GM to restructure 27 bln dlrs of debt, cut more jobs

By AFP

July 15, 2010 Updated Apr 27, 2009 at 1:03 PM CDT

Troubled US auto giant General Motors announced stepped-up cost-cutting plans Monday to restructure some 27 billion dollars of debt and shed an extra 7,000 to 8,000 production jobs.

The automaker, which is working on a new viability plan to get an extension of US government aid, said it would seek to restructure the debt by offering a swap of common stock for bonds, as well as phase out its Pontiac brand.

GM said these and other actions would "speed the reinvention of GM's US operations into a leaner, more customer-focused, and more cost-competitive automaker."

GM said bondholders would own 10 percent of GM after successful exchange offer. But without this deal and other concessions, GM said it would seek bankruptcy protection.

"We are taking tough but necessary actions that are critical to GM's long-term viability," said Fritz Henderson, GM president and chief executive.

"Our responsibility is clear -- to secure GM's future -- and we intend to succeed. At the same time, we also understand the impact these actions will have on our employees, dealers, unions, suppliers, shareholders, bondholders, and communities, and we will do whatever we can to mitigate the effects on the extended GM team."

GM said it would phase out the Pontiac nameplate by the end of 2101 and focus on four core brands in the US -- Chevrolet, Cadillac, Buick and GMC.

The revised plan seeks to find a buyer or phase out the nameplates Saab, Saturn, and Hummer by the end of 2009, at the latest.

These actions would reduce GM's US dealer network from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent -- a further reduction of 500 dealers, and four years sooner, than in its February 17 Plan.

"This reduction in US dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets," a GM statement said.

GM said that under the latest plan, it could break even in the North American market with an industry volume of 10 million total vehicles.

"This rate is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007," GM said.

President Barack Obama's auto task force called the bond exchange offer "an important step in GM's effort to restructure its company."

"The interim plan that GM laid out in this filing reflects the work GM has done since March 30 to chart a new path to financial viability," the task force said in a statement.

"We will continue to work with GM's management as it refines and finalizes this plan and with all of GM's stakeholders to help GM restructure consistent with the president?s commitment to a strong, vibrant American auto industry."

The statement said the US administration "has made no final decision regarding the treatment of its current loan to GM or with respect to any future investments in the company."

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