DESPERATE STRAITS: GM has sent out the below letter to all businesses and industries connected to Detroit's Big 3. The company makes a big case for avoiding a worst-case scenario of massive layoffs and the collapse of the American auto industry. However, in fairness, we should consider an equally strong and logical case for a Chapter 11 bankruptcy filing. Such a private sector solution would force its own set of efficiences and reforms, namely the outrageous, unbearable legacy costs of the workforce.
Check out this article in today's Wall Street Journal. Chapter 11 is in many ways a "bailout" as well since it would give the Big 3 breathing room to reorganize and revitalize.
Regardless of which view you prefer, this nation has a vested interest in transforming GM, Ford, and Chrysler into viable 21st Century vehicle builders that are greener and leaner.
As an important partner of General Motors, you are probably well aware that the auto industry is at a crossroads. Companies that support millions of workers and families across the U.S. have been slammed by the worst economic downturn in 75 years. Particularly frustrating is that this crisis struck just at a time when these companies were successfully restructuring themselves and creating a new generation of cleaner, more efficient vehicles.
This progress, and the very existence of the U.S.-based auto industry, is threatened.
Discussions are now underway in Washington D.C. about government support for this vital industry through this downturn. We are asking for your support, too.
The U.S auto industry has been hit at every level by the global financial crisis. Carmakers can't get loans to complete their restructuring and put advanced technology vehicles into production. Customers can't get credit for new cars, and consumer confidence has plunged to an all-time low. Suppliers and dealers can't get loans for routine business needs.
This crisis caught the U.S. auto industry in the midst of a successful restructuring. Domestic carmakers have closed the productivity gap with their global competitors, and GM has closed the quality gap as well. New labor agreements are in place to make U.S. manufacturers' costs competitive with non-union transplant factories.
Since 2005, GM has taken a series of bold steps to restructure its business and reduce its structural cost. In fact, since 2005, GM has reduced structural cost in North America by over $9 billion. And more recently, GM has outlined plans to enhance its liquidity position by $20 billion through 2009. And, we've tightened our belt in hundreds of other ways, large and small - some of which you have felt too.
On the product front, we have introduced a series of award-winning products, including the Saturn Aura, Cadillac CTS, Chevy Malibu and Buick Enclave. Today, we have the most models that get an EPA-estimated 30 mpg or better on the highway, more vehicles capable of running on E85 ethanol than any other automaker and a wide variety of hybrids, one for every need. We are also testing the world's largest fleet of hydrogen-powered cars right now and are committed to building the Chevy Volt extended-range electric car in 2010.
However, faced with the worst economic downturn since the Great Depression and the worst car sales since World War II, this hasn't been enough.
This current crisis knows no geographic boundaries. What happens to the U.S. auto industry also had an immediate impact on Main Street. U.S.-based carmakers have 105 plants in 20 states, including California, Texas, Kansas, Louisiana and Maryland. They support 14,000 dealers across the country, and these dealers in turn employ 740,000 people, with a total payroll of $35 billion a year. The companies buy $156 billion in parts and services from suppliers in every state. The auto companies provide pensions for 775,000 and health care benefit for 2 million.
Because carmakers are so tightly woven into the fabric of the U.S. economy, the collapse of this industry would reach far beyond Detroit. The Center for Automotive Research in Ann Arbor predicts that a collapse of U.S.-based carmakers would lead to widespread failures of supplier companies, already pushed to the brink by the downturn, and this in turn would shut down the transplant factories owned by Toyota, Honda and other non-U.S. companies. Shockwaves through the economy would quickly put nearly 3 million people out of work. In the first year alone, personal income would drop by $150 billion, and tax and social security receipts would fall by more than $45 billion.
Faced with these risks to the well-being of millions of Americans, and to the U.S. economy as a whole, it is clear to us that government support is a sound investment in an important industry, and in America itself.
The Aura, CTS, Malibu and Enclave show that GM can compete with the best. Our aggressive restructuring and rapid global growth shows our commitment to reinventing our company. And the Chevy Volt and other advanced technology vehicles show our passion for being a leader in reinventing the automobile.
Please share this information with all of your employees and other stakeholders. We hope you will ask your legislators and other political leaders to support the U.S. auto industry through this critical transformation. It's easy and turnkey. Please take a minute to go to
To give you more context and the facts, attached are some industry talking points and the study recently released by industry analyst, David Cole, with the Center for Automotive Research (CAR), entitled: "The Impact of the U.S. Economy of a Major Contraction of the Detroit Three Automakers."
Thank you for your time and support.
Executive Director, Advertising and Media Operations
General Motors Corporation