise significant capital, said James
Mallak, an auto restructuring expert with Alvarez & Marsal in
Detroit.
"They have some tricky waters to navigate through, but
they are not in immediate danger," he said. "They should be able to
obtain a loan because they still have a lot of unsecured assets."
via detnews
According to Japanese
sources, Mitsubishi is readying a crossover version of its new Lancer
Sportback model that’s expected to hit international markets by early
2010. As you can see in this computer generated image that was scanned
from an unnamed Japanese car magazine by one of our readers, the Lancer
Sportback X features a
slightly raised suspension for better ground clearance and a protective
body cladding combined with new alloy wheels and a different front
grille. -Continued
