EXHIBIT 99.1
GM Announces Additional Actions to Support
North American Turnaround
DETROIT - General Motors Corp. (NYSE: GM) today announced significant new
actions to support its ongoing turnaround plan, particularly in its North
American business, to reduce costs and business risks, and to further enhance
its financial flexibility.
These actions include the following:
o Revised health-care benefit plan for salaried retirees in the U.S. that is
expected to reduce the company's liability by about $4.8 billion and its
annual health-care expense by almost $900 million before tax;
o Planned restructuring of the U.S. salaried pension benefit plan;
o 50-percent reduction in the cash dividend paid to stockholders;
o Significant reduction in salary for GM's chairman and senior leadership
team;
o 50-percent reduction in compensation for outside board members.
"These are difficult decisions that involve sacrifices by our employees,
stockholders, retirees, and the senior leadership team," GM Chairman and Chief
Executive Officer Rick Wagoner said. "However, we are confronting a dramatic
change in our industry and in the global competitive environment, and that
requires us to look for additional ways to reduce financial risk and improve our
competitiveness for the long term."
Wagoner said the actions announced today further support the ongoing
implementation of GM's North American turnaround plan.
"We are now aggressively implementing a solid plan to turn around the North
American business and restore overall profitability as quickly as possible,"
Wagoner said. "It includes plans to grow our revenue base with great cars and
trucks and the right marketing strategies - and I have great confidence that we
are moving quickly in the right direction here. We also have a clear plan to
address our costs, especially in areas where we are not competitive - our
structural costs, and health-care and legacy costs."
GM previously announced plans to reduce its North American structural costs by
$6 billion on a running-rate basis by the end of 2006, and further plans to
reduce its annual net material costs by $1 billion. GM signed a historic
agreement with the UAW in October and announced a capacity reduction plan in
November that included ceasing operations at nine assembly, stamping and
powertrain facilities. Additionally, an aggressive target was recently announced
to reduce global structural costs to 25 percent of automotive revenue by 2010
from the 2005 level of about 34 percent on a global basis.
"Our plan is focused on setting us up to be competitive for years to come, and
to achieve strong business results - in revenue, income, and cash flow," Wagoner
said. "We need to improve our liquidity and our balance sheet, and to reduce
risks to our business and financial viability going forward. And while the steps
we've announced previously are big, we said at the time we would be doing more.
The next steps are today's announced actions."
SALARIED RETIREE HEALTH CARE
General Motors today advised its U.S. salaried employees, who are eligible for
retirement health-care coverage, of changes to their retiree health-care
benefits.
GM will cap its contributions to salaried retiree health-care at the level of
its 2006 expenditures. The cap will take effect beginning Jan. 1, 2007. This
affects those employees and retirees who are eligible for the salaried
post-retirement health-care benefit, their surviving spouses and their eligible
dependents. Salaried employees who were hired after Jan. 1, 1993, are not
eligible for retiree health-care benefits, so they are not affected by these
changes.
When average costs exceed established limits following 2006, additional plan
changes that affect cost-sharing features of program coverage will occur,
effective with the start of the next calendar year. Program changes may include,
but are not limited to, higher monthly contributions, deductibles, coinsurance,
out-of-pocket maximums and prescription drug payments. Plan changes may be
implemented in medical, dental, vision, and prescription drug plans.
"This is a difficult but necessary decision, and it was made only after the
greatest deliberation," said Wagoner. "A number of other U.S. companies have
already taken similar action in the face of these rising costs and increasing
global competition. In particular, U.S. health-care costs continue to rise at
high rates. When these benefits were conceived decades ago, no one could have
foreseen the explosive cost inflation that we have been experiencing in recent
years. These costs are simply not sustainable."
The adjustments are projected to reduce GM's retiree health-care (OPEB)
liabilities by approximately $4.8 billion and cut GM's annual retiree
health-care expense by approximately $900 million on a full-year pre-tax basis.
The majority of the OPEB liability reduction and related expense would accrue to
GM's North American automotive operations. Cash savings will be limited
initially, but GM expects that cash savings from this action will grow to about
$200 million within five years, and then continue to increase after that.
ADDITIONAL SALARIED BENEFIT CHANGES PLANNED
In addition to the health care benefit changes announced today, GM is currently
evaluating ways to restructure its U.S. salaried pension benefits.
"We have decided to substantially alter the pension benefits for current U.S.
salaried employees so that we can provide a competitive and fair benefit but
also reduce the financial risks to GM," Wagoner said. "While we will announce
specific details early next month, we intend to freeze accrued benefits in the
current plan and implement a new plan for future accruals which could include a
defined contribution or cash balance plan."
Wagoner said the pension plan changes would not affect current retirees or
surviving spouses who are drawing benefits from the Salaried Retirement Program.
QUARTERLY DIVIDEND
The GM Board of Directors declared a quarterly cash dividend of $0.25 per share,
payable on March 10, 2006 to holders of record as of Feb. 16, 2006. The dividend
had been $0.50 per share, per quarter, since the first quarter of 1997.
"While GM believes it has adequate cash to fund its turnaround initiatives, it
is essential that we stay focused on enhancing our liquidity and financial
flexibility," said Wagoner. The change in the dividend rate would reduce GM's
cash outlay by about $565 million on an annualized basis.
EXECUTIVE AND BOARD COMPENSATION REDUCTIONS
GM senior leadership team will reduce its salaries as follows:
50 percent reduction for Wagoner; 30 percent reduction for vice chairmen
John Devine, Bob Lutz and Fritz Henderson; 10 percent reduction for Executive
Vice President and General Counsel Thomas Gottschalk.
Additionally, there were no annual or long-term cash incentive awards paid to
GM's global executives for the 2005 performance year.
"While our `pay-for-performance' executive compensation system is already
structured to significantly reduce total compensation when our business
performance and stock price are underperforming, we all agreed that this is the
right step to take at this time," Wagoner said.
The Board of Directors voluntarily reduced board member compensation by 50
percent. Non-employee directors will forgo cash compensation and will retain
some of the stock portion of their annual retainer.
General Motors Corp., the world's largest automaker, has been the global
industry sales leader for 75 years. Founded in 1908, GM today employs about
327,000 people around the world. With global headquarters in Detroit, GM
manufactures its cars and trucks in 33 countries. In 2005, 9.17 million GM cars
and trucks were sold globally under the following brands: Buick, Cadillac,
Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and
Vauxhall. More information on GM can be found at www.gm.com.
Forward-looking Statements
In this press release and in related comments by General Motors' and General
Motors Acceptance Corporation's management, the use of the words "expect,"
"anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal,"
"project," "outlook," "priorities," "target," "intend," "evaluate," "pursue,"
"seek," "may," "would," "could," "should," "believe," "potential," "continue,"
"designed," "impact," or the negative of any of those words or similar
expressions is intended to identify forward-looking statements. All statements
in this press release and in related comments, other than statements of
historical fact, including without limitation, statements about future events
and financial performance, are forward-looking statements that involve certain
risks and uncertainties.
While these statements represent our current judgment on what the future may
hold, and we believe these judgments are reasonable, these statements are not
guarantees of any events or financial results, and GM's 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-K, 10-Q and 8-K. Such factors include, among
others, the following: the ability of GM to realize production efficiencies, to
achieve reductions in costs as a result of the turnaround restructuring, to
achieve reductions in health care and pension costs and to implement capital
expenditures at levels and times planned by management; the amount and rate of
employee attrition, the pace of product introductions; market acceptance of the
corporation's new products; significant changes in the competitive environment
and the effect of competition in the corporation's markets, including on the
corporation's pricing policies; our ability to maintain adequate financing
sources and an appropriate level of debt; restrictions on GMAC's and Residential
Capital Corporation (ResCap)'s ability to pay dividends and prepay subordinated
debt obligations to us; changes in the existing, or the adoption of new, laws,
regulations, policies or other activities of governments, agencies and similar
organizations where such actions may affect the production, licensing,
distribution or sale of our products, the cost thereof or applicable tax rates;
costs and risks associated with litigation; the final results of investigations
by the SEC; changes in our accounting principles, or their application or
interpretation, and our ability to make estimates and the assumptions underlying
the estimates, which could result in an impact on earnings; changes in relations
with unions and employees/retirees and the legal interpretations of the
agreements with those unions with regard to employees/retirees; labor strikes or
work stoppages at GM or at key suppliers such as Delphi Corp.; additional credit
rating downgrades; the impact of a potential sale or other extraordinary
transaction involving GMAC on the results of GM's and GMAC's operations and
liquidity; other factors impacting financing and insurance operating segments'
results of operations and financial condition such as credit ratings, adequate
access to the market, changes in the residual value of off-lease vehicles,
changes in U.S. government-sponsored mortgage programs or disruptions in the
markets in which our mortgage subsidiaries operate, and changes in our
contractual servicing rights; shortages of and price increases for fuel; and
changes in economic conditions, commodity prices, currency exchange rates or
political stability in the markets in which we operate.
In addition, GMAC's actual results may differ materially due to numerous
important factors that are described in GMAC's most recent report on SEC Form
10-K, which may be revised or supplemented in subsequent reports on SEC Forms
10-K, 10-Q and 8-K. Such factors include, among others, the following: the
ability of GM, to complete a transaction with a strategic investor regarding a
controlling interest in GMAC while maintaining a significant stake in GMAC,
securing separate credit ratings and low cost funding to sustain growth for GMAC
and ResCap and maintaining the mutually beneficial relationship between GMAC and
GM; significant changes in the competitive environment and the effect of
competition in the corporation's markets, including on the corporation's pricing
policies; our ability to maintain adequate financing sources; our ability to
maintain an appropriate level of debt; the profitability and financial condition
of GM, including changes in production or sales of GM vehicles, risks based on
GM's contingent benefit guarantees and the possibility of labor strikes or work
stoppages at GM or at key suppliers such as Delphi Corp.; funding obligations
under GM and its subsidiaries' qualified U.S. defined benefits pension plans;
restrictions on ResCap's ability to pay dividends and prepay subordinated debt
obligations to us; changes in the residual value of off-lease vehicles; changes
in U.S. government-sponsored mortgage programs or disruptions in the markets in
which our mortgage subsidiaries operate; changes in our contractual servicing
rights; costs and risks associated with litigation; changes in our accounting
assumptions that may require or that result from changes in the accounting rules
or their application, which could result in an impact on earnings; changes in
the credit ratings of GMAC or GM; the threat of natural calamities; changes in
economic conditions, currency exchange rates or political stability in the
markets in which we operate; and changes in the existing, or the adoption of
new, laws, regulations, policies or other activities of governments, agencies
and similar organizations.
Investors are cautioned not to place undue reliance on forward-looking
statements. GM undertakes no obligation to update publicly or otherwise revise
any forward-looking statements, whether as a result of new information, future
events or other such factors that affect the subject of these statements, except
where expressly required by law.
Use of the term "loans" describes products associated with direct and indirect
lending activities of GMAC's global operations. The specific products include
retail installment sales contracts, loans, lines of credit, leases or other
financing products. The term "originate" refers to GMAC's purchase, acquisition
or direct origination of various "loan" products.
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