isn't so sure it needs more than $30 billion from the federal government.
The reality, GM says, is that it was asked to come up with a downside scenario in the viability plan it submitted to the Treasury on Wednesday, and so it did. The scenario envisions domestic-vehicle sales at a 40-year low, as well as unsustainable debt levels for GM, CFO Ray Young said Wednesday, on a conference call with analysts.
"If we believed we were in the downside, we would take some draconian measures," Young said. "If we were into this type of scenario, there would be a major operations restructuring."
The automaker submitted a worst-case scenario to Congress in December, one that foresaw annual U.S. vehicle sales around 10.5 million, but since then "the downside scenario has really morphed into what we're looking at," said President Fritz Henderson. So GM has come up with a new, worse scenario that anticipates domestic volume of 9.5 million in 2009 and 11.5 million in 2011, and requires more than $30 billion in federal loans.
The last time domestic volume fell below 10 million, according to J.D. Power & Associates, was 1970, when sales totaled 9.8 million.
The way GM computes its financial performance -- and the appropriate size of a bailout -- is first to compute industry sales, and then to compute its own sales as a percentage of the market, which it sees as falling from 23.8% in 2006 to 21.5% in 2008 to 19.1% in 2014.
Under the December worst-case scenario, GM said it needed $18 billion. (In the closing days of the Bush administration, it was awarded $13.4 billion from the Troubled Asset Relief Program.) Additionally, now that the downside case is reality, GM has new assumptions about its $4.5 billion revolving credit facility. "In this plan, we have assumed we would need to pay off that loan," Henderson said. "It would not be refinanceable privately and would be rolled into the TARP loan in 2011."
Moreover, under the downside scenario that Young appears to consider unlikely, GM would need another $7.5 billion by 2011, bringing its total to $30 billion.
But wait, there's more, because GM potentially has mammoth pension obligations. In its presentation Wednesday, the company said it may require federal support of $5.9 billion in 2013 and $6.4 billion in 2014 to pay its pension debt.
Again, however, the numbers and the need for bailout money are extremely tentative, Young said, while the widespread decline in asset value could lead to revised funding standards.
"As corporations close their '08 books, I think there's going to be a lot of news about degree of (funding)," he said. "I suspect there's going to be a lot of discussions regarding the funding terms of these retirement plans."
The viability plan also lays out bankruptcy scenarios, again because GM was asked to discuss them, not because it believes they make sense.
At one point, Henderson noted, in a clear understatement, that: "We don't dwell on the upside of this plan." However, he continued, "We really position ourselves much more positively in the event we were to catch any wind in our sails." While it seems that this phenomenon last occurred decades ago, he said, it happened as recently as 2007.
In the end, perhaps only two things are entirely clear.
One is that GM will be a far smaller company in 2009 than in 2006, with revenue down 42%, to $67.9 billion from $116.7 billion, and factory sales down 47%, to 2.6 million vehicles from 4.9 million vehicles.
Another is that this baby is headed for Washington, where the Obama administration is going to have to decide what to do with a company that, for all of its shortsightedness, still sells one of every five vehicles purchased in the U.S. "Now that we've submitted the plan, we need to engage the presidential task force and work with them," Young said. "They want to get involved in the plan. They want to help us (achieve) a successful restructuring of General Motors."
In afternoon trading, GM shares were at $2.06, down 12 cents, while
was at $1.67, down 2 cents.