Detroit With an almost certain bankruptcy filing days away, General Motors is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest.
As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, its main union overwhelmingly approved dramatic labor cost cuts. Germany’s finance minister said a plan was approved for Canadian auto parts maker Magna International Inc. to rescue GM’s European Opel unit. And a deal to sell GM’s rugged but inefficient Hummer brand also appeared on the horizon.
The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion.
GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.
With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades.
“It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. “But in just the past few months we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.”
GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year.
GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless.
The United Auto Workers’ reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.
The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said.
GM is banking on more demand for smaller cars previously shunned by Americans. The government decided earlier this month to raise fuel economy standards for the entire U.S. fleet by 2016.