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Transcript: Fritz Henderson Press Conference

President of bankrupt GM
Tuesday, June 02, 2009

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Steve Harris - GM VP - Global Communications

Good afternoon, everybody. Welcome to the General Motors building in New York. As normal, all of the things that we will have to say in answer of the Q&A will be covered by the Safe Harbor language. In addition, we'll be taking some questions after Fritz has some brief remarks. We'll take questions from both here in room and from those of you on the telephone. With that let's get started with our President and CEO, Fritz Henderson.

Fritz Henderson
Fritz Henderson - GM President, CEO

Thanks, Steve. Good afternoon, everyone. Thanks for joining us on a difficult, but very important day for General Motors Corporation. You have all heard President Obama's comments, received copies of GM's press release. Let me offer a few observations before opening it up for your questions.

Today marks a defining moment in the history of the General Motors Corporation. Our agreement with the U.S. Treasury and the government of Canada and Ontario provide a fast track plan to form a leaner, quicker, more customer, completely product-focused Company. One that's more cost competitive and has a competitive balance sheet. The plan incorporates the terms of our recent agreements with the UAW and the CAW, as well as has received the support of a substantial portion of GM's unsecured bondholders.

This New GM will be built from the strongest parts of our business, including our best brands, and our very finest products. We will have far less debt, fully competitive labor costs, and the ability to generate sustained and positive bottom line performance. The New GM will have a significantly stronger and healthier balance sheet, which will allow us to better support our brands and products through investment, increase our investment in new technology, and be able to weather difficult times.

Initially, the New GM will be owned primarily by the U.S. Department of the Treasury, the governments of Canada and Ontario, the UAW's post retirement healthcare VEBA trust, and the unsecured creditors, largely the bondholders, of the old General Motors. To implement these agreements and formally launch the New General Motors, it was necessary to enter a court supervised process, which we did earlier this morning, with the full support of the U.S. and Canadian governments, the UAW, the CAW, and with the support of a majority of GM's unsecured bondholders. While our preference was to create a New GM through other paths, and you heard me say this many times, what was and is the most important thing to do is to get to our destination, restructure General Motors permanently, and get there fast.

The 363 sale we're pursuing provides a powerful tool. In fact, an array of tools to accelerate and complete the job of reinventing General Motors Corporation. The court supervised process also offers strong safeguards to our customers and our business, until GM or the New GM, is launched as an independent Company, which we expect to happen in 60 to 90 days.

The actions we need to take to launch the New General Motors also include a number of extraordinarily difficult steps. Especially tough are the actions to close additional plants and further reduce our U.S. hourly and salaried employment. I want to express my sincere and heart-felt appreciation and thanks to all who have sacrificed so much in this regard, who have sacrificed in the past and will sacrifice in the future, including our dealers, suppliers, retirees, plant communities, as well as those who will continue to invest and in fact share the sacrifice in the future and in the days ahead.

This includes very serious sacrifices -- and the other unsecured creditors of General Motors Corporation, whose recovery will come in the form of stock and warrants and reminds us of the importance of delivering in the future, so that they get a recovery on their investment, and they're able to reduce the amount of damage that they've sustained. It's the job of management to maximize the return on our stock by producing the results, including generating cash as soon as possible to invest in our business, to grow, to be product-focused and in fact to reward the confidence of the taxpayers of the U.S. and Canada, but of the very parties that we're asking to sacrifice so that there can be a New General Motors.

In the meantime, GM remains open for business. In addition to marketing and selling our cars and trucks, we will continue to honor our warranties, service our products, and support our customers. Importantly, our product launches and technology programs remain on track. In fact, a key part of our new agreement with the UAW, for example, is our intention for the New General Motors to build a new small car here in the United States, and to do so profitably.

Also, all of our business operations are continuing without interruption in Europe, Latin America, Africa and the Middle East, and in Asia-Pacific. In fact, none of our operations outside the United States are included in the U.S. court filings or court supervised process, and these filings have no impact on our plans and operations, again, outside the U.S.

Today, GM Europe announced that it has secured a Memorandum of Understanding with Magna International and has received the support for a bridge financing package of 1.5 billion Euro from the German government, and we're very appreciative of the professionalism and the dedication and support of the Magna team, and we're extraordinarily grateful for the support we've received from the German government. This action, the series of actions, isolates our European operations from the court supervised process in the U.S., and GM Europe will continue to operate as normal as it will in the U.S., as it completes its restructuring, and we complete the negotiations of the definitive agreement with Magna International. Those negotiations are ongoing, but in the end, we anticipate that the New General Motors will maintain a substantial but still minority stake in the assets and the businesses that we commonly refer to as our Opel and Vauxhall business in Europe.

To our customers: we appreciate the confidence that many of you have placed in us over the years. Going forward, we intend to offer you nothing less than best-in-class cars and trucks and even better service than before. And to those of you who have never tried a GM vehicle, or who have tried one and given up on us, we look forward to the chance to win your business and earn back your trust. Give us another chance. The GM that many of you knew, the GM that in fact had let too many of you down, is history.

Today marks the beginning of what will be a new company, a New GM, dedicated to building the very best cars and trucks, highly fuel efficient, world class quality, green technology development, and with truly outstanding design. And above all, the New GM will be rededicated in our entirety as a leadership team to our customers. A number of our cars and trucks from the Chevy Volt, the Buick LaCrosse, the Chevrolet Camaro and Equinox, the GMC Terrain and the Cadillac SRX, amongst others, are already world-class or in the case of advanced technology, are breaking new ground. We need to make sure that all of our products are world-class and that will be our focus going forward. The days when General Motors would have 15 launches of which we would count on five or six of them being hits and the rest of them being okay are history. We need to make sure every single one of our vehicle launches is an outstanding car or truck.

Finally, on behalf of the entire GM team, some sincere thanks are in order starting with President Obama and his automotive task force of the U.S. Department of the Treasury, and especially the American and Canadian taxpayers, for the opportunity that's being provided to us to reinvent General Motors. We know we need to prove ourselves and to do it every day and we will. And we will do it right and we will do it once. From here on, we move up. This is not the end of General Motors but the start of a new and better chapter, one that needed to happen and one that begins today.

As we move forward, I want to continue to put a high priority on making sure we are open and transparent. One way we'll do that is through increased use of web chats and other information sources, and you'll be seeing and hearing a lot of me. I'll kick things off later this week on Thursday, followed by a steady stream of GM leaders available to answer questions and talk about our progress.

Thank you very much for your time. With that, let's open it up for questions. Thank you.

Steve Harris - GM VP - Global Communications

We're going to start over here on the right with a question from [TV Group] from Mexico. Can we get the microphone to this young lady right there? Right behind you is the microphone.

Unidentified Audience Member

Yes, sir. I would like to ask you. You say you're not going to close plants abroad, but what will be the impact on -- just is going to be temporary for these 60 days that you guys are going to be restructuring the Company? How will this affect Mexico who has 13,000 employees from GM and four plants?

Fritz Henderson - GM President, CEO

Buenos tardes.

Unidentified Audience Member

Buenos tardes.

Fritz Henderson - GM President, CEO

Our Mexico operation is not included in the U.S. filing. Our Mexico operations like our operations in the U.S. and Canada are being affected today by substantially reduced levels of demand. And so, therefore, as we've reduced the level of capacity and reduced our level of production to equate with the level of demand, we've seen an impact obviously in Mexico as well as in Canada and the U.S. That's been a function of the market. Let me just reinforce, our Mexico operations are not part of the U.S. bankruptcy process, are not intended to be, and they are a part of the new General Motors going forward.

Steve Harris - GM VP - Global Communications

Let's go over to Phil LeBeau on the other side.

Phil LeBeau - CNBC

Hi, Fritz. Right now, people around the country and around the world are watching this press conference, and a lot of people are probably saying, we've heard this from General Motors in the past. We've heard about the plant closings, the restructurings, that there's a new day approaching for GM. How should the American public look at this today and say, we have confidence that this is, finally GM's getting it right? How can you convince people that this is the last time GM will have to restructure?

Fritz Henderson - GM President, CEO

Well, I'll say at the beginning, that the only way to convince people is to produce results. Let me at least try to answer your question sitting here today. If I think about this business and being successful in the business, there's never been a successful turnaround done in the automotive business in its history without having success on both the product and the revenue side of the business, and getting your costs right. Nobody ever gets to do a turnaround with one or the other. You get to do both. If I think about the situation we found ourselves in, the work being done on restructuring the business, the work that has been done, and the work that we have done recently with our partners and the sacrifices that are being made, we find ourselves in the position where we feel confident that we are competitive and we will be competitive from a cost perspective.

The second is the impact on our balance sheet, the leverage, the various claims on the Company really were to a point were just untenable. We're solving that problem. So getting the issues and the operations behind us, we're getting the issues within the balance sheet behind us, so that the leadership team can spend the time where it needs to spend the time which is on products and on customers. Share of mind, share of time in a day is an extremely important thing for a leadership group, and I think what this does is allow us to permanently address problems that we have not been able to permanently address until today. And so I think we can say that when we exit this process and the New GM comes forward, we will have taken some of these historic problems, addressed them in a permanent way, to allow us to spend our time on where we should be spending our time, products, customers, reinventing the technology, and then we have to prove that the investment and the confidence and the sacrifice of people are worth it. So I do think that there is a very different approach here and one that addresses some of these traditional chronic problems in a permanent way and, frankly, frees us up to focus on exactly what we need to do to win. Thank you.

Steve Harris - GM VP - Global Communications

If I could identify yourself when you go to speak. Micki Maynard, we'll go next here.

Fritz Henderson - GM President, CEO

Hi, Micki.

Micki Maynard - New York Times

Hello, Fritz. Micki Maynard from the New York Times. You're in a different position than any other General Motors Chief Executive; you're the first one that's ever had to file for Chapter 11 protection. You'll have a new Chairman, although you already know him, Kent Kresa, you'll have a Chief Restructuring Officer. What will this mean to your role, running General Motors? I know everyone is emphasizing that you will run General Motors, the government will stay out, but your role has changed, and how do you view that?

Fritz Henderson - GM President, CEO

Interesting, as I came up from our offices here, there was a painting there of Mr. Sloan, Alfred Sloan, this morning, and I see paintings in our buildings in Detroit and I ask myself the question, I wonder what he would do if he were in my shoes, although he never was. At the beginning of General Motors there was a crisis, and what he did is, he did his job. He led the Company through it. And I would say that if he were sitting here today he would say do your job, and so if I look at what my job is, yes, we have a Chairman, Kent is the interim Chairman, he's repopulating the Board. We'll have a world class Board. I personally am a big believer in separating the Chairman's role from the CEO's role. I've got my hands full running General Motors, let alone running the Board of Directors, so I'm very appreciative of that, and the job that Kent is doing, working for Kent is a pleasure, and working for the General Motors Board of Directors has been a pleasure.

With respect to the government and the major shareholders, you heard the President. Certainly the only thing I can tell you is the automotive task force has been rigorous in its analysis and basically dissecting our plans, but with no real interest in running our business. They've basically said you need to run your business. We should hold you accountable. The Board of Directors should hold you accountable. We're fine with that. I'm fine with that. I couldn't ask for a better environment.

Yes, it's different. But I would say that leaders of the past in General Motors, were they in my shoes would be doing exactly the same thing to lead the Company through the situation and in terms of the change in governance, I think Micki, I'm quite confident it's going to work out just fine.

Steve Harris - GM VP - Global Communications

Next we'll go to the back row here.

Alan Chernoff - CNN

Alan Chernoff with CNN. Your predecessor had said that bankruptcy was not an option. Clearly was concerned about GM losing market share. Are you concerned about that, and can you also put that in the context of your target, becoming profitable, if auto sales are just at 10 million units a year?

Fritz Henderson - GM President, CEO

Well, so there's, I think, a three or four part question in there. Let me see if I can't take them apart. First, when I look at the situation in the market today, and the possibility of losing market share and the possible erosion of sales through a bankruptcy process, the most important thing that needs to happen is we need to move fast. Speed is of the essence. I can assure you that we've gotten ourselves ready to move fast. And the 363 process and the tools that come with that, with the support we have, we're quite confident. There's always risk, but we're confident that we will move fast. Not with a sense of urgency. I'm talking about pure unadulterated speed. Obviously, the process is driven by a court supervised process, but with a team of people and professionals that we have, we're confident that we'll face this and we'll move through it fast.

The second thing is we're open for business today. We're providing customers outstanding products. GMAC is in business, providing customers financial services, wholesale financing for dealers, retail financing for customers, and in fact, we feel very good about the support of GMAC through this process. That would be a second thing.

Third is, we're planning to run our business. Of course, we have a series of first-thing motions later today that we expect to be approved. The court needs to consider it, obviously, but if approved, would allow us to run our business in the ordinary course and we move fast. The issue of the acceptability of a bankruptcy process, if one steps back and look at the broad picture here of what's being accomplished in terms of the restructuring of the operations and the balance sheet, it's a remarkable opportunity for us to address both the competitive issues we found and the operating structure of the business and the significant excess leverage that we had in the balance sheet. And in the end, this was the best tool for us to be able to address both of those issues and do it in a thoughtful way. So yes, we were concerned about the impact on our sales and bankruptcy.

We are doing everything we possibly can. We are in business. We're servicing customers. We're taking care of customers. We're in the market with outstanding offers and we've got great products to sell. So that's what we're going to be doing. In the meantime, we're going to be moving fast through a bankruptcy process.

Steve Harris - GM VP - Global Communications

We're going to take two more in the room on this side and then we'll go to the phones. We have one right here in the front row.

Connell McShane - Fox Business Network

Yes, Fritz. Connell McShane with the Fox Business Network. Let me try to ask that government involvement question in another way. In a hypothetical, if the largest shareholder, being the government, comes to you and says, or recommends to you, we want to make car X and you and your management team are thinking car Y makes a lot more sense for us from a business perspective. How do you handle that situation, number one and, number two, what's a reasonable amount of time to expect the government to have exited that status of being a majority shareholder?

Fritz Henderson - GM President, CEO

Well, to answer that first question, I don't think it's going to happen. If I understand, I think we all understand the government and certainly President Obama was quite clear. He wants to have world-class Board of Directors in place, they want to be a shareholder and they only want to be involved in the most core of governance issues, which probably wouldn't include whether we do a next generation coupe or sedan. So I actually don't think we're going to see that situation.

I'm very confident. We're not seen that even through the task force process. It's been about how do we actually get the business restructured. Second part of your question?

Connell McShane - Fox Business Network - Media

When do you think that the government might exit that status of being a majority shareholder?

Fritz Henderson - GM President, CEO

Both the governments of the United States, Canada, Ontario, as well as actually the VEBA, the VEBA Trust, have an interest in actually selling down, creating a market for GM shares, selling down in an orderly fashion. They've certainly communicated that to us clearly. There will be some time for us to be able to get ready to do that. But I think, let's face it, this is a substantial bloc of shares, so this is a question of years, not months and I think that question is actually more appropriately addressed to the Treasury. But I do think they've certainly indicated an interest in having GM in private hands as soon as possible but consistent with getting the right return for taxpayers.

Steve Harris - GM VP - Global Communications

Let's go over on the far side, John Stoll against the wall there, I believe.

Fritz Henderson - GM President, CEO

Was John hiding back there?

John Stoll - Wall Street Journal

Hello.

Fritz Henderson - GM President, CEO

Hey, John.

John Stoll - Wall Street Journal

Fritz, a lot of concern about the future of GM in terms of if you continue to lose market share, same old story, you may be right back restructuring. What is the plan for stabilizing U.S. market share? And you had pleaded to U.S. consumers at the beginning to give you another chance. Is this the right time to rethink the way you've been approaching the market, give a little texture on how things are going to change, the market share story that GM does have of a silver lining.

Fritz Henderson - GM President, CEO

Well, we've been -- the last 60 or 90 days has been hectic would be an interesting word, but we've been intensely focused on trying to get issues behind us and address problems and challenges. The approach we're taking in terms -- and I'm going to focus my attention on the U.S. markets, to simplify the discussion. The approach of going to market with four core brands, properly resourced with capital and engineering, marketing and advertising and with a right sized dealer body is absolutely the right way, I personally believe, to go to market. So the most important thing is products, making sure that they're outstanding name plates -- we'll have fewer name plates, which allows us to basically focus on getting every one of these name plates right. In this case, I think fewer, more focused and better is a much better approach. I think having four core brands allows us to focus our marketing money and our attention behind those four core brands, and then distribution that basically supports that.

I think the most important thing we have is, I think we have a coherent approach to going to market. Second, we have a finance company which is now a bank. That bank is not just for General Motors, but obviously also for Chrysler, has the ability to provide financial services to GM dealers and customers, and if I think about the situation last fall versus today, and the ability for GMAC to provide competitive products and services, financial products and services to GM dealers and their customers, we are oceans away from where we were and we're very confident that GMAC can be a fantastic partner going forward.

Third is, we are in the process of right sizing our inventory, our dealer stock inventory, which was excessive given the level of sales that were experienced in the market, driven largely by the decline in the market. I think our job is to make sure we get our level of inventory in line, maintain it there, so the traditional, I'll call it inventory pressure situation in our view isn't necessarily, given the environment, tenable. We need to basically go to market with more equilibrium in terms of our stock levels versus the level of sales. We're going to achieve that and solve a problem that's been with us for some time.

I think it talks about products, customers, financial services that can support that and then finally how we run our production schedules and we think that -- we not only think, we know that this is a significant change from what we've historically been able to accomplish in the past.

Steve Harris - GM VP - Global Communications

Let's take a few questions on the phone. We'll start with Tom Walsh with the Detroit Free Press.

Tom Walsh - Detroit Free Press

Hi, Fritz. You mentioned a few weeks ago that you would be looking at leadership management changes as you went forward. How quickly are you going to move on that, and where are the priorities? I'm wondering specifically, as Bob Lutz is phased out, how you're going to run product development, now that the focus is back on product and not restructuring.

Fritz Henderson - GM President, CEO

Phasing out is an interesting term. Bob continues to provide great advice to myself and Tom Stephens. Tom has made the transition flawlessly and seamlessly to running our product development organization more broadly, and I'm quite confident that first of all the transition's been done well, and second, I personally continue to look forward to the advice and counsel of Bob, and he's been very forthcoming and its extraordinarily valuable to me. I think the transition, Tom has been made in the product development organization. Tom Stephens is a superb choice to run that organization.

The great thing about Tom is he's like me, he understands his limitations and understands where the assets are, and we just have some enormously creative people within the organization. Bob Lutz built a great product development organization. He is a charismatic and capable leader, but like all great leaders, they build an organization that's capable of actually delivering and that's what he's done. I think the product development factory if you will at General Motors will do its job, and do it superbly.

With respect to your first question about leadership changes, we will finalize those in the next 60 days, but let me just start out. The impact on the salaried workforce, for example, in North America and in the U.S. from year end 2008 to year end 2009 will be about 22% reduction in the salaried workforce. We have about a third of that completed at this point. We have another two thirds to go. That will be completed between here and the end of the year and the impact on executive leadership will be higher than that as we take levels out of the organization and simplify the decision making process.

Tom Walsh - Detroit Free Press

I missed the number of days that you -- before you announce those.

Fritz Henderson - GM President, CEO

Yeah, I mean, this is one where we've been working -- we've been kind of knocking down issues as we lead up to this day. We know exactly what we want to do, but I would say this is something that the actual communications, the specific decisions will be things that would take place in the next 30, 60 days.

Steve Harris - GM VP - Global Communications

Let's try to keep it to one question to a customer. We'll take two more on the phone, and then we'll come back into the room. We've got Robert Schoenberger from the Cleveland Plain Dealer. Robert, go ahead.

Robert Schoenberger - Cleveland Plain Dealer

Thank you. Fritz. On the dealer side you're sticking to the 17 months warning before the cancellation of a franchise, but it looks like the number is going up. Can you discuss your rationale for sticking to that number as opposed to Chrysler, which gave significantly less time to dealerships, and is the 2,000 stores it looks like now, going to be enough to rationalize the supply chain?

Fritz Henderson - GM President, CEO

Couple things. First, we are taking a different approach. Let me just talk about GM. Got my hands full with GM, not Chrysler. Let's talk about GM's approach. What we're doing is providing dealers options. We'll be communicating here shortly this week for those dealers, where we don't intend to renew their franchise agreements that expire in the fall of next year, we will offer dealers a chance for first termination.

What that will mean is that we will provide them with an amount of compensation for their franchise in an agreement that we will work with them to manage the wind-down of their inventory on an orderly basis. We will provide them sales and service support for disposal of the vehicles. We'll allow them to sell down their inventory in an orderly way. We will work with them on both parts, as well as bringing their franchise down in a more thoughtful and orderly way, if they agree to this agreement. If they don't, we wouldn't be able to actually have the new Company assume those contracts, but our view is this is definitely in the best interest of our dealers and our customers to try to handle this in a thoughtful way, and try to buffer what is otherwise a very difficult process for them. So that's our strategy. That's our approach.

In terms of the number, we still think actually that number of 3,600 is still the right number, but what we have done is provided an appellate process, because we don't pretend to be perfect, and so in number of cases what dealers have done is basically come in and said they'd like us to reconsider, and what we're doing is sitting down with any dealer that does that and try to look at their facts. There aren't, to be honest, very many reversals of those decisions, but nonetheless, I think it's thoughtful -- it's incumbent upon us to look at the facts, because in some cases we have made some mistakes, and so we'll correct them.

You probably heard Mark LaNeve talk in the past, this is an issue of getting not only the right sized dealer body, but making sure we get the right dealers in the right locations. This is not something that, like delivering parts to the assembly line, this is something that requires a fair amount of work per community and we have a great team of people to do that. It's going to take a little bit of time but in the end, we will end up with not only a right sized dealer body. We will still have the most extensive dealer network in the United States to take care of GM customers, including metropolitan areas, uptown and rural areas.

Steve Harris - GM VP - Global Communications

We'll go to Erin Ailworth of the Boston Globe and then we'll come back into the room.

Erin Ailworth - Boston Globe

So actually you just answered my question.

Fritz Henderson - GM President, CEO

Great.

Erin Ailworth - Boston Globe

Perfect.

Steve Harris - GM VP - Global Communications

All right. We're going to come to the back, Jeff Gilbert.

Jeff Gilbert - WWJ –AM -

Fritz, Jeff Gilbert from WWJ in Detroit. You want to move very quickly, but one question a lot of people want to know is how quickly will GM start making money again, and if you can't get it down to specifically the quarter, if you could give us a ballpark of when we will see a profitable General Motors?

Fritz Henderson - GM President, CEO

Actually, there were a couple questions in the front which I realize in retrospect I didn't answer. Let me pick up one, which is this one on profitability. One of our objectives, we're not sitting here today, we've got so much work to do, we're not in the business of picking which quarter we're going to become profitable. The issue is getting the breakeven down to about a 10 million unit level EBIT, earnings before interest and taxes, and to execute our plan through 2009 to get our self to that point.

So that doesn't mean we're profitable, obviously, because if you're breakeven at EBIT, you're not in a profitable position, but nonetheless the risk to the Company will be substantially less than it was before, and the upside will be substantially better to the extent the markets improve. As opposed to trying to guess what the volumes will be in any given quarter, the focus will be getting the breakeven down, so we're as robust as we possibly can be for different economic environments.

Steve Harris - GM VP - Global Communications

One over on the far side here.

Donny Laring - Swedish Radio

Hi, I'm [Donny Laring from the Swedish Radio]. A lot of people in Sweden are wondering what this means for Saab. Are you prepared to write down Saab's debt to make it more likely to sell? And is it [Repliput] or Fiat that right now is the strongest bidder for Saab?

Fritz Henderson - GM President, CEO

I don't think Repliput or Fiat are interested in Saab, actually. So they actually were part of Opel. But I would say, yes, General Motors is the largest creditor of Saab. We have been providing a small amount of DIP financing through our European business, actually for the Saab business. It's been quite manageable. They recently received an extension of the process. There are three possible bidders, none of which are those two institutions, who are interested in the business, and we're continuing to support the process. I don't think there's anything that we're doing here today which would change that. We'll continue to support that process, and we'll see what happens. Well, I think sitting here today, they have I think 90 more days, actually, now that I think about it because I think they got a three month extension so that would be the time line.

Steve Harris - GM VP - Global Communications

We're going to move over here, to the second row.

Caroline Hepker - BBC

Caroline Hepker with the BBC. You talked a lot about green products and trying to move forward in terms of embracing more fuel efficient cars. You've also talked about the government staying out of GM's business, but President Obama has been very firm really about talking about more fuel efficient vehicles. Will there be pressure on you to come out with a new greener vehicle for the United States sooner?

Fritz Henderson - GM President, CEO

Well, so let me just talk about fuel prices. And if I really knew what it was, I probably wouldn't be standing up here, actually. But let me talk about the -- I was watching this morning lots of discussion of replacement and it reminded me that our beliefs in our Company, we're planning our business, assuming that the economies as they improve, we will see higher oil prices than we have today, and I think it's a fair assumption, you have to make assumptions about your business, but I think our view is that oil prices will trend higher. We learned one thing in 2008, is economic growth can drive sharp increases in oil prices. The consumer themselves have actually changed in many ways, depending on the segment, but for example, the mid-sized car segment here, fuel economy, consumers are behaving as if fuel prices are higher than they actually are today. So I do think fuel economy will remain a key driver of the purchase decisions for consumers so I think it's very important.

I think the market will drive it, first of all. Second of all, the requirements for CAFE and just recently for example, I was in Washington where the industry, the State of California, the Federal Government, both the EPA and NHTSA, we all reached agreement on what is, I think, one common harmonized standard for vigorous and challenging fuel efficiency requirements for vehicles going forward, but nonetheless, we viewed that as to some degree a watershed. Because of the business, we couldn't afford to be planning on three or four different sets of regulations within the United States alone. We're very supportive of that. We as a Company have never missed a fuel economy guideline, and we're not planning to do it now.

I think between demand, and the requirements of the law, the fuel efficiency of our vehicles is going to improve, and I think the technologies that we're investing in, whether it's the Volt, whether it's hybrid technology, whether it's basic research, is all important for us to get that accomplished. So I think our objectives both as a firm as well as to the market are in alignment with what not only President Obama, but I think most governments around the world would view the importance of having more fuel efficient vehicles. I don't think it's unique simply to the United States.

Steve Harris - GM VP - Global Communications

We'll take three on this side and then we're going to go to the phone.

Roger Wang - 21st Century Business Herald

Roger Wang, a reporter from 21st Century Business Herald from China. How to solve the structure cost problem, I mean, where will you launch more global platform, and will you adopt some strategy like 1/4 strategy, products in one global platform to cut the structure cost?

Fritz Henderson - GM President, CEO

The answer is yes. We tend to continue to run our vehicle development operations on a global basis. One of the advantages that Magna offered for example in our European business, was its linkage to the global vehicle development processes within GM and the fact we were able to leverage our vehicle development money, for individual architectures across global volumes.

I used the example once before is that if you developed an insignia only for Opel, it's 150, 160,000 units. If you develop for a series of vehicles coming off that architecture it's a million units and there's a significant amount of economies of scale from that, so I do think we will continue to develop vehicles on a global basis and powertrain, and there will be certain vehicles that are unique and specific to individual markets. For example, in the U.S., the full sized pickup is something that is quite -- it's not unique solely to the U.S., but it is a vehicle that is prevalent here in the U.S. market. Some vehicles are that way. But by and large, the vehicles which have global application will continue to be developed on a global basis.

Steve Harris - GM VP - Global Communications

We're moving back here.

Jing-ha Huang - China News Agency

Jing-ha Huang from China News Agency. Mr. Henderson, GM's business in China grew 33.8% in the first five months of this year, compared to the same period of last year. I also heard from GM Shanghai that your business in China will not be affected by this bankruptcy petition. My question is will the New GM focus more on China, and could you give us some details about your new China plan, if there is any? Thank you.

Fritz Henderson - GM President, CEO

Let me start out with the fact our ventures in China are certainly -- are a critical part of the new General Motors, so they move forward and our ownership interest and ventures in China are part of the new General Motors, unequivocally. The second is our business in China continues to grow at a very fast, I would dare say torrid pace, and we're very appreciative of that. The business itself is highly successful, with our partner, SAIC, quite profitable, generates cash to be able to invest in the business and that's exactly what we're doing and it remains a critical part of General Motors going forward.

Does that mean we will increase our emphasis? I would say already our emphasis in China is one of the critical parts of being successful as a global automaker. We've had a good start, we're interested and excited about the next five years, and I think we've got a good start on it. We've got a lot of fantastic Buicks, Chevrolets, and actually Wuling being launched into the China market this year and next year and we're excited about continuing to grow, so China remains a key part of our business.

Steve Harris - GM VP - Global Communications

Down the row there from him.

Unidentified Audience Member

Mr. Henderson. My name is (inaudible) with Hong Kong. My question is also about China. You just mentioned bankruptcy, Chapter 11 application, will not impact part of your oversea division, especially in China. But my question is, you sell your strategy here, what chance that you'll produce more smaller cars, more fuel efficient cars here, and is that kind of strategy also applied to China actually there and also, I don't know if you had a plan to import more GM vehicles from GM China to here to keep your market share here?

Fritz Henderson - GM President, CEO

One of the bed rock principles of General Motors actually since Alfred Sloan has been we build where we sell. Historically, if you look at the U.S. market and North America, well over I think in 2009, 98 or 99% of our production for the North American market is built in North America. So between Canada, the U.S. and Mexico, the NAFTA countries. Of that, our U.S. business, if you will, is approximately two-thirds. So we certainly believe and we live the idea of we build where we sell.

The exact same philosophy has guided our business in China, where I think in terms of the product we sell in China, my guess is well over 99% of the product we sell in China, we build in China. Because it's the best way to be successful and be profitable. We're highly localized. As we are here in terms of working with local suppliers. Shortening supply chains, and I actually think the philosophy of building where we sell is absolutely the right philosophy as a firm. Number one, and number two, I think it applies whether we're in China or the United States.

Steve Harris - GM VP - Global Communications

We have one more in the room over here and then we'll going to go to the phone.

Stefan Wiechert - Die Presse

Stefan Wiechert from the Austrian newspaper, Die Presse. You briefly talked about Opel and the German government. I was wondering if you could elaborate briefly on the role of the German government and the problems that might have arisen during the process of selling Opel and also how important it was to General Motors to close the Opel deal before today, before you filed Chapter 11.

Fritz Henderson - GM President, CEO

What's the name of the publication?

Stefan Wiechert - Die Presse

Die Presse. Austrian newspaper.

Fritz Henderson - GM President, CEO

Thank you very much. I'll answer your second question first. It was very important to us to try to get clarity around Opel and Europe prior to today. It was very important. Because had we not done that, we weren't exactly certain what would happen. Between our own cash needs and Europe, which are significant, and the need to make a decision about how it might be affected by a U.S. filing, we were very interested in bringing closure to the matter prior to June 1st, and so we worked furiously to try to accomplish that with the German government, with the support of the German government, with the support of Magna and with the support of many other -- not just the German Federal Government in Berlin, but actually the federal states as well.

The first point of the deliberations, it was a complex, tense negotiation, but in the end, I don't really dwell on what happened during it. I basically focused on what happened at the end, and I think we arrived at a solution which works for Opel, allows us to be able to take the time to finalize the agreement with Magna. We've gotten good support. We're very appreciative of the support we received from the German government to allowed us to do that. (inaudible) Yes. (inaudible) No, but I was certainly involved in the middle of the night.

Steve Harris - GM VP - Global Communications

We're going to take three from the phone and Greg, we're going to come back to you, after we take the ones on the phone. Chris Isidore of CNN Money on the phone.

Chris Isidore - CNN Money

Thank you very much. When would you say that you became convinced that bankruptcy was the choice you would have to do and is this something that you were pretty well resigned to, even if you were still hoping to avoid it, on the day you took the job? Or did you take the job, thinking that there was still bankruptcy would be avoided?

Fritz Henderson - GM President, CEO

The day I took the job, I remember it well, it's actually about 60 days ago. We certainly felt that the -- our preference was to accomplish the restructuring of General Motors operationally and the balance sheet outside of a bankruptcy process, but the important thing in my mind then and today, was we needed to get a job done, both on the operating side of the business as well as the capital structure, and if it couldn't be done outside of a bankruptcy we would do it within a bankruptcy.

Chris Isidore - CNN Money

You said that all along. Did you think that a bankruptcy was almost unavoidable by the time you took the job or did you think that it was still a strong chance that you could avoid it on the day you took the job?

Fritz Henderson - GM President, CEO

I was asked that question actually I think when I was standing at a press conference on that date. I think I indicated at the time it was a probable or more probable we would need to contemplate bankruptcy given what needed to be done in the capital structure of the company, and how you deal with the level of the indebtedness. We certainly felt that to address the operating side of the business, that we could do that outside of a Chapter 11 process. In fact, I think through tremendous sacrifice from various parties we've been able to accomplish that. The tricky part, the hardest part, was how to deal with the capital structure of the Company, the level of indebtedness, pensions, healthcare and restructuring, the series of liabilities which were quite complicated.

In the end, by the way, we were able to actually reach agreement with the UAW, reach agreement with the CAW, get the majority of bond holders to basically support what's being proposed, but in order to effect this change, in order to effect the fundamental change in the capital structure of the Company, the 363 process, where the good part of General Motors is purchased by this investor group, in order to move quickly, was viewed certainly in our judgment as the best approach, the exact date at which we reached that conclusion, I couldn't put my finger on it. I can say that certainly in the last 60 days, our readiness for bankruptcy, we've made sure we consistently ratcheted up our readiness so that if this would be required we would be ready to go.

Chris Isidore - CNN Money

Did you ever contemplate a less agreement, more adversarial approach where you would try to --

Steve Harris - GM VP - Global Communications

We're going to have to move on. Let's go to Dave Hall at the Windsor Star.

Dave Hall - Windsor Star

Couple quick questions about Canadian operations. I see that GM Canada is not listed amongst -- and affected by today's filing, but I also don't see GM Canada listed amongst the operations which will continue without interruption. I wonder if you could clarify that. And also, if there's going to be any scaleback in production during this process in Canada.

Fritz Henderson - GM President, CEO

Thank you for that layup question. Canada is not included in the CCAA filing. And it is part of the new Company. So in terms of the level of production, it's really being affected by the level of demand. It's not necessarily something that's Canada specific. It's much more driven by the level of demand.

Steve Harris - GM VP - Global Communications

Next, we have [Julio Ruzit] from EFE News.

Julio Ruzit - EFE News

Yes, hi, thank you very much. Mr. Henderson, could you tell us, do you know the restructuring process, what would be the production capacity of General Motors in the States, the number of employees, and also what would you forecast the production in 2010?

Fritz Henderson - GM President, CEO

Okay. Employment in the U.S. would be -- as we get into 2010, around 40,000 hourly employees, that's in our plans, and about 23,000 salaried employees. Our North America business is obviously larger and a lot of our U.S. people by the way support our total American business and our global business. That gives you a sense of U.S. employment. Production capacity in the U.S., two shifts, straight time, about 2.3 million units. If I remember correctly. It's basically somewhere between 2 and 2.5 million units. Being short of capacity is not my worry, because in fact, we can actually put our plants on to three shifts, and actually reach for significantly higher levels of demand if it's required. In 2010, we'll have to see what the market gives us. Thank you.

Steve Harris - GM VP - Global Communications

We're going to go to Greg Miles in the room here.

Greg Miles - Bloomberg

Fritz, Greg Miles. Good to see you. Boosting sales are crucial to your long-term survival. Yet in the past two years, you've produced cars that have gotten very high marks for quality, very high marks for styling, both interior and exterior, yet they haven't sold extremely well in terms of gaining market share or boosting sales. How do you get the American consumer to come back to GM, which Bob Lutz argues still requires several more years to win them over?

Fritz Henderson - GM President, CEO

I would say first I'm not sure I agree with the assumption. I think if you look at a CTS or you look at a Malibu I think we've shown we are actually able to translate a great car into better results, whether it's sales or whether it's average transaction prices. I do think that there are certainly clear tangible examples we can point to. I think my view, let's just take a Saturn example, where we did some fabulous vehicles but in the end, we just had a hard time getting the volume and getting the share out of those vehicles. Part of it would have been lack of advertising, lack of marketing, a whole host of reasons.

But in the end I think by focusing around four core brands, by launching the vehicles, great vehicles into those core brands, we have the best chance of making every one of those new launches pay and at the same time, it is I think a key part of the business is to use launches not only to sell the launch vehicles but to sell the vehicles that are in the showroom otherwise, and use a vehicle like the Camaro, for example, to generate some excitement about the Chevrolet brand. I don't necessarily agree with the first assumption. Second, I think putting our vehicles within these four core brands gives us the best chance of accomplishing this goal, which is winning in the market.

Steve Harris - GM VP - Global Communications

We're going to move over on this side.

Dan Hernandez - Tokyo Shimbun

Hi, Fritz, Dan Hernandez with the Tokyo Shimbun. Another question, I hope it's just a layup for you, how does this affect your NUMMI joint venture with Toyota out in California?

Fritz Henderson - GM President, CEO

Good question. The Vibe, the Pontiac Vibe would be expected to go out of production as part of the phase-down of Pontiac which would have us not receiving any products from NUMMI. We have had to start a dialog, our team has actually started dialogue both with NUMMI and Toyota about the ultimate handling of the joint venture. Nothing that I can report today, but this is something that's on our list to try to get accomplished here in the next 30 to 60 days. It's been one where we basically reached out. We talked to them about what we might do and whether or not we actually have any interest going forward in being part of it, but no decisions have been taken at this point until we actually finalize these discussions with Toyota.

Steve Harris - GM VP - Global Communications

We have five minutes left. We're going to go there and then we'll come back to you.

Dave Barkholtz - Automotive News

Dave Barkholtz, Automotive News. What do you owe dealers right now for incentives, payments for incentives that you owe them as part of ongoing business? And how much do you expect to ask the court to pay of that amount?

Fritz Henderson - GM President, CEO

The first day motions -- I'm not an attorney but -- broadly defined are intended to allow us to basically run the business and take care of customers and dealers. The exact amount we would owe dealers for warranty, that we would owe dealers for incentive, that we would owe dealers for floor plans, for boom, boom, boom, I think by and large it's our expectation that they would continue because they're important for us to be able to promote the sale of cars and trucks. I couldn't point to the exact number today, but it would certainly be our expectation that we would be able to continue to operate with our dealers in the ordinary course.

Steve Harris - GM VP - Global Communications

We're coming over to this side. Do we have have a microphone here?

Dan Strumpf - Associated Press

Hi, Dan Strumpf with the Associated Press. This has been a costly six months for taxpayers, since GM went to Congress in the fall. Looking back on the whole process, would it have been possible to file for bankruptcy in the fall and avoid the last six months of deadlines and government loans?

Fritz Henderson - GM President, CEO

One of the things that we said was necessary in order for us to even have any chance of bankruptcy was we needed to raise DIP financing, be able to run the business through a bankruptcy. Last fall that wasn't available. In fact, the conclusion that we reached in terms of using the 363 tool with the U.S. Treasury not only providing the DIP financing for us to go through a bankruptcy process, but also provide the excess financing just simply wasn't available last fall, and the truth is that the work done by the task force, the work done with the task force in terms of how might we actually effect the change in the capital structure, it just as far as I was involved in it. Really wasn't on the table nor in the cards at that point. It is today. So that's why it's feasible today and really wouldn't have been feasible last fall.

Steve Harris - GM VP - Global Communications

Move to the back of the room.

Warren Levinson - Associated Press

Warren Levinson from the Associated Press. The government's interest in putting money in GM is to preserve GM as an engine of economic growth. Have there been conversations in which you say, look, a smaller, leaner GM can't be the kind of economic engine that the old GM could be.

Fritz Henderson - GM President, CEO

No such discussions whatsoever. None.

Steve Harris - GM VP - Global Communications

Okay. We're going to take two right over here and one back here and then we've got to stop.

Alisa Priddle - Detroit News

Hi, Alisa Priddle from the Detroit News. Can you just characterize how you'll work with the new Restructuring Officer and do you go into it with all of your assets already lumped into good and bad and how much interplay could there be in shuffling them from one list to the other?

Fritz Henderson - GM President, CEO

That was the other part of Micki's question that I didn't answer. I got the one. Then I just got the other. Al Cox, who's the Chief Restructuring Officer with a small group of staff, who will be responsible for winding down the old General Motors. That's their role. They were brought aboard. They've been working with us. They know the Company well, the firm Alex Partners is a quite capable firm in that regard and Al personally is a highly capable leader. It's our expectation, certainly Al has been working with us step by step but their principal role will be to oversee the orderly winddown and disposition of the old General Motors. They really won't have a role in the management of the new General Motors at all.

Steve Harris - GM VP - Global Communications

Okay. We're taking one from Jui.

Jui Chakravorty - Reuters

Hi, Fritz. Congratulations belatedly.

Fritz Henderson - GM President, CEO

Thank you. I think she's talking about two months ago actually, not today.

Jui Chakravorty - Reuters

Just a quick follow-on on the U.S. production capacity. You talked about it. Where does that bring the U.S. market share through the new Co?

Fritz Henderson - GM President, CEO

We built the plan around 18 to 18.5% market share in the next several years and certainly given the level of market demand, number one, and number two is the fact that we're correcting our inventories, we're going from -- we ended last year at 870,000 units of inventory. With the actions we're taking, our objective is to bring our inventory down to between 500,000 and 550,000 units, so our production is down 300,000 units more than our sales, simply to correct inventory. When we're done with this, which we think we'll be able to accomplish this summer, then we'll be able to run our business in accordance with the level of demand, which is frankly a much happier situation to find ourselves in, and then we'll have to see. But the level of capacity utilization this year has been aggravated by one, excess capacity, two, lower levels of demand, and three, this massive inventory correction that needs to be accomplished.

Steve Harris - GM VP - Global Communications

One last question here in the third row.

Roberta Yafie - Business Journal

Hello. I'm Roberta Yafie with the Business Journal in Youngstown. You're going into Chapter 11. Delphi is trying desperately to get out of it. Its big hearing is tomorrow, yet there's very strong relationship between the two in your efforts to assist Delphi. Will you be able to be there for Delphi in doing that, given the situation now?

Fritz Henderson - GM President, CEO

Yes, I was just looking at Delphi's release today, actually.

Roberta Yafie - Business Journal

I've been here.

Fritz Henderson - GM President, CEO

No problem, so have I, actually. Just been one of those days. We do need the parts, obviously. We need to support Delphi. We've been supportive of Delphi's efforts to both attract an investor, I point to Delphi, I'm not going to speak on their behalf. I think we've been able to reach a ground that not only provides an exit for Delphi with a very capable investor who I know well and we're very confident in as the General Motors Corporation, and then the negotiations continue with respect to the Delphi dip lenders, and Delphi management has to deal with the disposition of the Delphi capital structure today. This is something that has been going, like many of the things we've been doing around the clock, trying to actually get closure on it.

We were pleased with where we got to today with Delphi. But we still have some more work to do before we've hung the last nail in but it is our objective to do that. We would anticipate not only will some of the key plants of Delphi go with the new General Motors, they'll be part of it exactly. They'll go with the new General Motors. Then the relationship with the remaining Delphi will be a relationship with the new General Motors, and where we're pleased that that can happen.

Steve Harris - GM VP - Global Communications

I'm sorry if we couldn't get to your question in the room or on the phone. I'm going to turn it over to Fritz for a few closing comments. Thanks, very much.

Fritz Henderson - GM President, CEO

Thanks, Steve. I'll be brief. First of all, thanks very much for your time today. Just some key points I want to make.

One, today is in many ways for me and this past weekend, including Board meetings, has been exceptionally difficult, both personally and professionally, but no matter how you look at it, whether professionally or personally, you have to realize that this is a new beginning for GM. It's a reinvention of the corporation. It represents our ability to transform our Company and the operating side of the business and address what was an untenable capital structure at the same time. And in the end, back to a couple questions that were answered, I believe that as a leadership team, our focus needs to with on product and customers. That's where we need to be spending our time. That doesn't mean other things are unimportant but that means that's the most important, and by virtue of having this opportunity to reinvent ourselves, we as a leadership team will be focused on products and customers.

On customers, we are open for business. We have organized ourselves as well as possible, such that we can go to market. Going to market June 1st. Going to market through the month of June. Taking care of customers, selling cars, providing financial services, doing the things we need to do so that customers can feel confident they can buy a GM car and truck. In fact, we really want you to, in this environment, we want to try to win in the market, we want to win your business and we are open for business today. Not only working -- not only GM, our dealers, our suppliers, our people are there in the ordinary course of business to run our business.

Third, it's a day where we need to pay real thanks to the parties who are supporting us, whether it's the U.S. and Canadian taxpayer, in fact, the German taxpayer, the governments, particularly in this case of U.S., Canada and Ontario, but also the -- our dealers, our employees, our retirees, our customers, the various parties who have to support GM as we make it through the process, and each and every time I have the opportunity, I want to thank the various parties, because we couldn't have been here, I think about our own Board of Directors and the support we've gotten, to work with the automotive task force, but to go all the way through, it's a day that we have to pay tremendous thanks to people for giving us this exceptional opportunity to reinvent the Company.

It's also a day to feel for the sacrifices people are making, whether it's the losses that are being borne by GM shareholders in their entirety, or the losses borne by bondholders, retirees who will have to pay more for their healthcare or otherwise be impacted in their pensions, particularly non-qualified plans. Other claimants, other unsecured creditors of General Motors Corporation who will have a loss. Communities, where we're going to be closing plants. People will be losing their jobs. It is the day that is also a day to recognize the sacrifices that the people are making and understand with those sacrifices brings enormous responsibility as a leadership team.

So what is our promise? Our promise is to deliver what we need to do in our plan. To deliver a business that creates value so that the sacrifices are worth it, so people have sacrificed for something that means something. To create a business that can be part of the future of General Motors. General Motors being part of the future in the automotive industry on a global basis, particularly re-establish a position here in the U.S. that we have not had, in terms of I'll call it true leadership. Not size, I don't view size as leadership, per se. I view leadership as leadership. It's a quality that is sometimes hard to find, but it's something that most people can point to and say, that is leadership, that's our objective, that's our promise.

The last thing is do it once, do it permanently. That's the responsibility that we have as a leadership team. I can tell you certainly personally as well as on behalf of our entire leadership team, our Board of Directors, we understand that responsibility, and there are no second chances. We won't need one. And it's our job to deliver. Thanks very much.

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