General Motors’ CEO, Fritz Henderson, says that his management team will work closely with the company’s new board of directors to revise the automaker’s 2010 business plan.
Speaking with local dealers, business leaders and students in Fort Lauderdale on Thursday, Henderson told the assembly that he expects the new board to be “very active” in charting the company’s direction in the coming year. This will be the first time the company’s board will have the chance to directly influence key decisions pertaining to increasing the automaker’s market share and reducing costs.
Henderson said, “The last plan done was the viability plan going into bankruptcy. We haven’t refreshed that.”
He also predicted that the new car and truck market will reach 11.5 million sales domestically in 2010 and estimates that number to be approximately 10% higher than needed for GM to break even.
The company projects structural costs to be in the neighborhood of $24 billion next year, which is 40% below their costs in 2005. That reduction is mitigated, however, by GM’s smaller market share which is currently around 19%.
Chaired by former AT&T CEO Edward Whitacre, Jr., GM’s new board includes several new members with years of experience in the areas of private-equity and corporate restructuring. Based on their backgrounds, some have speculated that they may pressure Henderson and his management team to make significant changes to the current business plan. Whitacre, for one, has publicly expressed frustration over GM’s reliance on sales incentives, which he sees as counter-productive, to bolster sales.
The new board was assembled by the Obama administrations Auto Task Force following GM’s emergence from bankruptcy this past summer.
Henderson has said that the new GM plans to begin issuing stock in the second half of 2010 to repay the $50 billion in taxpayer funded federal bailout that allowed the company to survive as it went through restructuring this past summer. Recently, however, officials with the U.S. Treasury Department’s oversight committee for T.A.R.P. expressed skepticism over GM’s ability to repay taxpayers.
Henderson said that improving its margins on rental car sales, boosting the average transaction amount on sales of Chevy’s small cars, and differentiating GMC and Chevy truck brands are among the areas the company will focus on in preparation of the initial public stock offering.
He also expressed optimism about next year’s launch of the new Chevy Cruze. The Cruze was developed overseas and designed to compete with the Honda Civic and Toyota Corolla. When launched, the Cruze will replace the Chevy Cobalt. Although the Cobalt sold well initially, sales have slumped in recent months. Henderson said that he has challenged GM’s designers and engineers to raise the transaction price on the Cruze from its current level of around $13,000 to approximately $17,000 to $18,000 to price it comparable to the Civic and Corolla models.
In a good-humored response to what some critics feel is GM’s over-reliance on incentives, Henderson said he is committed to rehabilitating Chevy’s image from being “a brand that is known for having the most demented incentive programs.”
GM’s business planning summit is expected to be held this November or December.