UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 7, 2005
GENERAL MOTORS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE 1-143 38-0572515
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(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
300 Renaissance Center, 48265-3000
Detroit, Michigan (Zip Code)
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (313) 556-5000
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01. REGULATION FD DISCLOSURE
On June 7, 2005, General Motors Corporation (GM) Chairman and Chief Executive
Officer Rick Wagoner delivered a state of the business address at the company's
annual meeting of stockholders. The press release follows.
GM CHAIRMAN ADDRESSES STOCKHOLDERS AT ANNUAL MEETING
WILMINGTON, Del. - General Motors Corp. (NYSE: GM) Chairman and Chief Executive
Officer Rick Wagoner today delivered a state of the business address at the
company's annual meeting of stockholders. The following are his remarks:
I'd like to focus my State of the Business comments today on recent
developments, and specifically on the status of our plans to address the sudden
downturn in our performance here in North America, which is our top priority in
the company.
In the interest of time, then, I will comment only briefly on our other business
units, all of which are running at or ahead of plan.
GMAC continues its strong financial and business performance, despite the
challenges presented by credit rating pressures and restricted availability of
funding from its traditional sources.
GM Europe is moving at a good pace in its turnaround, with significant progress
in its structural cost reduction plan and positive sales momentum in the
relatively weak European market.
GM Asia-Pacific continues its steady sales and share growth in the world's
fastest growing region, and is resuming a stronger profit performance after a
dip in the last two quarters.
And, finally, GM Latin America, Africa and Middle East, boosted by strong
economic and industry growth, is continuing its recent track record of sales and
profit improvement.
In all these business units, we for certain have plenty of work to do, but the
trends are encouraging.
The most challenging and important operating issue we face is getting GM North
America, our biggest business unit, turned around and back into a profitable
position.
GM North America Performance
First, let me comment on GM North America's poor performance in the first
quarter of this year, in which we lost $1.3 billion, and address the obvious
question -- what happened? The answer is pretty direct -- our North American
business is highly leveraged from an operating perspective -- we have a high
structural, or fixed, cost base and so when we lose revenue, it drops quickly to
the bottom line. And, last quarter, we lost revenue, due to lower retail sales
-- we did not achieve our market share expectation; a significant, and needed,
100,000 unit year-over-year reduction in dealer inventories; and a much weaker
sales mix -- fewer high profit SUVs, more lower profit cars.
In addition, our material costs came under pressure, due primarily to higher
commodity prices, and finally, we continue to feel the ever increasing burden of
higher health care costs. These negative factors swamped our improvement in
efficiency and structural costs, and so we registered an unacceptable financial
performance.
As we implement our comprehensive plan to address this situation, we are
focusing our efforts keenly on the areas of greatest impact. What I mean by this
is the following:
- First, for the aspects of our business that have been moving in the right
direction in recent years -- quality, product competitiveness,
manufacturing productivity, and so on -- we need to pick up the pace, and
elevate our targets from being "competitive" to "being the best".
- Second, there are some areas where that we need to step back and ask, "Is
our current strategy effective?" -- and, where it's not, make the
necessary changes. Our sales and marketing approach is in that category --
more on that in a minute.
- And finally, there are some structural issues -- difficult, long-standing
issues that we have to step up to and address. In doing so, it will be
challenging and discomforting, but it is clear that not addressing them
will cause significant risk to the long-term viability of our business.
One example of a structural issue that we took on last fall at GM Europe,
was our uncompetitive manufacturing cost structure. You'll recall we
negotiated a plan with our European unions to reduce our employment by
12,000 people over two years, including 10,000 in Germany.
- Under the current challenging circumstances at GM North America, I put our
U.S. health care costs in this category of challenging structural issues
that we have to address, and do so now.
I wanted to give you that perspective on my thinking before I outline the four
specific actions that we are taking now to get GM North America back on track.
Let me say up-front that our absolute top priority is to get our largest
business unit back to profitability as soon as possible. The four primary
actions to drive this are as follows:
Great Cars and Trucks
First and foremost, we need to continue to raise the bar in the execution of our
new products. We know that you can't turn around, or be successful in our
business, without great cars and trucks. So, to address that, we are increasing
our capital expenditures by nearly a billion dollars this year, with the
increase mostly in North America, and focused on product. We'll hold this higher
level of spending in 2006.
We also re-energized our product portfolio over the near term, by advancing the
timing of several high volume, high profit programs such as our large pick-ups
and mid- and large-utilities. Looking out a little farther, we're prioritizing
our product development resources in the areas where we see the greatest volume,
growth, and profit opportunities -- crossovers of all kinds; entry luxury and
premium models; hybrids and other technologies to improve fuel efficiency.
Finally, we have now made all our appointments in our new global product
development organization, and so Bob Lutz and his team will step on the
accelerator and start delivering the benefits of globalizing product development
-- crisper product execution, shorter life cycles, better quality, lower cost.
Let me close the product discussion by emphasizing that we're starting from a
solid base ... we've had a number of successes over the past few years, such as
the Cadillac line-up, and recent launches like the Chevy Cobalt and Pontiac G-6.
And, we're very excited about products just now, or soon-to-be launched, such as
the Hummer H3, the Chevrolet HHR, and the Pontiac Solstice.
Sales and Marketing Strategy
The second key element of our North American turnaround is the re-tooling of our
sales and marketing strategy here in the U.S. -- doing that will consist of four
major initiatives:
- First, we are clarifying and focusing the role of each of our eight
brands, giving them distinctive, clear, compelling roles in the GM
portfolio. We start with our foundation brand Chevrolet in the mainstream
of the market, and Cadillac at the premium end. Both of these brands are
in good shape, and we have plans to make them even stronger. Our other six
brands -- GMC, Pontiac, Buick, Saturn, Saab and Hummer -- will focus on
targeted market niches, offering distinctive, differentiated products with
easy-to-grasp brand promises. In some cases, such as Pontiac and Buick, it
will mean fewer but stronger entries in the future.
- Second, we'll go to market with a total value proposition. This means,
simply, going back to selling cars and trucks on the basis of the great
value that they have to offer customers, with lessening emphasis over time
on incentives. It means strong product offerings at compelling prices that
represent great value -- like the Chevy HHR at $15,995; the Pontiac
Solstice at $19,995; and the Hummer H3 at $29,500. It means improving our
total value proposition by including industry leading content, features,
and technology -- like offering OnStar and Stabilitrak as standard
equipment on all GM cars and trucks.
- Third, we'll focus on improving our sales performance in major
metropolitan markets. Simply stated, we need to perform as well in the top
25 markets in the U.S. as we do in other parts of the country. This means
strengthening our position in markets like Miami, New York, Washington,
and Los Angeles.
- Fourth, we're accelerating our drive for consistent, world class
distribution networks. This means getting our dealers on channel --
Chevrolet and Saturn remaining as standalone facilities; Buick-Pontiac-GMC
grouped together; Cadillac, Hummer and Saab as premium channels but in
many cases under the same owner. We'll work with our dealers to get in the
right locations, with competitive facilities.
Overall, under Mark LaNeve's leadership, we have a revitalized and focused sales
and marketing plan, and we are confident that it will yield positive results.
Cost Reduction
The third area of focus in getting GM North America on track is to pick up the
pace in reducing our cost, and improving our quality. With little pricing
opportunity, we know we can't return to adequate levels of profitability without
an extremely competitive cost structure, and without being among the very best
in quality. And, again, we have solid base to build on here.
Last week, the annual Harbour productivity study ranked our Oshawa plant as the
most efficient assembly plant in North America, and placed GM assembly plants as
leaders in seven out of 13 vehicle segments. On the quality front, we've also
received some excellent news recently.
In the latest J.D. Power Initial Quality Study, GM had the top three highest
quality assembly plants in North and South America, and we took the top position
in five vehicle categories. And, we had similar favorable results in the
Strategic Vision 2005 Total Quality Study.
We are pleased that consumers are recognizing our quality, but we know we can
and must do better. And the same is true for our cost position. We have a number
of cost reduction initiatives in place, but I want to briefly highlight three
that we think are especially high leverage going forward.
First, we are re-energizing our global sourcing efforts. While we've had an
effective approach in purchasing for a number of years, our move to a global
product development system, accompanied by the emergence of excellent supply
capability in lower cost markets, provide us with some real cost savings
opportunities. Bo Andersson and his purchasing team, working closely with
Engineering, are restructuring their purchasing model to take full advantage of
this.
Second, Gary Cowger and his global manufacturing team are proactively driving
best practice sharing on a worldwide basis now. We believe that this, combined
along with enhanced manufacturing flexibility and the ability to look at
capacity utilization on a global basis, will provide significant structural cost
savings going forward.
And finally in the cost reduction area, we need to get to 100% capacity
utilization, or better. With the plant closing and idling announcements in North
America in recent months, we'll have reduced our annual assembly capacity from
six million units in 2002 to five million units by the end of this year.
Going forward, in order to achieve full capacity utilization based on
conservative volume planning scenarios, we expect to close additional assembly
and component plants over the next few years, and to reduce our manufacturing
employment levels in the U.S. by 25,000 or more people in the 2005 to 2008
period. We project that these capacity and employment actions will generate
annual savings of approximately $2.5 billion.
Health Care Costs
The fourth, and perhaps the most challenging element of our North American
turnaround, is addressing our health care burden.
Our $1,500 per unit health care expense represents a significant disadvantage
versus our foreign-based competitors. Left unaddressed, this will make a big
difference in our ability to compete in investment, technology, and other key
contributors to our future success.
We've worked the health care topic hard for a long time, and from every angle --
with governments, providers, consumers -- with a focus on better quality health
care, and greater cost effectiveness. And, we've made progress in these areas
... but, frankly, the continuing double digit U.S. inflation in health care
costs is swamping that progress.
This rapidly rising health care burden is not, in fact, unique to GM -- it is a
critical national competitiveness issue for the United States, affecting our
entire economy's long-term strength. It's clear that the health care crisis
could benefit from stronger leadership by governments at all levels, and by
business, and consumers, too -- and I want to assure you that we at GM are not
giving up our commitment to work proactively and constructively in these areas.
But, it's equally clear to us that that these efforts are not yielding the
progress that we need, fast enough, and that the health care crisis is putting
our future at stake ... and so, we must act now.
In recent weeks, we have been in intense discussions with the UAW and our other
unions focused on a cooperative approach to significantly reduce our health care
cost disadvantage. We have not reached an agreement at this time, and, to be
honest, I'm not 100% certain that we will, but all parties are working hard on
it, in the spirit of addressing a huge risk to our collective futures while
providing greater security and good benefits for our employees.
What happens if we can't reach agreement with the UAW on this matter promptly?
Well, I don't believe that it serves a useful purpose to speculate on that. Let
me just emphasize that our very strongly preferred approach is to do this in
cooperation with the UAW, because we're convinced that is the best way for our
employees, our stockholders, all our constituents.
Frankly, over the past decade, we've had periods of conflict with the UAW, and
periods of cooperation. While both may have yielded improved competitiveness for
GM, it is clear to us that working this challenging issue together, on a
cooperative basis, is the best alternative for all concerned. So, we owe it our
best efforts to try to make that work, and if it that takes a little longer that
way, then we need to give it that time.
But either way, it is crystal clear that we need to achieve a significant
reduction in our health care cost disadvantage, and to do so promptly. We are
committed to do that.
Balance Sheet Strength, GMAC
Finally, today, I want to comment briefly on our balance sheet, liquidity, and
GMAC. The recent credit downgrades have put a lot of pressure on us, especially
GMAC. But they highlight the importance of the strong liquidity position that
we've built up in recent years under John Devine's leadership, and validate the
need for a solid cash base in our business -- which is very cyclical, and
requires heavy capital spending even when times are lean.
We are very cognizant of the pressures that the credit ratings and resulting
restrictions in funding availability have placed on GMAC. GMAC is a business
that is very important to GM. Besides their steady contribution to our overall
earnings and financial strength, GMAC provides significant support in the sale
of GM's cars and trucks around the world, at both the wholesale and retail
level. This "hand-in-glove" working relationship between GM Auto and GMAC
provides ample benefits to our dealers and our stockholders, and is critical to
our ability to compete in the marketplace. Also, through its association with
GM, GMAC benefits significantly in its insurance and residential mortgage
businesses, as well.
So, our challenge now is to find a way to maintain and even grow these important
benefits to our stockholders, while proactively addressing the impact of our
credit situation on GMAC's competitiveness. We are now in the midst of a
detailed study of the strategic options that are available to us.
Our objective is to insure GMAC's access to liquidity and funding cost
competitiveness, and continued support of mutual synergies -- all of which will
optimize the value of GMAC for our stockholders. In the meantime, GMAC has
robust liquidity, and so is effectively positioned to continue to support auto
sales and its mortgage and insurance business, and contribute strong earnings.
Conclusion
I appreciate your patience and your support in our plan to get GM North America
back on track. We have some serious challenges to address, but we also have a
solid base to build off. We've got a clear focus on the necessary steps to get
GM North America back to profitability as soon as possible, and we are
addressing them with intense focus and a great sense of urgency. Combining this
with the positive performance we see in our other four business units -- GMAC,
GM Europe, GM Asia Pacific, and GM Latin America, Africa and Middle East -- I'm
confident that GM's overall business and financial performance will be back to
the level that our stockholders expect, and deserve.
Thank you.
In the presentation that follows and in related comments by General
Motors management, our use of the words "expect", "anticipate", "estimate",
"forecast", "objective", "plan", "goal", "project", "outlook",
"priorities/targets" and similar expressions is intended to identify forward
looking statements. While these statements represent our current judgment on
what the future may hold, and we believe these judgments are reasonable, actual
results may differ materially due to numerous important factors that are
described in GM's most recent report on SEC Form 10-K which may be revised or
supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors
include, among others, the following: changes in economic conditions, currency
exchange rates or political stability; shortages of and price increases for
fuel; labor strikes or work stoppages; health care costs; market acceptance of
the corporation's new products; pace of product introductions; significant
changes in the competitive environment; changes in laws, regulations and tax
rates; and, the ability of the corporation to achieve reductions in cost and
employment levels to realize production efficiencies and implement capital
expenditures at levels and times planned by management. GM is recording the
remarks and visuals presented today which are copyrighted by GM and may not be
reproduced, transcribed, or distributed in any way without the express written
consent of General Motors. Neither the audio or video portions of this
presentation may be recorded by any party other than GM.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
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(Registrant)
Date: June 7, 2005 By: /s/PETER R. BIBLE
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(Peter R. Bible,
Chief Accounting Officer)