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GM Chairman and CEO Rick Wagoner, Congressman Sandy Levin and Senator Carl Levin arrive for Washington D.C. Senate hearing driving a test version of the Chevrolet Volt extended-range electric vehicle
December 4, 2008

On December 19, 2008, President Bush approved the U.S. Big Three’s request for a bridge-loan to see them through one of the most challenging economic times in recent history. This followed weeks of grueling testimony on Capitol Hill, and the collapse of a compromise bill in the U.S. Senate.

GM, along with Chrysler and Ford, approached the U.S. Congress in October to request some form of assistance following the seizure of the financial markets which made available credit extremely scarce. All aspects of the auto business, from dealers, to suppliers, to car buyers, depend on fluid credit markets. The initial talks evolved into full blown, televised congressional hearings before House and Senate subcommittees on November 17-18 and December 4-5.

It was sometimes difficult to watch. It soon became apparent to me that the Congress, the pundits and the general public didn’t understand the domestic auto industry or the changes that have occurred over the last decade. Some of the criticism was legitimate, and some of the questions needed to be asked, but it was tough to have serious discussions in this often grandstanding sound-bite forum. The idea of loaning money to a struggling industry was both emotional and controversial to say the least, and there were plenty of skeptics.

GM had been in the middle of a turn-around plan (launched in 2005) when the credit crunch hit. No company, analyst, or pundit anticipated the magnitude of the credit crunch. Nearly two-thirds of automotive customers could not get car loans. Leases, which accounted for nearly 20% of GM U.S. sales, were no longer available. Sales, on a per capita basis, collapsed to levels not seen since the 1940s.

GM and Chrysler were facing potential insolvency under these extreme conditions. (Note: Ford had borrowed 18 billion dollars earlier, when credit was still available, so they were not facing an immediate threat.) The fear within the industry was the collapse of any one of the Big Three would create a chain-reaction of failures within the integrated supplier network. This would in turn bring down the entire industry, resulting in thousands of bankruptcies and millions of jobs lost. Ultimately, this situation proved politically unacceptable in a rapidly deteriorating and fragile economy.

So the bridge-loans were granted …with strings attached. "This restructuring will require meaningful concessions from all involved in the auto industry -- management, labor unions, creditors, bondholders, dealers, and suppliers," Bush said. Some conditions, called "targets" in the loan agreements, would be subject to negotiation.

Binding Terms and Conditions:
Firms must provide warrants for non-voting stock (so taxpayers can benefit from any recovery).
Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
Debt owed to the government would be senior to other debts, to the extent permitted by law.
Firms must allow the government to examine their books and records.
Firms must report and the government has the power to block any large transactions greater than $100 million.
Firms must comply with applicable Federal fuel efficiency and emissions requirements.
Firms must not issue new dividends while they owe government debt.

Targets:
Company debt must be reduced by 2/3 via a debt for equity exchange.
Make one-half of VEBA Trust payments in the form of stock (retiree health care trust).
Eliminate the jobs bank.
Implement work rules that are competitive with transplant auto manufacturers by December 31, 2009.
Adjust wages to be competitive with those of transplant auto manufacturers by December 31, 2009.

Following the approval of the bridge-loan, Rick Wagoner sent the following letter to employees.

Dear Employee:

By now I'm sure you've heard that the Administration agreed to provide funding for the U.S. auto industry, including General Motors. We appreciate this support. This funding provides us with a financial bridge to help preserve jobs, support the continued operation of GM and the many suppliers, dealers and small businesses that depend on us.

It's important to understand that these federal loans are not the end of a process, but the beginning of a new chapter in GM's history -- and that chapter's work has just begun. In many ways, the plan accelerates and expands the important work that we've been driving in our North American business for the past several years. But, in reality, it's a blueprint for a new General Motors... one that will be fully competitive in our second 100 years. A General Motors that's dedicated to great products, world-class quality, and exciting design; fully committed to leading in energy-saving vehicles and technology; responsive to the needs of our customers and stakeholders; and focused on long-term sustainable success.

Our focus now turns to rapidly implementing the restructuring plan that we reviewed with Congress earlier this month. We look forward to working closely with the Administration and the appropriate government officials, along with our debt holders, dealers, unions, suppliers, other stakeholders and all of you, to get this done fast. We will continue to be transparent as we execute our plan, and we will provide regular updates on our progress.

And I know I can count on each of you to contribute to these efforts... in the U.S., and around the globe. Almost every region and country in the world is facing challenging times, which calls on all of us to re-commit ourselves to excellence… as "good" is no longer good enough.

I really appreciate the hard work and tremendous support of you and all GM employees in every region in one of the most challenging periods in GM's long history. Thanks for your terrific efforts in 2008, and for all the great contributions I know you'll make going forward as we reinvent General Motors together.

Now, as we head into the holiday season in many parts of the world, I wish you and your families all the best.

Again, my sincerest thanks.

Rick

Moving Forward
How GM Will Use the Bridge Loan

Video Courtesy of General Motors Corporation, 2008

GM teams have been working with key stakeholders to refine our viability plan and meet the requirements of our U.S. government loan agreements. Our updated plan documents the significant further progress that we've made since our December 2, 2008 submission in our efforts to further enhance our operating competitiveness, now on a global basis, as well as to demonstrate that GM can be viable over the long term.

Click to read the GM Viability Plan: February 17, 2009

Remember When
Give the people a history lesson about GM. Wasn't it great when overtime was flowing…when you bought two stocks and GM donated the third…when World War II was greeted, my GM going all in and giving those that worked for them unheard of wages for work well done. Bonuses, suggestion awards, health insurance, retirement benefits. We had it all. Worked hard and were well paid. I/we raised eleven kids (WITH YOUR HELP) and they never did without a thing. Thirty years of Oldsmobiles, Buicks and Cadillacs. Never a lemon…never disappointment. Four sons that drive or have driven GM cars or trucks plus five daughters that knew their lifestyle depended on GM and Dad. Come on GM retirees and those still working, kick back a little of the good old days. Buy a car, buy some stock and if you can't…get down on your knees and thank God for what you had/have. Come on GM, You can do it! Everyone has got to reconsider their worth and what they owe GM for the "good old days"…Including GM.
Do you remember when?

Thanks to Rick
I am Owen Lewis, a skilled trade’s retiree from the Fairfax plant [Kansas City, Kansas] and I would like to say Thank You Rick Wagoner for going through all that in Washington D.C. on December 4-5, 2008. I know it must have been very difficult, with all the shots the Representatives and Senators were taking at you. But I want to say Thank You for enduring all that for me and my family. Whatever the outcome, I will never forget.

God Bless you and your Family

GM Middle East
I have read the submission from your CEO to the U.S. Congress. I believe it is very good but it missed mentioning the important political void that will be created if GM vehicles are impended from coming to this area. Here in Kuwait they form and perform an important task in transporting family members to schools, shopping and trips into the desert. GM is a very popular brand due to its support to the customer via a well trained Dealer Group. Whilst Japanese cars have taken a reasonable share of this market, if we were to lose cars like the Caprice, Suburban, Lumina, as well as the smaller models, there would be an unfillable void. Yes, we all bleed when people lose their jobs but we also bleed when we lose our friends. What happens in the USA has a profound effect on this strategic area politically wise. Yes, Congress should look at home first but they must also remember their friends who support GM vehicles here in the Middle East. I believe the profitability from this area will help GM climb out of this short depressive period.

Freedom to Produce Great Cars
GM produced great cars and then the war came. We transformed our plants to produce tanks and so on. The thanks we get in 2009? We have the goverment telling us what kind of cars to produce when we need a little help.

GM and Me
I worked for GM from 1975 to 2005. During that time as an employee, I did what was asked of me for the good of the company thinking that the promises made would be honored when it came to retirement. Little did I know that that those promises would not be kept. In some strange way all the things bargained for by the UAW on behalf of its members were turned into some sort of perk that made us villains in the eyes of the nation and the government. And the worst thing of all is the abandonment by the UAW itself by not making GM live up to its moral obligation to us retirees. Without the workers that have and now make up General Motors not only would the past and present executives not have made their millions, but the standard of living for the average worker would never have reached the level it did.

Once the Global economy arrived and every last high paying job left, no one was able to buy the very products they once made. I still continue receiving promotions for GM telling me now is a great time to buy a new vehicle. With my retiree health care benefits being reduced and the security of my pension up in the air, do they really think I need a new automobile?

This economy will not turn significantly turn around until people have good paying jobs again and a single payer healthcare system is in place to remove the profit of being sick in this nation.

Sincerely,
Jeff Vrba
GM retiree
Helena, Montana

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