通用汽車 (GM) 2009 Q3 法說會逐字稿

Good morning, good afternoon, good evening, wherever you might be joining us from around the world today. I'm Chris Preuss, Vice President of Communications of General Motors. Welcome to our somewhat special third quarter earnings broadcast today. With us is Fritz Henderson, President and CEO, we'll be going through the results here today with us. But before we get started, for those people in the room I would just ask that you turn off your pagers, phones -- I guess nobody does pagers anymore -- your BlackBerries phones, turn them to quiet and we'll commence. We'll be taking questions after Fritz's comments and we'll have people queued up on the phone. Those of you who are with us on the world wide web we welcome you as well. Before we get started, just wanted to acknowledge a few other individuals who are with us today, first Chief Financial Officer Ray Young is here with us, we also have US Sales, Service, and Marketing Vice President, Susan Docherty will be with us as well.

And with that, I'll turn it over to Fritz.

Good morning, welcome, it's nice to be here. Just have a few remarks and then we'll open it up for questions. It's -- this is our first opportunity to share publicly some insights in to the new GM. The release requires some work. I think Jeff was commenting earlier, it's -- you have to kind of get used to it, but if you look at -- we tried to do July 10, through September 30, period outline the new results of GM. In some cases you compare with the old GM, and in other cases you not. But we try to provide information so people can get an insight in to what was happening in the Company. They are non-GAAP, so for those of you who are not financial experts, you need to realize the statements are more managerial than the typical unaudited statements, so I think it's important to understand that.

But I think as least as I look at it, some progress, some signs of stability. We have stabilized share in some important markets around the globe, including in the US I think that's -- first and foremost in terms of if I look at revenue, for example, up $4.9 billion to $28 billion in this -- we call it the third quarter -- I always will fall back to the third quarter, but the period from July 10 to September 30, part of it was the reduction in inventories that we saw in the first and second quarter, and then basically running our plants more normally once we started back up as we began in the third quarter. Consideration of our brands has begun to show some improvement, consumer consideration, particularly of our core brands. A open (inaudible) has been canned for example, Chevrolet, Buick, GMC, and Cadillac really pick up the pace and fill the space that has been vacated by, particularly Pontiac and Saturn and I think we've been encouraged by the results we've seen today.

Our new vehicle launches, if we start with the Camaro, it doesn't seem like the Camaro is new, but in fact it is, Equinox, Terrain, LaCrosse, and SRX have all been encouraging. We have been pleased with the reception not only here in the US but also if I think about globally, our new Astra in Europe, the Agile in Brazil, there are -- and then our growth in China has been in many ways fuelled by strong acceptance of new-launch vehicles in China, whether it's the Regal or the LaCrosse in China -- excuse me, the Buick, or the Cruze in Chevrolet. Finally, in terms of cost, again, it's important that you don't necessarily have direct comparability but when we look at the progress on the structural cost front, achieving our goals reducing the break-even level of the Company, reducing the risk of the Company and on the risk of the Company it's -- in the release and later today with investors will show what has happened to the level of indebtedness of the Company. It has been fundamentally restructured. So the reduced leverage and liquidity position that we have, which allows us, really, to reinvest in the business.

I would say though, when you come away from it, we lost money during this period of time. $261 million was the EBIT loss, and then you had about $0.5 billion in items, and then you had interest. So about $1 billion pretax and about $1.2 billion after tax during this period of time. Again, these are managerial numbers. Not satisfactory. I mean, certainly much lower than what it has been, although it's not necessarily comparable, and certainly better than our plan going in to bankruptcy, but nevertheless it is a loss, and you cannot be satisfied with it. The operating cash flow in the quarter $3.3 billion, I keep saying quarter -- this period of time was good to see. Now part of that was just starting up our plants and so you typically have the favorable working capital effect when you do that, and then you combine that with a fairly low level of capital spending resulted in us generating cash in the third quarter, our cash balance has actually rose to $42.6 billion including the funds that were in escrow. We articulate in the release what we expect in the fourth quarter, whether it's funding the Delphi reorganization, which is now completed, which is very good news to have that done, or the one-time effect of the change in payment that we have seen about $2 billion so there are going to be some factors in the fourth quarter which will lower that number from what I think was the peak, but nevertheless a good, strong liquidity position to reinvest in our business, and B, begin repaying the taxpayer early.

With respect to the loan what we announced is we would begin the repayment in December of this year, $1.2 billion. $1 billion to the US treasury, about $200 million to the Canadian government. Begin that this year, there's a repayment schedule. We certainly felt given our liquidity position that we're able to do it, and we're committed to do this. We have to begin the process, it's a personal commitment it's a commitment of the entire leadership team of the Company to repay the taxpayer first and foremost from repaying the loan and then over time generating value in the shares so the taxpayers benefit as major shareholders of the Company.

So as we look in to the fourth quarter of this year, and in to next year, I would say, as I think about the US market, for example, granted 10.8 million units last month, this month feels much like last month in terms of where the markets are. That's encouraging versus September, but nonetheless at 10.8 million it is not a very good number, but it is the kind of exit rate that we see is necessary in order for the US next year to run between 11 million and 12 million. We're basing our plans, for example, at 11.5 million units. Outside of the US, I think you are going to see some payback from scrappage programs that we have seen whether it's in Germany, there is one underway today in the UK, you have seen some tax incentives in Brazil, which are being phased out gradually over time, and then China has been substantially driven by not only economic growth but also a stimulus package. Nonetheless we still think China will have a strong market next year, but I think you'll see some payback from these various different initiatives, but nonetheless when you step back our outlook for 2010 is one of modest growth, and I have already articulated what the US -- what we think the US will be but we're seeing signs of -- I won't call it the recovery but certainly size of the stability and stabilization but second the factors that are necessary in order for things to begin to recuperate. So thanks very much for your time. At this point happy to take questions.

For those of you who are in the room, we do need to have you speak into a microphone so that we can pick you up on the broadcast, so as I call you we'll send one over to you quickly. And secondly for those of you on the phone, we'll be queueing you up on the phone here. I'm going to start with Bill Vlasick.

Good morning,

Hi, Bill.

How long do you anticipate it will take to pay back the entire loan?

The repayment schedule is over eight quarters, and so -- and we begin in December, so think of it as -- if I think about it is a it a two-year repayment schedule, a little bit less actually but there is a date, June of 2010 where this escrow agreement basically, I'll call it -- it's a check in date or a due date. We have the ability the petition the treasury for a one-year extension of that, but in the event that things are going well, any funds in that escrow would be first used to fully repay the loan, so I would say, that's -- we have a repayment schedule, but this escrow date is also important to understand, so it's such that if the moneys are over the amount that the balance is in there and the business is reasonably good, we can find ourselves fully repaying in June of 2010, but I would say the repayment schedule certainly calls for a no -- a period shorter than two years -- the original maturity is 2015, so those are the facts.

I'm going to go to Rod and then I'll do Dee and Derbin over here.

I want to see if I can get some perspective on this, in terms of the accelerated repayment of the loans, and then the attention that gets paid toward the IPO, and the valuations there. Is it -- am I correct in the assumption that you are attempting to pay off the loans as quickly as possible? Does that take the yoke of all -- of many of the restraints, as soon as you pay back the loans then you do the IPO, then the race is to get the shares up high enough to allow the Federal government to sell them off over time? Is that what I'm reading into this this morning?

With respect to executive compensation, that's actually an open question, as to whether repayment of the loan actually changes that. I think the answer is, I don't know the answer to that question. But let's talk about the -- I'll call it the privatization of our capital structure which is how I look at it. What do we need to do in order to privatize GMs capital structure. One is to create the financial statements necessary on a fresh-start basis in order to publicly report, and that will be done by March 31, of next year. Including GAAP statements for this period of time that we're reporting today, the fourth quarter, and then the calendar year. Really important that we do that. From that, then, you say, okay, what do you need to do?

One it's certainly my personal commitment and be accountable for it to begin repaying that loan because it's a first step. I think it's an important thing to do, something we can do and something we obviously agreed to do. The second step you need to deal with is, we don't have a revolving line of credit today, so as I look at it, as I go out in to next year, it's certainly an objective that Ray and I have, in terms of arranging a revolver, doing things that would provide us more financial flexibility than we have today, the third thing to do is to prepare for the IPO, and that's not only putting the financial statements together but also laying the groundwork for that, and the reason why that's important is because all of our shareholders want to sell shares, and so creating a market for an orderly trading of the stock is important, and then once you do that, you know, not only repaying the loan, having a revolver, but creating a value market in the stock so that your shareholders over time can sell down. That's a process I put under this umbrella of the privatization or capital structure, and the process begins now with the loan.

Okay. Go to (inaudible) then 'm going to go to the phone.

Hi, thanks for having us this morning. The GAO said recently that tax payers are unlikely to recoup their investment. Can you respond to their report?

Yes, I can, I can say clearly the ability of the taxpayer to fully recoup the investment is going to be a function of the value of the shares. Not only repaying the loan, they -- some amount of preferred, but the lion's share of the investment in the Company is held in the form of common stock. We're accountable for results. I'm accountable for results. And it is my mission to disprove the GAO. Is to create value in the Company, generate results in the Company, so in fact the taxpayers can get a return on the investment. I read the report, we understand it. But in the end it is a question of your outlook on the stock, so the outlook of the stock and the value of the stock is driven by how management performs. So that's how I would respond.

We're going to Neil Hodgeson with Liverpool Daily News, I believe, on the phone.

I have two questions, first of all what kind of future can (inaudible) expect in the restructuring of (inaudible) and secondly, are you considering awarding para production to (inaudible) please?

Well, this -- we are obviously in the process of sharing our updated plan with the EEF, the European Employee Forum, as well as the works council in the various locations. I can say with respect to the (inaudible) it's the lead plant building our brand new Astra, so I can't think of a better signal of the importance of the plant than having the lead planned for our new Opal Astra. So we're encouraged by that. I have been to (inaudible) a number of times when I was in Europe. The team there has done a remarkable job transforming itself in terms of quality, productivity, flexibility, and we feel very good about the plant, and certainly we felt so good about it that we made it the lead plant for the Astra. Actions speak louder than words and that's the strongest action we can take to reinforce the importance of Elsmer Port to our European business going forward.

Thank you.

Okay. I'm going to do one more on the phone. I think it's David Bailey from Reuters.

Great. About the loans, why not just pay them all back right now if you have the liquidity? Why make a delay?

Good yes We felt this is the prudent thing to do. I made the comment when Bill Vlask asked the question, we have this June 2010 date that's important and if -- if the business is -- is in reasonable condition, and the funds are there at that time, we could very well find ourselves fully repaying the loan in June of next year. So I think we felt this was the prudent balance of things to do, start repaying the loan now, and then we obviously go have this repayment schedule. That repayment schedule by the way is suspended in the event of an IPO, but as I think about this privatization of the capital structure, we will deal with the loan whether it's through an IPO, or as of this June 2010 date,we just didn't think it was the right thing to do to fully repay it today.

Todd Lassa.

Todd Lassa with Motor Trend. In your reorganization plan, you said $10 million of -- per year as your break-even point.

Yes.

Now we're not quite at $10 million for the full year yet, but now that you have had a few months operating as the new GM, do you still feel that that would be the break-even point, and what will it take -- are there still some cost restructuring that you have to realize before you reach that level?

We felt that the US break-even point 10 to 10.5 on an EBIT basis, so it was done on an EBIT basis, number one, number two, there were still some things that needed to be implemented. For example, the final implementation of our healthcare agreement takes place either December 31, or January 1, one of those two dates. So -- I mean and that's a very important component of restructuring the cost structure, in fact, I'll call it the cash flow of the Company, and -- and it -- basically it is then blocking and tackling and executing, but there are some things that need to get done in order to bring our break-even point down in 2010 to what our objective is, and then we'll have a chance to update you on where we stand relative to that date when we finalize our plan, we've accomplished a lot of what actually accomplished a significant amount from what we outlined in the bankruptcy plan, at the same time however we have ramped up media spending and done some things in order to make sure we are properly promoting our brands, particularly our core brands, which is going to tend to raise the break even point, so I think what we need to do is need to be able to show you what that balance is once we finish our 2010 plan.

Mary Conway.

Hi, Mary.

Hi, Fritz. Two things, how much of starting to repay the loan is meant to boost consumer confidence? And also earlier when we had a round table, we talked about the possibility of calling any workers back, and you were talking about 6,000 to 7,000 on long-term layoff. What is their status at this point?

No change in the status today. Our production plans are set for the fourth quarter, pretty much set for the first quarter in some ways, so I wouldn't say there is any change in status from where we are today, unfortunately. It would have been nice to have more of a tick up in demand but I think we have our inventories properly in place. We don't want to let them go up. So we're going to maintain production to keep our inventories in line.

With respect to consumer confidence, I think this is as much about management confidence as it is consumer confidence. We feel confident that we can begin to repay this loan, we think it is important to show our commitment to the taxpayer, that, yes, in fact, we will begin paying back this investment, and certainly it is something I felt strongly about as did the Board and our leadership team. So we begin now. Consumer confidence is really a function of employment, income, the future, credit, all kinds of other things and to the extent that our announcement helps, great, and, I think -- I think -- that's -- it's much more about what is happening in their daily lives to the consumer than it is -- so this action wouldn't necessarily have a direct correlation, but I certainly think that it's a sign of what we can do to begin repaying the taxpayer now.

Okay. Back to the phone Larry Simonson from the FT.

Hello, Fritz. Woefully ignorant question from a non-accountant. I wonder if you could address how you arrive at the $2 billion cash flow, given that the government loans came to over (inaudible) billion, and you had a number of cash anyway when you went in to Chapter 11, and you had a positive cash flow. How come we're at $42 billion right now.

Actually stay tuned a little bit later this morning, we'll go through the cash flow statement Bernard, but a couple of things have happened. One the business has performed better than we anticipated going in to bankruptcy from an operating perspective. Two, many of the contingencies actually that we provided for in the financing of the Company through bankruptcy haven't happened, part of it is -- the situation just didn't take place, so a combination of better performance relative to the plan going in to bankruptcy, combined with some of these contingencies that we outlined not coming true has resulted in a liquidity position candidly well in excess of what we would have thought going in.

We're going back to one more phone call and then we'll move back to the room. Sky News, Joel Hill.

Thanks, Chris. Couple of questions if I can, first of all you state in the results that the international operations reported a profit of $238 million. Was GM Europe profitable, and if so, how much money did it make or lose, and a second question, it strikes me, even from the statement you've acknowledged the impact of the various scrappage schemes around the world, and the impact that it has had on your business , are you not concerned that as those are withdrawn that actually you'll fall back on the same problems of fewer people buys cars?

Okay. First question, international operations, we're profitable in this period from July 10, to September 30, Europe was not, Europe lost a little bit more than $400 million in that period, which means that Asia Pacific and Latin America were obviously solidly profitable. And with respect to scrappage schemes, certainly we've seen, I think we're going to see Germany fall back from the level it's run this year, it's -- our expectations would be that would happen, with respect to the UK, I think time will tell. With respect to the US, the payback for the Cash for Clunkers program, we felt it in the month of September, and once we got through September, October, we pretty much put that payback period behind us. So yes we will have some impact in scrappage from the expiration of scrappage it seems, in Europe next year. I would say, though, that, in terms of our production level, one of the things that has happened here with us in the US and also in Europe, is that 2009 has been a year where we substantially reduced inventories, and therefore we've run production far less than the rate of sales. I think our inventory levels in Europe as I look at them are in the best shape they have ever been, they're extremely lean and so as we go in to next year, we think we will be able to run production in line with sales. We do that, that's actually a more virtuous cycle for us to be in. So it is true, I think we're going to see some markets fallback, but our production or our wholesale sales if you will, may not be as severely impacted certainly relative to 2009 because we're not going to have a period where we are going o have to take inventory down further.

Okay. Jamie Larue, Automotive News.

Thanks, Fritz. I'm looking here and this $0.5 billion you took in special items is attributed primarily to dealer restructuring.

Right.

Can you give me the status of where that is is this going to the bulk of these charges, and how much has it saved you in terms of your dealer restructuring?

The lion's share of the $500 million was a provision for wind down expenses. We had some of those expenses in the second quarter. I think that -- I wouldn't rule out having them in the fourth quarter, but once we do that, we know what the game plan is, we'll have disbursements going in to next year, though, we'll write checks, but in terms of the accruals we'll have those largely behind us this year. And then we'll write checks to finish it off and I would say we are on track in terms of our restructuring plan, in some ways maybe we're ahead of schedule, because inventories are much lower and so dealers are actually coming forward without inventory and saying let's just wind up now.

And how much has it saved you?

I think it would be much more important to get in to that when it's all complete than trying to speculate about it today, Jamie.

One more in the room here then I'll go over to the phone. So Tim Higgins for Quest.

Good morning, thanks for having us. Can you talk about the impact of Cash for Clunkers on the US revenues?

Tim -- I mean in terms -- I think to talk about it in terms of retail sales in terms of revenues our revenues in this period were $4.9 billion higher than what they were in the second quarter. It was really a function of production more than it was Cash for Clunkers, and I think certainly with our inventories where they are, again, we're going to be able to run production in line with sales, which is a much better place to be in relative to where we have been in in the last, seemingly 18 months where we've been shrinking inventories, we have needed to, so I'm not sure I could draw a direct correlation between our revenues, if you will, which are on a wholesale production basis with the impact on Cash for Clunkers, I would say the program was successful in terms of generating retail demand and moreover how the program ended was actually quite well done, because it ended -- it was clear, everybody understood the rules, and therefore the payback, which when these things don't end well, the payback can go on a very long time. There was a very clear definition of when the program ended, we felt the payback in September. We don't really see it now as we look in to October and November.

Okay. We're going to go to the phone, I have Chris Isadore from CNN.

Folks what would you say if you had to estimate today what I think stood with the IPO, do you think that before the end of next year is likely or unlikely?

Chris, the -- our objective is to be ready for it, and when I say ready, getting our financial statements done by March 31, making sure the information is provided, to be ready, and then if you think about what are the factors which would lead to an IPO in the second half of next year, part of it will be the capital markets and the interest of investors to actually sell or not sell, part of it will be how the auto business is doing and how we're performing so there's a lot of factors that go in to whether or not you actually execute it.

Our objective is to be ready to go in the second half of next year, my view, though, all four of our shareholder groups want the Company to go public, and it's important, sometimes they are a private Company, and the investors don't want the Company to go private in our case all four of our investor groups want the Company to go public, one of which are the creditors of the old GM, and they begin receiving their shares if the Company were for example -- if Motor's Liquidation were to begin distributing shares early next year, I'm not saying they will, but it could happen, they are going to want to begin to sell their shares, so we want to actually create an orderly market for the shocks, so there's a lot of factors which would suggest that we should be ready to go in the second half, and then we'll make the decision at that point, but I do think it's important to understand the context because all four of our shareholders want and in fact many cases need the Company to go public.

We're going to go back to one more phone then we'll come back to the room with David Wells.. Right now we'll do ABC news Chris Bury.

Good morning, Fritz. I wonder if you could respond to concerns raised by some in Congress that the taxpayer money has been used to fund overseas operations or restructuring of Opel, basically that US taxpayer money is going out of the country to GM operations overseas?

Couple of things, first, we are a global Company. And in order to run as a global Company you have got to have some ability to support your international operations. Our exit financing documents when we came out of bankruptcy explicitly recognized that. We do provide notice, we provide disclosure. With respect to Opel, for example, the repayment of the bridge loan, which is occurring this month, a part of it will be funded from Europe, but a reasonable part will be funded, reasonably large part will be funded here from the US. In order to run a global company, you need be able to move funds around the world, you have got to be careful about it, we'll provide the appropriate disclosures, and we certainly want to minimize it, but if you are going to be a global company, there's no choice that you have to be able to do that.

The second thing -- I actually saw some information today about China, I'll use this as a marketing opportunity, if you will. Our China business basically from day one has been profitable, from day one has been generated cash flow, has been paying dividends, reinvesting in the China market with our partner and so that business is throwing off cash and doesn't require support, for example, from the U.S.

David Welsh.

David.

Two questions. When the Viva does kick in, can you give us an annual impact in terms of how much that will help profitability, and the second thing is these restructuring charges and how long of a tail is that, are we going to see this going on well in to next year?

The lion's share of the restructuring charges should be behind us this year. In fact, if you look at the level in this period of time, it was actually fairly small. When you go through -- by historical standards -- when you go through fresh-start accounting, you basically put assets and liabilities on your books at what you expect their fair market value to be, once you do that if there are liabilities you should reflect those, so I think the process of using fresh-start accounting would actually minimize over time, the amount of restructuring charges. There will be likely amortization.

One of the points we made, this is a non-GAAP statement, so it doesn't include if we have to put intangibles on our books, which is probable, you'd have some amortization associated with it but it wouldn't affect cash flow. So I do think that you are going to see far fewer restructuring or special charges in the future than what you have seen from GM historically. With respect to the Viva, the accounting for the Viva is driven in many ways, it's fairly complicated but let me just talk about cash which is the direct way to think about it, we spend, this year for the UAW Viva -- excuse me UAW post retirement health care, as I recall, somewhere between 2.5 billion and $2.8 billion cash and that ends January 1, of next year. So that gives you some sense in terms of cash, the actual expense impact is driven by remeasurements and fairly complicated, but the cash impact is not complicated at all.

Okay. We'll go over here.

(Inaudible) Question about these operating actions that allowed you to achieve this $1.2 billion, can you elaborate, perhaps again on what operating actions actually allowed you to achieve this reduction in your loss?

Sure if you look at the reduction in the restructuring cost for example already that we outlined in the release, although it is not directly comparable period over period, you do have some context it's about plant rationalization, manpower reductions both in salary and hourly workforce, curtailing, for example, marketing and advertising for non-core brands, so it was all of the operating actions that we envisioned going in to the bankruptcy we're executing those. They are tough. They are difficult to deal with, but they are important in terms of lowering the break-even point of the Company. Thoughts would be the key actions that I would refer to.

We're going to go back to the phone lines. Steve Hawk from the Sun.

Hi, guys. Just following up on the first question, can you give any indication of (inaudible) to the UK as a whole, because obviously things have changed somewhat since you decided to not sell to (inaudible). Can you rule out any job loss in the UK?

No, not going to talk about that this morning. We're going to make sure we cover that with our work force in Europe, first before we go public with it.

When will that be a final decision?

This is a process, which I view is measured in weeks, and so -- I mean, it's -- basically the time is right in front of us. The discussions began last week, will continue in to this week, and certainly this is something that we would like to accomplish a substantial amount before the end of this year.

I'm going to take one more from the phone lines. Nick Van Pratt from the National Post in Canada.

Hi, Fritz. Hi, Nick. Two quick ones. From what I understand you have received some pushback from Congress in terms of dealership closures in the United States and other things in terms of cost cutting. Have we seen similar pushback in Canada?

No. I don't believe so. So -- I mean -- I had to think about whether or not I have seen that, but I have not seen that, certainly up until now.

Okay. And second question, you do have a joint venture in Canada with Suzuki and they are not producing anything there, what is your sense of how that partnership is going to move going forward?

The plant in Cami is building Equinox's and Terrain's as fast as they possibly can, it is true it doesn't build Suzuki product anymore. We actually consolidate Cami in our financial statements actually, we began that last year. I would say with respect to our relationship with Suzuki there, I would prefer not to comment on it publicly, we do have dialogue about Cami with Suzuki and specifically with Suzuki on a regular basis, so we'll talk about it in the future, but what I can say the plant is on 3 shifts running all out to satisfy demand for Equinox and Terrain and it's a very very nice situation to be in.

Okay. Other questions in the room? Okay. Bill?

Fritz, do you expect to be profitable next year, and how does your profitability -- what factor does that play in paying back the loans and the IPO?

Bill, we're -- we will finalize our plan -- our operating plan and budget with the Board here early December, so it would be premature for me to talk about 2010 or '11 at this point, so I won't, but I mean, I would say we have been, again, encouraged by the results we have seen. What are the factors I think was your second question that would drive it?

Profitability play a role in whether or not you pay back all of the loans?

Yes, it does. Profitability, cash flow, you have to step back and look at it in its totality, not only overall liquidity position, we articulate in the release some of the factors which will result in a lower cash balance in the fourth quarter, but a number of those are actually also one-time, so, we developed our own productions, shared them with the Board and certainly felt confident we could begin this repayment schedule starting in December, but, yes, it would have been a factor as we came to that conclusion.

Hi, Fritz -- was there one single factor that prompted you to save instead of sell Opel and then how much fence mending do you still have to do with German Unions, German government .

No, not one single factor. If I think about our new Board, the various meetings they've had, my guess is that -- 30 or 40% of the time the new Board has met it has been on Europe. It is a very complicated strategic matter and so I wouldn't say that there's one factor. And with respect respect to fence mending we still have a fair amount to do. There's no question. Particularly in Germany but I would say it's also across Europe, we need to communicate, we need to make sure that our work force and the various governments where we operate, whether it's the UK, or Spain, we want to make sure that, in the plants where we operate, the countries there, they understand our game plan, but we do have a fair amount of work ahead of us particularly in Germany in terms of mending fences.

Mary Conlan again.

Fritz, going back to the 6,000 or 7,000 that are on layoff, that may become permanent layoffs, might you talk about where they are, and with their not having a jobs bank anymore, when might they be permanently laid off?

The way the program works, depending on seniority you have one year of sub, and then the second year is called TSP or basically a transition program, and the level of income protection steps down in the second year. If the person is not -- and by the way if we have an opening and we offer someone a job, they need to make a decision whether or not they want to take the job, and we have done that at this point to some degree, to a limited degree, but I think of it, Mary, as basically one year of I'll call it income production from subs, second year in step down basis called TSP, and after that, if there's no job, unfortunately they need to leave.

Do you know how far along in the process those people are, though? Have they already been off for a year, or is this fairly recent?

No, if you think about that group, some population of that group has been on layoff for sometime, some population of that group won't even go on playoff until the plan is ultimately affected. So it would be impossible to generalize.

Okay. I'm going to go back to the phones. James Amon from Wards.

Hello, Fritz.

Hi, James.

Hello. Curious if you can update us on the Opel Chief Executive search, where that stands? Any sort of time table you're under there?

We launched it last week, so we don't have one today. And I would say -- I think of this -- I was asked -- and I said, this is a process of actually finding an excellent candidate is -- this is one that is measured in months not weeks, so we kicked the program off -- excuse me, we kicked the search off, and we'll update you at the appropriate time, but I don't have anything to share with you this morning.

Michigan public radio, right?

Hi, Tracy.

I suspect you are never going to be able to quantify the damage from the bankruptcy, but I wonder if you can sort of give us your gut feeling about whether it was perhaps less damaging to the Company than you had thought going in? Do you have a sense at this point based on what you are seeing financially, that it has been a little better than you thought?

I think it actually is -- you are capable of quantifying the damages in bankruptcy, whether it's the debt that has been extinguished, obligations have been restructured, shareholders have been wiped out. I mean, I think if you look at the damage, it's -- it can be quantified, I don't have that at my fingertips this morning but I think any -- an external analyst could wind it all up, and you could come in to the many 10s of billions of dollars in terms of the damages if you will. What I said is the business -- the underlying business is actually -- relative to the projections that we had going in to bankruptcy has actually performed better. Part of that is because we were there 40 days, so, therefore, the impact was -- the period in which we were in bankruptcy was fairly -- very, very short, and part of it was because he business, we make projections and we had never done it before, so you had no ability to really -- you didn't have any guide posts that you could use, but we were encouraged by that, I think the key is over time creating the value in the Company, Tracy, so that the parties that had sacrificed, particularly bond holders, they have the ability to begin to recoup part of their investment. Same with UAW Viva. and I certainly think that the damages, if you will, were substantial, and under no circumstances should they be minimized.

Okay. Game to go back to the phone. I have got John Stohl from the Wall Street Journal.

You keep forgetting Tom so go ahead.

I'll get Tom. I'm trying to balance the folks here. We had a special seat for John, but he wasn't here, so.

Hey, John -- other room, right -- I --?

I swear we're not doing this to you, John, but you are breaking up. Do we still have you?

Yes, I'm here.

Why don't you try it again.

In respect to Opel in terms of restructuring costs there, if GM might take out of its own liquidity reserves, where would that money come from and how much (inaudible) in terms of the business.

All right. I think I got it. I mean, a part of it -- I mean, our European business is actually run butter than we thought as well, but I would say with respect to if funds are required from the US, they would not be dispersed from the escrow account, we would fund them from our cash balances that you see on the balance sheet that are not restricted, and with respect to the quantification of that I'm not in the position this morning to go into that with you.

Tom Walsh.

Two things Fritz. One, where do you think you will be next year on North American headcount, are we pretty much through the buyout programs, white color and blue collar, or do you look for further headcount reductions, and then secondly, I wonder if you could give us a little color on the gains in transaction prices and residual values.

Yes. Okay. So in terms of the adjustments in the structure of the Company, Tom, as I outlined -- we kind of gave the 90-day outlook. We expect to end this year, in terms of the salaried workforce in the US, interestingly we have a fair amount of the people leaving the Company in January 1. So I always have to be a little careful about what date you pick, whether it's 12/31 or January 1. But we'll be less than 24,000 people, 23,800, in that range, which is generally in line with the plan we had. So I wouldn't anticipate we would see any more significant action in that area, as we don't expect it, we don't plan it. I do think over time, we'll make changes in people, but not -- I think what you're getting at is we're going to have any other major programs and we don't anticipate that on the salaried side, on the hourly side, Mary asked the question, we had -- we have about 6,000 to 7,000 people in layoffs in the hourly side of the business, some part of those people will roll off. We'll be adding to that as some of the plants that are being closed do close. But I think that we don't anticipate, for example, another major attrition program -- if we do it we would tend to do it on a location specific basis as opposed to across our entire work force.

Okay. All right. I think -- Sharon, right?

Yes.

Hi, Sharon.

Hi. Can you talk a little bit about what you envision in terms of the structure for Opel. You talked about AG maybe not being the best way to go.

We actually were an AG we changed to a (inaudible) and the AG law was actually enacted many, many years ago to protect minority shareholders and since we hadn't had a minority shareholder in Opel for 100 years or 80 years, we thought, maybe we didn't need it. There is, certainly -- there -- as part of looking at the structure of the Company, in terms of, where it's located, which will be in Germany, we'll basically consolidate our operations under one umbrella in Germany as opposed to the way we've historically run it with an operation in Zurich and an operation in Germany. I think we'll take a look, another look at that.. I made the comment when I was asked, I'm not convinced that we need to become an AG. Clearly the head of the works council wants us to, it's one of their requests, so we're evaluating it, because I think in any sort of negotiation you should be thoughtful in terms of assessing the demands of the party you are dealing with. So we'll take a look at the pros and cons and sit down with the works council in Germany and have that discussion.

Okay. I'm going to take one more from the phone and one more from the room here. Julian Buckley, I believe from Manufacturing Magazine.

Yes it's ultimate manufacturing solutions. Good morning, Fritz.

Jutian, good morning.

Good morning to you, sir. My question concerns the new Regal. I wondered in this time of need to cut costs wouldn't it be more effective to bring the insignia straight over from Europe for production in the US?

We'll start with the product coming over from Europe. But, we do have -- Julian, one of our historical philosophies is to build where we sell. We do that whether it's in North America, whether it's in Europe, whether it's in China, I mean it's a policy that has work, it was articulated first -- Mr. Sloan first discussed it, and it works actually, and now only -- currency risk out of the equation. You do a lot of other things, and your time to market is actually much better. I think starting out with bringing the products from Europe is a really good idea, because it's a fabulous product. But I -- my history with importing product in to the US from euro-denominated manufacturing plants is not good -- ?

You couldn't build the Insignia in the US, though? --

Euro, one could argue, including me that it's not a particularly good idea longer term. I wouldn't rule it out, but you need to understand that that is -- you have to deal with dollar euro over a long period of time. I'm not sure that's -- I'm pretty sure that's not the right decision for the Company.

Sure. Sure. I understand. Thanks.

Rod, and then we're going to--.

Fritz, just to revisit a couple of points, the reasoning behind paying the loans back, is that sort of a notion that you want to give your image a little bit of a boost with taxpayers angry that you got the bailout in the first place? That's the first part, and the second part if you are not certain of how the Federal government peels back from it's a control over your day-to-day existence though they claim that they're not telling you what to do, but they do have considerable control, how will you go bout that process of having the government peel back from their control.

All right. So repaying the loan, I'm asked the question -- I have probably been asked the question since the bankruptcy, I don't know, actually probably 100 times, when are you going to start paying back the taxpayer? The answer is now. I think it's a commitment of the Company that we need to start doing this and the best place to start is with the loan, and agree to a repayment schedule, and begin the process we absolutely felt was the right thing to do, and it's as simple as that, because I think, it -- no time like the present if you will. So that will be the answer to your first question. Your second question, related to--?

Related to the Federal government's overall control.

Yes. The -- I would say the -- one of the things that the treasury had indicated initially is that they really want the Board of Directors of GM to be responsible for the oversight of the Company, including the oversight of management. They have been very true to their word. If I think about -- if you think about your average -- I'm not sure there is such thing as an average 60.8% shareholder, but if you think about an 60.8% shareholder and how they might behave in a public or private company, relative to what the treasury has done. The treasury has really asked the Board of Directors to take responsibility for overseeing the Company. They have been true to their word, and I think it has been remarkable in some ways. If you think about any other 60.8% shareholder, they could be sitting in my office every day. And what the treasury said is we want the Company to be overseen by a world class Board of Directors and that's what is is happening today. And I would say in terms of quote unwinding the treasuries involvement, there are some elements of it whether it's elements that go with the exit financing document, I'll call it review processes, but none of those are particularly burdensome, it's really about at this point, the governance of the Company as overseen by the Board of Directors, and I think that has been a very positive development.

I keep coming back to this issue of having executive pay, and Mr. Whitaker talked about how that is having an impact on your ability to get people to come in. Wheen might you see that end?

The -- I think you asked the question earlier, and I'm not sure was what the answer is, whether -- whether -- I mean, if repaying the loan -- clearly the loan brings with it those restrictions but the treasury is going to be a shareholder for a very long period of time and a preferred shareholder in it. So it just -- to me it's not clear -- I think it's an open question as to whether or not the restrictions actually run to the shareholding. I don't pretend to be an expert in this area. I think the most important thing that we could do is start repaying the loan and realize that the treasury is going to be a shareholder of GM for some period of time, but you start the process of reducing the shareholding and then you see. I just don't know how to answer your question today.

Fritz, so much changed over the last several months. Old GM, so many things we were able to leave behind, there was one thing we could not leave behind, and that is the disclosure on forward-looking statements. And if you just read this, up here, I would direct you to the press release to satisfy our friends in legal that in fact we have met our obligation to make sure that you understand that. We certainly appreciate your time this morning, and hope to be up here again in three more months with even better news. So thanks for your time and attention.

Thanks very much. Thank you.