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March 31, 2009

Interview with GM's CFO

The Situation Room

BLITZER: And joining us now from Detroit is the General Motors chief financial officer, Ray Young.

Mr. Young, thanks very much for coming in.

RAY YOUNG, CFO, GENERAL MOTORS: Thank you, Wolf.

BLITZER: The president yesterday used the word "bankruptcy." And an editorial in today's "New York Times" entitled "The Last Best Chance for Detroit" said this: "A government-backed bankruptcy process could be used to discard G.M.'s liabilities and unwanted assets and produce a profitable, albeit smaller, car company."

How close is GM now to some sort of heavily structured bankruptcy?

YOUNG: Well, Wolf, as you know, President Obama yesterday basically gave us 60 days to try to work an out-of-court restructuring process through with the very stakeholders. And right now we're very focused on getting that done.

At the same time, he clearly indicated that at the end of 60 days, if we can't get this done, we will enter an in-court process. It's fair to say that we, at General Motors, we've been planning for contingencies. Every since January, we've had advisers and experts working with us in order to understand and plan for a contingency, which would be the case of a Chapter 11 filing, in-court process restructuring. So...

BLITZER: Because...

YOUNG: ... from our perspective...

BLITZER: Yes, go ahead. Finish your thought.

YOUNG: ... we need to get the job done. We need to get the job done.

We understand we have too much debt on the balance sheet. We're going to basically reduce this debt load either through negotiations with the various stakeholders over the next 60 days, or we'll use the in- court process in order to help us reduce the debt load and allow us to come up with a viable balance sheet for the long term.

BLITZER: Because, as you know, over the past four to six months, whenever there was talk of bankruptcy, people would say, well, who would buy a car from a company that was in formal bankruptcy? But now the government, the president of the United States, says the government is going to guarantee these warranties so people who go out and buy a new GM car, they don't have to worry about their warranties.

That seems to suggest to me and to a lot of other folks out there that this train is leaving the station towards some sort of structured bankruptcy.

YOUNG: Well, it's very important what President Obama spoke yesterday about the government backing the warranties. Our biggest concern always with respect to an in-court process is how consumers viewed the guarantee on their vehicles, the warranty on their programs. With the government basically stating that they are going to back General Motors, A, in terms of the warranty and, B, even more importantly, the government indicated that General Motors will survive, ,will prosper in the future, this allows us, in effect that, if we had to go through an in-court process, it significantly reduces the risk of an unsuccessful reorganization.

BLITZER: Over the next 60 days, as this clock is ticking, does GM, do you and your other top executives need to consult with the White House on major decisions?

YOUNG: Wolf, this being a process over the past month working with the task force, they spent a lot of time learning from us, a lot of time gathering information, doing analysis. It's fair to say that over the next 60 days, we will work closely with the task force in terms of understanding both the operational restructuring that we're going to do, as well as the balance sheet restructuring, which is effectively converting the unsecured debt, as well as the VEBA, into equity. So I expect close collaboration working with the task force.

BLITZER: And would you need their permission to make major decisions?

YOUNG: Well, our loan agreement actually does specify when we formally have to consult and seek approval from the U.S. Treasury in terms of doing certain things. There's a certain monetary amount in terms of the dollar value transactions, which we need their approval if it's out of the normal course of business. But setting aside the loan agreement terms, I think from our perspective, we want to work collaboratively with the task force to make sure that the direction that we're going to affect in terms of restructuring, both operational and balance sheet, is consistent with where their findings are.

BLITZER: It sounds like there's a real partnership with the task force, the federal government, in effect, and GM right now.

A quick question on the $13.4 billion that the federal government has already lent General Motors. Where has that money gone?

YOUNG: We've used that -- those fundings in order to effectively finance our working capital requirements here in the United States. As you know, Wolf, during the first month of this year, in January, we basically had very, very little production, and hence, we did not generate revenue in order to recover payments to our suppliers, as well as our employees.

And so, effectively, we used the loans to cover our working capital needs over the first two months of the year. What has been encouraging is that in the month of March, we have been producing vehicles. And as a result, we were able to defer the $2 billion draw that we had forecasted in our February 17th submission into the future.

BLITZER: Ray Young is the chief financial officer of General Motors.

Mr. Young, good luck.

YOUNG: Thanks a lot, Wolf.

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