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December 04, 2008

Wagoner's Testimony to the Senate Banking Committee

By Rick Wagoner

Thank you, Mr. Chairman.

I appreciate the opportunity to return to this Committee to speak about the urgent need for federal assistance for General Motors and the domestic auto industry.

It's fair to say that last month's hearings were difficult for us but we learned a lot.

For sure, we took very seriously the concerns raised by the members of this Committee -- and that has accelerated a healthy internal review and a lot of good discussion with our partners and stakeholders.

Its no secret that GM, like our fellow domestic automakers, has struggled in the face of increased competition from foreign manufacturers with lower wage, healthcare, and benefit costs.

We made decisions that were right for the times -- collective bargaining agreements, investments in full-size trucks and SUVs that consumers wanted, and others. But we made mistakes, as well -- such as failing to build sufficient flexibility into our operations, and not moving fast enough to invest in smaller, more fuel-efficient vehicles for the U.S. market.

We have addressed these and many other issues in the plan for long-term viability that we submitted to this Committee two days ago.

Our plan demonstrates why GM needs temporary government funding, how it will be used, how we intend to repay the taxpayers, and why such funding is necessary for the company, and beneficial to the U.S. economy.

Our plan dramatically accelerates and expands the restructuring that we've been driving in North America for the past several years. Its a blueprint for creating a new General Motors -- one that is lean, profitable, self-sustaining, and fully committed to product excellence and technology leadership, especially in alternative propulsion.

Key elements of our plan include:

Increased production of hybrid, flex-fuel, and other fuel-efficient vehicles -- and an increased commitment to new, energy-efficient technologies like those in the Chevy Volt.

Significant changes to our market and retail operations, including a reduction in brands, models, and retail outlets.

Further manufacturing and structural cost reductions.

Full labor cost competitiveness with foreign manufacturers in the U.S. by no later than 2012.

Significant capital restructuring involving our debt and post-retirement healthcare obligations.

Continued suspension of GMs common stock dividend for the life of any federal loans associated with the plan.

Changes in executive compensation. For example, I will reduce my salary to $1... Board members have elected to reduce their annual retainer to $1... and the next four most senior officers will reduce their total cash compensation by about 50 percent in 2009.

And as of this week, the cessation of all corporate aircraft operations.

These and other actions detailed in our plan affect everyone associated with GM... but we believe they're necessary to position the company for long-term success.

And we believe this success is fully achievable, if we are able to weather the ongoing global financial crisis and the lowest per-capita U.S. vehicle sales in 50 years.

Toward that end, our plan respectfully requests that the federal government make available $12 billion in short-term loans, along with a $6 billion line of credit in the event the current severe market downturn persists.

Specifically, were seeking an immediate loan of $4 billion and a second draw of up to $4 billion in January.

Our intent is to begin to repay the loans as soon as 2011 and under baseline industry assumptions, fully repay them by 2012.

And should GM share prices increase as a result of the plan, warrants issued as part of the loans would allow taxpayers to benefit.

* * * * * * *

Our plan also proposes the creation of a Federal Oversight Board to help facilitate restructuring negotiations with a range of stakeholders.

This Board would oversee the loans and restructuring plan, and protect taxpayer investments in part by assuring that loans are made contingent on GM achieving its benchmarks.

Let me close by noting that GM has been an important part of American culture for 100 years and for most of that time, we've stood as the worlds leading automaker.

Were here today because we made mistakes. And were here because forces beyond our control have pushed us to the brink. Most importantly, were here because saving General Motors and all this company represents is a job worth doing.

Thank you. I look forward to your questions.

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