The GM Restructuring March 2011 Wharton School
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Transcript of The GM Restructuring March 2011 Wharton School
Enterprise Improvement Corporate Turnaround and Restructuring
Financial Advisory Services
Information Management Services
Ted Stenger, Kyle Braden, Christian Cook Wharton Executive MBA Program Philadelphia, PA March 26, 2010
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“The GM Story”
Contents: • GM Profile and Key Statistics • Restructuring Activities and Milestones • Breakdown of Government Funding • "GM Before" to "NewGM" Comparisons • "Old GM" Overview • Property Overview
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Overview:
North America
Vehicle Sales 3,564,000
Revenue $86.2 billion
Employees 118,000
Europe
Vehicle Sales 2,041,000
Revenue $34.4 billion
Employees 55,000
Latin America, Africa, Middle East
Vehicle Sales 1,276,000
Revenue $20.3 billion
Employees 35,000
Asia Pacific
Vehicle Sales 1,475,000
Revenue $17.8 billion
Employees 35,000
Global
Vehicle Sales 8,356,000
Revenue $147 billion
Employees 243,000
General Motors Corp. in 2008
GM Restructuring Activities and Milestones
October November December January February March April May June July
GM recognized it needs cash to survive
“Big 3” CEOs request US government support
Emergency bankruptcy filling and cash-conservation plans developed.
President Bush approves $13.4 billion loan to GM
Steve Rattner and Ron Bloom appointed to US Treasury’s “Auto Task Force”
• Bankruptcy-prep program gains urgency
• March 28th, Rick Wagoner asked to step down as CEO
“Section 363” bankruptcy option becomes primary plan
Chrysler files for bankruptcy
June 1st, GM files for bankruptcy
• Bankruptcy Court approves the sale
• Remnants of GMC renamed MLC
•First Viability Plan filed on 12/2/08 •Drawdown of $4 billion (out of $13.4 billion) received on 12/31/08
Second draw of $5.4 billion
received
GM submits Second
Viability Plan Third draw of
$4 billion received
GM submits Third Viability
Plan
GM submits Fourth
Viability Plan
“GM Before” vs.“New GM”
“GM before” (2008) “new GM” (Today) Name: General Motors Corporation Name: General Motors Company
Chairman and CEO: Rick Wagoner Chairman and CEO: Ed Whitacre
Ownership: publically traded; 610 million shares outstanding
Ownership: privately held; 60.8% by US Treasury, 11.7% by Canadian governments, 17.5% by UAW healthcare trust, 10% by bondholders and other creditors
Market share: 22.3% Market share: 18.4% in 2012 (est.)
U.S. dealerships: 6,099 (April 30) U.S. dealerships: 3,600 (2010)
U.S. nameplates: 48 U.S. nameplates: 34 (2010)
U.S. brands: Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab, Saturn, med-duty trucks
U.S. brands: Buick, Cadillac, Chevrolet, GMC
Employees: 235,000 (worldwide) / 81,000 (U.S)
Employees: 63,500 (U.S.)
U.S. breakeven: 16 million units U.S. breakeven: 10.5 million units
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Breakdown of Government Funding
6
Pre-Chapter Estimated OCF Supplier Cash Revolver and Canadian Cash / ETC Total 11 Financing shortfall Support Restructuring Costs M&E Term Loan Legacy Cushion Other Funding Refinancing / Debt Liabilities Requirement Repayments
Post-Transaction Structure
7
OldGM
Purchased Assets and Assumed
Liabilities
Excluded Assets and Retained
Liabilities
UST
NewGM
60.8% Common
72.2% Preferred
$8B Note
Canada
11.7% Common
4.5% Preferred
$1.3B Note
17.5% Common
23.3% Preferred
Warrant to Acquire 2.5% of Common
$2.5B Note
10% Common
Warrants to Acquire15% of Common
2% Contingently Issuable Common Stock
New VEBA
Capital Structure
Debt $17BPreferred Stock $9BCommon Stock - *
* Warrants issued to Old GM & New VEBA for 17.5% of common stock
Bondholders
Unsecured Creditors
Motors Liquidation Company, “oldGM”
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All core and positive value assets were taken to NewGM, with the remainder remaining in MLC Relationship between New GM and MLC:
Master Lease Agreement: NewGM will lease 13 plants from MLC Transition Services Agreement: NewGM to provide various services to MLC, including Accounting, Tax, IT, etc. – Terminated as of December 31, 2009 Master Purchase and Sale Agreement
Plants: • 16 total (4 assembly, 6 stamping, 6 powertrain) including select machinery and equipment deemed not necessary by NewGM
Leases: • Leased office space and parts warehouses, which were subsequently rejected under Ch. 11 after NewGM vacated
Real Estate: • Numerous real estate holdings, including decommissioned plants, office space, dealerships, vacant land, residences, churches and a golf course
• Many have significant environmental liabilities
Entities • 50% Equity in NUMMI (50/50 JV with Toyota) • Equity in GM Strasbourg (Powertrain manufacturing plant)
Liabilities: • Splinter union obligations (IUE, USW, etc.) • Environmental (excluding property going to NewCo) • Dealers (that don’t accept either “wind down” or new dealer agreements) • Prepetition litigation; Pre-close product liability • Asbestos • Other Priority and Unsecured Claims
MLC Owns and Maintains Many of the Largest Buildings in the World
9 9 Confidential
0.00
1.00
2.00
3.00
4.00
5.00
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GM
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Approximate Square Footage (in MM sq. ft.)
Willow Run Powertrain Plant
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Location: Ypsilanti, MI Earliest Service Date: 1953 Approximate Size: 5.0MM sq. ft. Last Models Built: A. 4L80E RWD 4-speed w/capacity of 352,500 B. 4T80E FWD 4-speed w/capacity of 209,030
Pontiac Assembly - Body in White (1/3)
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Pontiac Assembly – Body in White (2/3)
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Pontiac Assembly – Body in White (3/3)
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Pontiac Assembly – Paint (1/3)
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Pontiac Assembly – Paint (2/3)
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Pontiac Assembly – Paint (3/3)
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Pontiac Assembly – Chassis Assembly (1/3)
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Pontiac Assembly – Engine Assembly (2/3)
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Pontiac Assembly – Final Truck Assembly (3/3)
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Pontiac Facility (North Facility)
15 20
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Location: Pontiac, MI Earliest Service Date: 1926 Size: 2.8MM Sq. ft / 302 Acres Models Built: Press Metal/Engine Status: NewGM has leased portions of the
facility through mid 2011
MLC New GM
“Old GM” (Motors Liquidation Co.): 3 Principal Tasks
• Disposition of remaining properties
– 125 holdings, including 16 manufacturing plants (~50 million s.f. under roof)
• Environmental remediation
– Both continuation of ongoing remediation and preparation for a court-approved trust to take over at end of the bankruptcy
• Claims settlement
– Goal: An approved Plan of Reorganization by Q4 2010
– Goal: To turn over all of the 10% of GM Company (“new GM”) that MLC presently owns (stock and warrants) to GM’s unsecured creditors
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Willow Run Powertrain Plant
23
Location: Ypsilanti, MI Earliest Service Date: 1953 Approximate Size: 5.0MM sq. ft.