GM News

General Motors Press Conference delivered on: 2008-06-03

Rick Wagoner
General Motors Chairman and Chief Executive Officer
Wilmington, Delaware

Good morning... thanks for joining us. We have some news we want to share with you this morning before the start of our Annual Meeting at 9:00 a.m.

As you know, in recent years we have been focused on several major strategies... including growing our business in emerging markets, leading in advanced propulsion technology, and, of course, turning around our North American business.

We've had tremendous success on our overseas growth initiatives, especially in places like China, Russia, and South America. Similarly, we've made significant progress on our advanced propulsion technology strategy. I'll address these more in my comments at the Annual Meeting.

We've also made a lot of progress on our turnaround plan... more than many people thought possible. From the start of our North American turnaround plan in 2005, I've said that our goal is not just to return GM to profitability... but to structure GM for sustained profitability and growth. We've been moving well on that track... but recent developments on the global oil scene have made it necessary for us to take additional actions.

Since the first of this year, U.S. market and economic conditions have become significantly more difficult. Of greatest concern is the unprecedented rise in oil prices... which have more than doubled over the past 12 months alone... and are viewed by most experts as part of a long-term trend toward higher energy costs... a structural change, not just a cyclical change.

You see the result at the gas pump every day. The national average price of gasoline is now almost $4.00 a gallon for the first time ever. These higher gasoline prices are changing consumer behavior, and rapidly... significantly affecting the U.S. auto industry sales mix. We at GM don't think this is a spike or temporary shift; we believe that it is, by and large, permanent.

Reflecting this rapid increase in oil prices, general economic conditions in the U.S. have changed considerably in recent months. While we remain reasonably constructive on the long-term prospects for the auto industry in the United States, we view the near-term U.S. economic and auto market environment with considerable caution.

These conditions, along with the rapid change in auto industry sales mix, require us to take further actions that will position us for sustainable profitability and growth.

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This morning, we have several important announcements, in three main areas. Let's start with product, where we've been moving quickly, and quite successfully, to revitalize our U.S. car business, and grow our crossover business.

Eleven of our last 13 new or major launches in the U.S. were cars or crossovers.

Take the Chevy Malibu, for example, which has won 29 industry awards so far, including the 2008 North American Car of the Year. And consumers are reacting with enthusiasm... as the Malibu is turning on dealer lots faster than any other midsize car, with retail sales up 125 percent this year.

The Malibu is a great example of our commitment to product excellence, and our ability to achieve it, in consumer's eyes. You'll see more of this in our future new car launches.

And the same is true for our crossovers... including the Buick Enclave, GMC Acadia, and Saturn Outlook.

GM's share in the mid-size crossover segment is up almost 4 percentage points this year, with many of these customers coming from competitive makes... almost 50 percent for the Acadia, for example.

Going forward, GM's focus on cars and crossovers will accelerate. In fact, 18 of our next 19 new product launches in the U.S. will be cars or crossovers.

I'd like to highlight several recent actions to illustrate this direction. At our meeting yesterday, the GM Board of Directors approved an all-new next-generation Chevrolet compact-car program.

This car will represent the first U.S. application of our global architecture strategy... an initiative we undertook several years ago, and which will pay major dividends as we fully leverage our expansive car development capability in Europe, Korea, and other locations, to accelerate the shift in our U.S. product portfolio.

This next-generation compact car will be pure Chevrolet in design and performance... it'll be better equipped than today's compact car... achieve benchmark safety and quality levels... and most importantly, have a 1.4 liter turbo engine that, when mated with a manual transmission, offers a 9 mile-per-gallon fuel economy improvement over Chevy's entry in this segment today.

Production will begin in mid-2010, in our Lordstown, Ohio, plant, subject to final negotiations with state and local authorities.

Our Board also recently approved the replacement for the Chevrolet Aveo.

The next-generation Aveo... which will also be based on a global architecture... will have segment-leading fuel economy when it becomes available for sale in the U.S. beginning in the second half of 2010.

Last night, the GM Board also approved an investment to produce a highly efficient, small-displacement engine module in the U.S. This 1.0- to 1.4-liter engine achieves a superb balance between fuel efficiency and power, and will be the mainstream engine for the next-generation Chevy compact car I just talked about.

This engine is tentatively planned to be produced in Flint, Michigan - again, subject to satisfactory negotiations with local and state authorities.

This new engine module in the U.S. is another good example of the benefits we're seeing from our global approach to running the business.

When you combine these recent Board actions with what we've recently announced, or are already doing... such as:

• 10 variants of our new six-speed transmission by 2010, which will allow us to produce more than 2 million units annually in the U.S....
• expansion of our hybrid offerings to eight vehicles by year-end 2008, more than any other manufacturer... and then to over 20 hybrid vehicles by 2012...
• our strategic alliances with two leading cellulosic ethanol startups to help jumpstart much needed growth in biofuels...
• delivery of 81 of the 100 Chevy Equinox Fuel Cell SUVs we're placing with customers to create the world's largest fuel-cell test fleet...

And last in the product and technology area... but certainly not least... I'm pleased to announce that, last night, the GM Board of Directors approved production funding for the Chevy Volt extended-range electric vehicle.

In other words, the Chevy Volt is a go... and we believe it is the biggest step yet in our industry's move away from its historic, virtually complete reliance on petroleum to power vehicles.

What we're saying with this approval is that the GM management and Board believe the technical goals of the Volt are not only achievable, but achievable generally within the time frame we previously outlined.

This also means that we are convinced that the Volt is an important investment for the future of our company and our stockholders.

We intend to show the production version of the Chevy Volt publicly in the near future, and we remain focused on our target of getting the Volt into Chevrolet showrooms by the end of 2010. We are preliminarily planning to produce the Volt at our Detroit/Hamtramck plant, subject to successful discussions with state and local governments.

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Our second set of announcements today involves GM's North American manufacturing capacity.

As I said earlier, higher gasoline prices are having a significant effect on U.S. auto sales levels, and especially on mix, as consumer demand shifts from trucks and SUVs, to cars and crossovers. We'll announce our May sales numbers later today, but what you'll see is more of the same... a clear shift away from trucks and SUVs, and toward cars and crossovers.

To respond to this market shift, GM will add, starting September 2, a third shift of production at our Orion, Michigan, assembly plant, where we build the hot-selling Chevy Malibu and Pontiac G6 midsize passenger cars.

Also in September, we plan to add a third shift at our Lordstown, Ohio, plant, where we produce the fuel-efficient Chevy Cobalt and Pontiac G5.

On the other side of the mix equation, we need to address the rapid industry shift away from trucks and SUVs. Today, we are announcing our plan to, over time, cease production at four GM truck assembly plants:

• Our Oshawa, Canada, Truck Assembly facility, where we build the Chevy Silverado and GMC Sierra pickups - with the timing likely to be 2009.
• Moraine, Ohio, where we build the Chevy TrailBlazer, GMC Envoy, and Saab 9-7 - at the end of the current model run in 2010, or sooner if market demand dictates.
• Janesville, Wisconsin, where we build the Chevy Tahoe and Suburban, GMC Yukon, and Chevy, GMC, and Isuzu medium duty trucks. The medium duty truck line will cease operation by the end of 2009, and the SUV lines will discontinue production in 2010, or sooner if market demand remains weak.
• And Toluca, Mexico, where we build Chevrolet Kodiak medium duty trucks -by the end of this year.

Employees at these assembly facilities were notified this morning by their respective plant management.

These are, for sure, difficult decisions. We'll work closely with our union partners in the U.S., Canada, and Mexico to mitigate the impact of these actions, made necessary by what we believe are long-term and permanent changes in consumer demand for trucks and SUVs.

In addition to these assembly plant moves, we will consolidate the related stamping and powertrain capacity, consistent with the lower market demand for trucks and SUVs. We will communicate the affected plants as these plans are finalized.

With today's announcements, we will be reducing our truck annual assembly capacity by over 700,000 units, and our total GM North America capacity to 3.7 million units by 2010.

We expect that these actions, along with the recently announced shift reductions at two other U.S. truck plants, Pontiac and Flint, will result in an additional GM North America structural cost savings of over $1 billion, on a running-rate basis, by 2010.

This is on top of the approximately $5 billion in savings by 2011 that we announced earlier this year... and also, of course, in addition to the $9 billion cost reduction accomplished over the 2006-2007 period in North America.

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Finally, the third part of today's announcement involves our distribution channels... and specifically, our Hummer brand.

We are undertaking a strategic review of the Hummer brand, to determine its fit with GM's evolving product portfolio, and considering the changing market conditions I discussed earlier. At this point, we are considering all options for the Hummer brand... everything from a complete revamp of the product lineup to partial or complete sale of the brand.

We are communicating this information to our Hummer dealer network today, and will seek their input during the review. We will provide more details as we move through the process.

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So, a number of important announcements today, covering everything from product and technology investments... to capacity adjustments... to a strategic review of our Hummer brand... all in response to substantially changed market conditions in the U.S.... a change that we believe is far more structural than cyclical.

While some of the actions... especially the capacity reductions... are very difficult, we believe they're necessary to adjust to changing market and economic conditions to keep GM's U.S. turnaround on track and moving forward.

In a few minutes, at GM's 100^th Annual Meeting, I'll have the opportunity to talk about our other major strategies: growth in emerging markets and advanced propulsion technology leadership, as we position GM for success in our second century.

Thanks for joining us today. We now have time for your questions.

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