Saturn may hit the ditch in GM's loan plans

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General Motors' restructuring plan is expected to be far more aggressive than originally believed and may include the elimination of its Saturn brand.

Both GM and another troubled domestic automaker, Chrysler LLC, must provide restructuring plans today to the U.S. Treasury Department that prove that they can repay the billions in federal loans that were approved for them late last year. They also must show that they will be viable companies once the restructuring is complete.

The plans are expected to be reviewed by a task force headed by Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers now that President Barack Obama has opted against naming a "car czar.")

GM was making progress in concession talks yesterday with debtholders and its main union, the United Auto Workers, but agreements may not come until after the deadline passes, according to people briefed on the situation.

GM executives have said the company only has to show substantial progress by today, with the whole plan finalized by March 31.

GM's plan will discuss cost savings from labor concessions and additional plant closures, but the locations of those plants will not be revealed, a person briefed on the plan said. The number of factories to be closed wasn't available.

GM's board met yesterday by teleconference to go over the plan, but details could not be obtained.

Chrysler, which like GM is living off billions in government loans, continued similar concession talks yesterday as well, but few details emerged.

Under the terms of the GM and Chrysler loans, both companies must use their best efforts to reach targets to reduce debt and labor costs. One target says the automakers need to make half of their payments into the UAW health care trust in the form of stock rather than cash. Another requires the companies to reduce unsecured debt by two-thirds by swapping debt for equity. The terms also seek labor cost parity with Japanese automakers that have U.S. plants.

GM has received $9.4 billion in loans and wants another $4 billion when its plan is approved.

Chrysler is staying in business with $4 billion in government loans. If the government approves its plan, Chrysler will get another $3 billion in loans.

"I haven't heard about what is in General Motors' plan in detail, but it looks like it will be more maximum than minimum. In other words, it will be quite aggressive, and I don't know whether this will include plant closings or elimination of brands," said David Cole, head of the Institute for Automotive Research in Ann Arbor, Mich.

Meanwhile, Bob Lutz, who is slated to retire as GM's vice president of product development, told the Automotive News that Saturn likely would not survive the restructuring plan.

"My personal favorite would be to see Saturn survive and prosper. But frankly, the reality is that that is probably not going to be the outcome," Mr. Lutz said. Neither he, nor other GM officials could be reached for comment on Saturn's future.

"We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup, top to bottom. They had a better and fresher lineup than any GM division, and the sales just never materialized. So we have to act on that. It's our duty," Mr. Lutz told Automotive News.

Working against the idea of axing Saturn is the enormous amount of money that would have to be spent to settle with dealers and the potential lawsuits from them that would probably follow. That happened with Oldsmobile.

Rob Cochran of No. 1 Cochran in Monroeville and Robinson said he held out hope that Saturn would continue as a brand.

"I know that Saturn is ... exploring a lot of options. The dealers met last month in New Orleans and there were three or four options on the table," Mr. Cochran said. "We are waiting to see what those alternatives are."

He added, "Mr. Lutz is famous -- or depending on your viewpoint, infamous -- for just winging it. He's a great product person, but a challenge from a PR standpoint."

Meanwhile, Saab, another GM brand under review, may fare better under the restructuring plan because the Swedish government plans to inject about $4 billion dollars into it and another Swedish nameplate, Volvo, which is owned by Ford, to make sure they survive the turmoil of the North American auto market, Mr. Cole said.

The question with Saab is whether GM will continue to control it or whether it will come up with some other arrangement, analysts say.

The betting among many industry observers is that GM will have to keep Saab because anyone interested in buying the brand now will have a difficult time getting credit financing to carry off the purchase..

The only mystery with the Pontiac brand is which models will be kept. If, indeed GM plans to focus on Pontiac's long performance heritage and youthful aura, it would make the most sense to keep the Solstice roadster and coupe along with the highly acclaimed G8 performance sedan.

GM also has said it plans to sell its Hummer brand.

At Chrysler, things are less settled because the proposed alliance with Italian auotmaker Fiat SpA is on the table. Chrysler officials have said the deal, which calls for Fiat to take a 35 percent stake in Chrysler LLC, will not be finished until after Chrysler submits its restructuring plan.

The automakers said last month that they had a nonbinding preliminary deal for Fiat to give its small-car technology to Chrysler in exchange for a 35 percent stake in the automaker. Chrysler's current small and midsize vehicle lineup has not sold well, and it lacks a subcompact model that Fiat could provide.


The Associated Press contributed to this report. Don Hammonds can be reached at dhammonds@post-gazette.com or 412-263-1538.


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