New GM overhauls marketing in bankruptcy exit

ERJ staff report (AN)

By Chrissie Thompson, Automotive News.

Detroit, Michigan -- General Motors has exited bankruptcy with an overhauled sales and marketing structure, a promise of more management changes and a message that a leaner and meaner automaker is ready to win back American consumers and pay back taxpayers.

“Business as usual is over at General Motors,” CEO Fritz Henderson said in a press conference this morning. “Everyone associated with the company must realise this and be prepared to change -- and fast.”

GM's Automotive Strategy Board -- made up of regional presidents and global function leaders -- and its Automotive Product Board will be replaced by a single, smaller executive committee that will meet weekly, Henderson said.

The group will focus on business results, products, brands and customers. It will cut GM's decision-making team in half and eliminate the company's matrix structure, Henderson said.

A key member will be Bob Lutz, the former chief of product development who had been scheduled to retire as vice chairman and senior adviser at the end of the year.

Lutz, 77, is taking a new position as vice chairman in charge of creative design, brands, marketing and communications. He will report to Henderson.

Chiefs of GM's brands, marketing, advertising and communications will report to Lutz "for consistent messaging and results." Lutz, who had been succeeded by Tom Stephens, vice chairman of product development, will also work with Stephens and design chief Ed Welburn "to guide all creative aspects of design."

North American overhaul

GM is eliminating its North American strategy board and the North American president position held by Troy Clarke. Henderson said he will head the money-losing North American unit.

“I have a number of moves that need to be made in the next couple of weeks, including with Troy, but the job no longer exists at this point,” Henderson said.

With Lutz's move, Henderson said, GM will split its marketing and sales functions.

This will result in changes in Mark LaNeve's job as GM North America's vice president of vehicle sales, service and marketing, Henderson said.

“Sales will report directly to me,” he said. “We actually have a huge amount of change going on. Mark is head of sales today. We have a huge number of changes to take place between here and the end of this month, and Mark is responsible for hitting the sales numbers this month.”

Henderson said GM will have new positions in place by the end of the month. Those will involve some retirements and some people leaving the company, he said. Some people will receive new appointments within the new GM.

“I would have had this done had we closed July 31st, but we closed July 10th,” Henderson said. GM filed for bankruptcy June 1 and originally projected its exit could take as long as two months.

Brands get the bucks

The four core brands -- Cadillac, Buick, GMC and Chevrolet -- will get the focus of advertising money, Henderson said. Ads will not necessarily stress the new corporation overall, he said.

Henderson said that in the next 18 months, GM plans to launch 10 vehicles in the United States and 17 outside the United States.

Nick Reilly, formerly president of GM Asia Pacific, will take responsibility for international operations, based in Shanghai.

Henderson said GM eventually expects to be a minority shareholder in its European unit and will announce leadership changes there this month. The company is negotiating with a consortium led by Canadian supplier Magna International Inc. that plans to take control of Adam Opel AG.

A whirlwind 39-day bankruptcy for GM concluded with the closing of a deal to sell key operations and the core brands to a new company majority-owned by the U.S. government.

The new GM has $11 billion in U.S. debt, Henderson said, not including $9 billion in preferred stock. One of the automaker's top priorities is paying back taxpayers, Henderson said. The government owns 60.8 percent of the automaker and will lend GM a total of $50 billion.

“We take these loans very personally, and we view paying them off as a very key goal,” Henderson said. “It's about creating value so the sacrifices that are being made are worth it.”

The new GM will receive any proceeds from the planned sales of Saab, Hummer and Saturn.

The new company is structured to break even when annual U.S. sales reach 10 million light vehicles, Henderson said. U.S. sales haven't topped that mark this year in the weakest auto market in nearly three decades.

GM's U.S. sales have dropped 40.4 percent this year, with its market share falling to 19.7 percent. Its peak was 51.1 percent in 1962.

Shaking up the culture

Shaking up GM's long-criticized corporate culture will be a key issue for Henderson as the 100-year-old automaker seeks to relaunch itself.

Steve Rattner, head of the Obama administration's auto task force, said this week that it would be natural for Henderson to cut layers of management to make the company "a bit closer to the ground, leaner and meaner." Henderson took over as CEO when his predecessor, Rick Wagoner, was ousted by the task force at the end of March.

Another pillar of the plan is GM's commitment to launch more fuel-efficient cars and to focus its resources on fewer brands, models and dealerships.

GM has burned through $40 billion over the past four years and posted losses of $82 billion.

The close of the court-approved sale would mark the completion of an unprecedented effort by the U.S. government to save GM and Chrysler from liquidation by slashing debt, labor costs and dealerships.

The White House also has disbursed almost $80 billion to shore up the auto industry, including $5 billion for auto parts suppliers.

Chrysler exited bankruptcy a month ago after blazing a precedent-setting trail for GM by following an asset-sale plan that gave operational control of the smaller automaker to Italy's Fiat S.p.A.

The new GM will have slashed its debt and health care obligations by $48 billion and dropped almost 40 percent of the dealers from an unprofitable network.

GM also will take advantage of a new labor contract with the UAW that the company says will put its hourly operating costs on par with Japanese competitors led by Toyota Motor Corp.

Jamie LaReau and Reuters contributed to this report

From Automotive News (A Crain publication)