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Obama Speaks on GM Bankruptcy; General Motors CEO Holds News Conference
Aired June 01, 2009 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Just over two months ago, I spoke with you in this same spot about the challenges facing our auto industry, and I laid out what needed to be done to save two of America's most storied automakers -- General Motors and Chrysler.
These companies were facing a crisis decades in the making and, having relied on loans from the previous administration, were asking for more. From the beginning, I made it clear that I would not put any more tax dollars on the line, if it meant perpetuating the bad business decisions that had led these companies to seek help in the first place. I refused to let these companies become permanent wards of the state, kept afloat on an endless supply of taxpayer money.
In other words, I refused to kick the can down the road.
But I also recognized the importance of a viable auto industry to the well-being of families and communities across our industrial Midwest and across the United States.
In the midst of a deep recession and financial crisis, the collapse of these companies would have been devastating for countless Americans and done enormous damage to our economy, beyond the auto industry.
It was also clear that if GM and Chrysler remade and retooled themselves for the 21st century, it would be good for American workers, good for American manufacturing and good for America's economy.
I decided then that if GM and Chrysler and their stakeholders were willing to sacrifice for their companies' survival and success, if they were willing to take the difficult but necessary steps to restructure and make themselves stronger, leaner and more competitive, then the United States government would stand behind them.
The original restructuring plans submitted by GM and Chrysler earlier this year did not call for the sweeping changes these companies needed to survive. And I couldn't, in good conscience, proceed on that basis.
So, we gave them a chance to develop a stronger plan that would put them on a path toward long-term viability. The 60 days GM had to submit its revised plans have now elapsed. And I want to say a few words about where we are and what steps will be taken going forward.
But before I do, I want to give you an update on where things stand with Chrysler.
When my administration took office and began going over Chrysler's books, the future of this great American car company was uncertain. In fact, it was not clear whether it had any future at all.
But after consulting with my auto task force, industry experts and financial advisers, and after asking many tough questions, I became convinced that, if Chrysler were willing to undergo a restructuring and if it were able to form a partnership with a viable global car company, then Chrysler could get a new lease on life.
Well, that more promising scenario has now come to pass. Today, after taking a number of painful steps and moving through a quick, efficient and fair bankruptcy process, a new, stronger Chrysler is poised to complete its alliance with Fiat.
Just 31 days after Chrysler's Chapter 11 bankruptcy filing, a court has approved the Chrysler-Fiat alliance, paving the way for a new Chrysler to emerge from bankruptcy in the next few days.
What happens next is in the hands of their executives, managers and workers, as it is for any private company. But what the completion of this alliance means is that tens of thousands of jobs that would have been lost if Chrysler had liquidated will now be saved.
And the consumers have no reason at all to worry about a restructuring, even one as painful as what Chrysler underwent. Keep in mind, many experts said that a quick surgical bankruptcy was impossible. They were wrong.
Others predicted that Chrysler's decision to enter bankruptcy would lead to an immediate collapse in consumer confidence that would send car sales over a cliff. They were wrong as well.
In fact, Chrysler sold more cars in May than it did in April, in part because consumers were comforted by our extraordinary commitment to stand behind a quick bankruptcy process.
All in all, it's a dramatic -- an outcome dramatically better than what appeared likely when this process began.
Now, the situation we found at General Motors was very different from what we found at Chrysler, largely because GM is a different kind of company. It is much larger and much more complex, with operations all over the globe. In this context, GM's management team, including its new CEO, Fritz Henderson, its interim chairman, Kent Kresa, and all of their colleagues has -- have worked -- has worked tirelessly to produce a plan that meets the strict standards I laid out at the beginning: to streamline GM's brands, clean up GM's balance sheet, and make it possible for GM to compete and succeed.
Working with my Auto Task Force, GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again. It's a plan tailored to the realities of today's auto market, a plan that positions GM to move toward profitability even if it takes longer than expected for our economy to fully recover. And it's a plan that builds on GM's recent progress in making better cars.
As this plan takes effect, GM will start building a larger share of its share here at home, including fuel-efficient cars. In fact, if all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades.
Now, anytime a business as large as General Motors goes through a restructuring, it is extremely difficult to find common ground among all of the company's stakeholders. But while the deal that has been worked out is tough, it is also fair. It will require the United Auto Workers to make further cuts in compensation and retiree health care benefits, painful sacrifices on top of all that they've already done.
It will require GM shareholders to give up the remaining value of their shares, just as they would have had to do in any private restructuring of this kind.
And it will also provide unsecured bondholders with an equitable outcome, an outcome that will let them recover more than the current value of their claims and substantially more than they would have recovered if the government had not intervened and GM had liquidated.
That's why a majority of GM's bondholders already support this deal.
Throughout this process, I wanted to ensure that none of GM's stakeholders receive special treatment because of our government's involvement. That's why I instructed my auto task force to treat all of GM's stakeholders fairly and to ensure that this restructuring was carried out in a way that was consistent with past precedent. And it was.
What we have then is a credible plan that is full of promise.
But GM can't put this plan into effect on its own. Executing this plan will require a substantial amount of money that only a government can provide.
Considering GM's extensive operations within their borders, the governments of Canada and Ontario have agreed to do their part with an investment in GM's future, and I want to thank them for doing so.
I also want to thank the government of Germany for working diligently to reach a memorandum of understanding on the sale of a major stake in GM's European division and for providing interim funding that will make it possible for that transaction to be finalized.
But, of course, GM is an American company, with tens of thousands of employees in this country, and responsibility for its future ultimately rests with us. That's why our government will be making a significant additional investment of about $30 billion in GM, an investment that will entitle American taxpayers to ownership of about 60 percent of the new GM.
Now, let me talk about this. I recognize that this may give some Americans pause. So, let me explain as clearly as possible why we are making this investment.
We inherited a financial crisis unlike any that we've seen in our time. This crisis crippled private capital markets and forced us to take steps in our financial system and with our auto companies that we would not have otherwise even considered.
These steps have put our government in the unwelcome position of owning large stakes in private companies for the simple and compelling reason that their survival and the success of our overall economy depend on it.
Understand, we're making these investments not because I want to spend the American people's tax dollars, but because I want to protect them. Instead of taking so much stock in GM, we could have simply offered the company more loans. But for years, GM has been buried under an unsustainable mountain of debt, and piling irresponsibly new debt on top of the new GM would mean simply repeating the mistakes of the past. So, we are acting as reluctant shareholders, because that is the only way to help GM succeed.
What we are not doing, what I have no interest in doing is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They, and not the government, will call the shots and making the decisions about how to turn this company around.
The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.
In short, our goal is to get GM back on its feet, take a hands- off approach, and get out quickly. Exiting a restructuring of this scale, however, requires not only new investment, it also requires giving GM a chance to start anew by clearing away the massive past debts that are weighing the company down. And that's why earlier today GM did what Chrysler has successfully done and filed for Chapter 11 bankruptcy with the support of its key stakeholders and the United States government.
In all likelihood, this process will take more time for GM than it did for Chrysler because GM is a bigger, more complex company. But Chrysler's extraordinary success reaffirms my confidence that GM will emerge from its bankruptcy process quickly, and as a stronger and more competitive company. And I want to remind everyone that if you are considering buying a GM car during this period of restructuring, your warranties will be safe and government-backed.
So, I'm confident that the steps I'm announcing today will mark the end of an old GM and the beginning of a new GM, a new GM that can produce the high quality, safe and fuel-efficient cars of tomorrow, that can lead America towards an energy-independent future, and that is once more a symbol of America's success. But I want to be honest with you, building a leaner GM will come at a cost.
It will take a painful toll on many Americans who have relied on General Motors throughout the generations. So, I want to say a word directly to all the men and women watching today, wondering what all this will mean as far as their own lives are concerned.
I know you've already seen more than your fair share of hard times. We saw 400,000 jobs lost in the auto industry in the year before this restructuring even began.
I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost, more plants will close. More dealerships will shut their doors, and so will many parts suppliers. But I want you to know that what you're doing is making a sacrifice for the next generation, a sacrifice you may not have chosen to make, but a sacrifice you were nevertheless called to make so that your children and all of our children can grow up in an America that still makes things, that still builds cars, that still strives for a better future.
As our auto workers and auto communities pass through these difficult times, we as a nation must do our part. That's why in march I appointed Ed Montgomery, director of Recovery for Auto Communities and Workers. That's why two weeks ago, Ed announced a green jobs training program for auto workers in hard-hit communities. And that's why last week Ed and Karen Mills, my Small Business Administration chief, traveled to Indiana to announce a new plan to provide loans to auto, RV and boat dealers to help finance floor plants.
That's why we are accelerating the purchase of a federal fleet of cars to jump-start demand and give the industry a boost at a time when it needs one. And that's why I'm calling on Congress to pass fleet modernization legislation that can provide a credit to consumers who turn in old cars and purchase cleaner, more fuel-efficient cars.
These are important steps on the long road to overcoming a problem that didn't happen overnight and will not be solved overnight. I recognize that today's news carries a particular importance because it's not just any company we're talking about. It's GM.
It's a company that's not only been a source of income, but a source of pride for generations of auto workers and generations of Americans. While the GM of the future will be different from the GM of the past, I am absolutely confident that, if well managed, a new GM will emerge that can provide a new generation of Americans with a chance to live out their dreams, that can out-compete automakers around the world, and they can once again be an integral part of America's economic future. And when that happens, we can truly say that what is good for General Motors and all who work there is good for the United States of America.
Thank you, everybody. TONY HARRIS, CNN ANCHOR: Wow, there he is, the president of the United States, talking about, boy, a company that, really, in many ways, defined the middle class. It took so many people in this country from poverty to the middle class.
General Motors struggling to redefine itself. The once mighty General Motors has filed for bankruptcy protection. And billions of your tax dollars are tied really to GM's future.
Joining us now to talk about what's ahead for the automaker, Chief Business Correspondent Ali Velshi in Toronto. And in New York, Peter Valdes-Dapena of CNNMoney.com.
Gentlemen, thank you both.
The president, as you heard, touting the Chrysler bankruptcy proceeding. A quick surgical bankruptcy, in the president's words, 31 days and out.
Look, both of you guys follow these things every day.
And let me start with you, Ali.
I can remember the Delta bankruptcy going on and on and on. How significant is Chrysler coming out of bankruptcy so fast? And could we see as clean, as efficient a process, albeit a longer one, for General Motors?
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: No, short answer. Chrysler is in a different situation. It wasn't a public company in the U.S. for many years. It just doesn't have the same degree of entanglements that General Motors has.
So, what the president is saying, there's sort of a second part he's leaving out of it, and that is that the new General Motors could emerge quickly, but there's a whole lot of old General Motors that's going to be languishing for a year, year and a half, maybe longer. And that's going to take a long time to unwind.
There's some decisions to be made about what cars they'll make. But ultimately, as Peter will tell you, whether it's Chrysler or General Motors, the answer remains in building the types of cars that Americans are going to be able to afford and buy and are fuel efficient. All of the financial engineering in the world is not going to solve the problem if General Motors doesn't have the type of cars people want to buy.
HARRIS: Hey, Peter, what do you think? Is it possible that the GM bankruptcy could go as smoothly as the Chrysler bankruptcy appears to be going at this point?
PETER VALDES-DAPENA, CNNMONEY.COM: Well, it's not going to be as quick, as Ali just pointed out, as the president just pointed out. This is going to take up to three times as long, even under their own estimation, as the Chrysler bankruptcy took. However, a big difference here from something like Delta, is that what's coming out of here is going to be a new company. General Motors, GM, the old GM, is going to stay in bankruptcy even as the new one comes out of bankruptcy. So this will be same name, maybe the same brand, same products, and some new ones, but it is not going to be the exact same company. But that's a better thing, because it means you can have a leaner, stronger company than the one you're leaving behind.
HARRIS: Well, how does the government, Ali, get out of this deal? I was interested to hear the president started down that road but didn't finish. How does the government get out of the auto industry? At what point, when do you sell? And what's a reasonable profit for the government to make on our investment?
VELSHI: Well, you'll notice nobody's talking about a profit on your investment. They might just be lucky to get out what they put in.
The government is going to be in for $50 billion. The government is a 60 percent owner in General Motors; the Canadian company is a 12 percent owner; the auto workers, 17.5 percent; and the bondholders 10 percent.
None of these people want to own the shares, so the only exit strategy is one in which General Motors, the new General Motors that Peter was talking about, comes out of bankruptcy protection, the shares start trading, they're selling cars that people want to sell, the economy recovers a little bit and people can actually buy cars because they can get credit, or because they're getting jobs, and somehow this stock becomes profitable. And then those people who hold the stock sell the stock and get their money back.
And again, everybody wants out of it, the U.S. government, the union, and the Canadian government. They can't all sell at the same time, because that will sink the stock. So we are talking years, if we're lucky, that we'll be invested in General Motors.
HARRIS: Yes.
Peter, to you first, and then to Ali, same question. What do you believe? What does your head and your intellect tell you about the long-term viability of General Motors, Peter?
VALDES-DAPENA: Well, I have actually a much better feeling about the long-term viability of General Motors, frankly, than I have about the long-term viability of Chrysler. Chrysler, it's going to be another year or year and a half at least before Fiat can start really giving them some products. And Chrysler's problem is they're coming out of bankruptcy with the same product lineup they had going into bankruptcy.
HARRIS: I see.
VALDES-DAPENA: And as an auto critic, I'll tell you, that's not so great. That's not such a great product line, particularly in the area of fuel-efficient cars. So I think GM is in a much better position, quite frankly, because right now they're making better cars.
HARRIS: Yes.
You agree with that, Ali?
VELSHI: Yes. Well, listen, look at the GM lineup. You've got a Silverado, which is an award-winning truck. You've got the Malibu, which is a whole lot less expensive than a Camry and feels competitive when you drive it. You've got the Corvette, obviously, but you've got those Cadillacs that Peter was telling you, real head-turners.
And what they don't have is enough in the very small end, the fuel-efficient end, but they've definitely got more of a portfolio than Chrysler has. They can fill out that portfolio and become a real competitive carmaker.
HARRIS: Got you.
VELSHI: But keep your eye on Ford, because that's what Ford did. They've got a more full line, and they're going to start to benefit from the failure of GM and Chrysler to do that.
HARRIS: So, final question, Peter. If my car goes -- if my GM car goes tink, tink, tink, rattle, rattle, rattle, bump, bump, bump, can I get it fixed?
VALDES-DAPENA: It's been known to happen. And yes, you can absolutely get that fixed.
Even when they're in bankruptcy, GM will still be covering their warranties, as usual. The backup the president was talking about is only in the unlikely event that this company somehow blows up and liquidates, which no one really foresees happening right now. But yes, if you have a problem with your GM car, GM is still covering those warranties just like always.
HARRIS: All right.
And Ali, 20,000 people in some of the information that we're getting about this to lose their jobs. Can you imagine the ripple effect? You talk about the broader economy all the time on this program. We're talking about the jobs, we're talking about people who don't have the ability to buy that next car when their car becomes a clunker. And maybe now we're talking about people whose mortgages slide closer to the default line.
VELSHI: Yes. Well, listen, go back to Henry Ford when he started building plants not only all over America, but around the world. The point was you build plants in places, you create a middle class that can afford to buy the car...
HARRIS: Yes. Yes. Thank you for saying that.
VELSHI: ... and then they buy the cars.
So, now you've got a problem where you're closing those plants, you're closing dealerships. Those are the very people who were the purchasers of your cars. So, the ripple effect is dramatic.
Again, keep in mind, there are more people who sell cars in America, more people employed by dealerships, than in the making of cars. And they're going to be 40 percent of GM's 6,000 dealerships shutting down. Twelve more plants are being shut down over the course of the next couple of years. So, we have to -- the rest of the economy's got to rally to make up for the damage that General Motors is doing to it.
HARRIS: You have said something that's so important there. I've got members of my family who were lifted out of poverty because of GM, because of Chrysler, because of the auto industry in this country.
Ali, Peter, as always, great to talk to you. Thank you both.
And one other note here. We are waiting for a news conference from General Motors CEO Fritz Henderson. That is scheduled to begin at 12:15 p.m., 9:15 a.m. Pacific Time. And when that begins, we will bring it to you live right here in the NEWSROOM.
Another big story that we're following today, a controversial abortion provider is shot and killed in church. What we're learning about the suspect.
(COMMERCIAL BREAK)
HARRIS: Very quickly, a lot going on at this hour.
I believe that's the district attorney in Wichita who is handling the case, the shooting death of Dr. George Tiller.
Am I correct in that? Someone in the control room, am I correct in that?
OK. Great. Thank you. Do we want to listen in?
Let's listen in for just a moment while we wait for the CEO, Fritz Henderson, of GM to begin his press conference.
So, let's listen in for just a moment.
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UNIDENTIFIED FEMALE: ... will be managed by the office of the district attorney as a state's case. And it will proceed in this jurisdiction, in this courthouse, whatever that outcome may be.
I want to just let you know where we stand so that you could at least have an idea of what kind of time you needed to spend here today.
HARRIS: OK. Let's get you to Fritz Henderson now in New York. And he is discussing the bankruptcy filing -- GM now in bankruptcy.
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UNIDENTIFIED MALE: And with that, let's get started with our president and CEO, Fritz Henderson.
FRITZ HENDERSON, CEO, GENERAL MOTORS: Thanks, Steve.
Good afternoon, everyone. Thanks for joining us on a difficult but very important day for General Motors Corporation.
You've all heard President Obama's comments, received copies of GM's press release. So let me offer a few observations before opening it up for your questions.
Today marks the defining moment in the history of the General Motors Corporation. Our agreement with the U.S. Treasury and the governments of Canada and Ontario provide a fast--track plan to form a leaner, quicker, more customer completely product focused company, one that's more cost competitive and has a competitive balance sheet.
The plan incorporates the terms of our recent agreements with the UAW and the CAW, as well as has received the support of substantial portion of GM's unsecured bondholders. This new GM will be built from the strongest parts of our business, including our best brands and our very finest products. We will have far less debt, fully competitive labor costs, and the ability to generate sustained and positive bottom-line performance.
The new GM will have a significantly stronger and healthier balance sheet which will allow us to better support our brands and products through investment, increase our investment in new technology, and be able to weather difficult times. Initially, the new GM will be owned primarily by the U.S. Department of the Treasury, the governments of Canada and Ontario, the UAW's post retirement health care VEBA trust, and the unsecured creditors, largely the bondholders, of the old General Motors.
To implement these agreements and formally launch the new General Motors, it was necessary to enter a court-supervised process, which we did earlier this morning with the full support of the U.S. and Canadian governments, the UAW, the CAW, and with the support of a majority of GM's unsecured bondholders. While our preference was to create a new GM through other paths, and you heard me say this many times, what was and is the most important thing to do is to get to our destination, restructure General Motors permanently, and get there fast.
The 363 sale we're pursuing provides a powerful tool and, in fact, an array of tools to accelerate and complete the jobs of reinventing General Motors Corporation. The court-supervised process also offers strong safeguards to our customers and our business until GM, or the new GM, is launched as an independent company, which we expect to happen in 60 to 90 days.
The actions we need to take to launch the new General Motors also include a number of extraordinarily difficult steps. Especially tough are the actions to close additional plants and further reduce our U.S. hourly and salaried employment.
I want to express my sincere and heartfelt appreciation and thanks to all who have sacrificed so much in this regard, who have sacrificed in the past and will sacrifice in the future, including our dealers, suppliers, retirees, plant communities, as well as those who will continue to invest and, in fact, share the sacrifice in the future and in the days ahead. This includes very serious sacrifices (AUDIO GAP) and the other unsecured creditors of General Motors Corporation whose recovery will come in the form of stock and warrants, and reminds us the importance of delivers in the future so that they get a recovery on their investment and they're able to reduce the amount of damage that they've sustained.
It's the job of management to maximize the return on our stock by producing results, including generating cash as soon as possible to invest in our business, to grow, to be product-focused and, in fact, to reward the confidence of the taxpayers of the U.S. and Canada, but of the very parties that we're asking to sacrifice so that there can be a new General Motors.
In the meantime, GM remains open for business. In addition to marketing and selling our cars and trucks, we will continue to honor our warranties, service our products, and support our customers.
Importantly, our product launches and technology programs remain on track. In fact, a key part of our new agreement with the UAW, for example, is our intention for the new General Motors to build a new small car here in the United States, and to do so profitability.
Also, all of our business operations are continuing without interruption in Europe, Latin America, Africa, the Middle East, and in Asia-Pacific. In fact, none of our operations outside the United States are included in the U.S. court filings or court-supervised process, and these filings have no impact on our plan and operations again outside the U.S.
Today, GM Europe announced that it has secured a memorandum of understanding with Magna International and has received the support for bridge financing package of 1.5 billion euro from the German government. And we're very appreciative of the professionalism and the dedication and support of the Magna team, and we're extraordinarily grateful for the support we've received from the German government.
This action, this series of actions, isolates our European operations from the court-supervised process in the U.S., and GM in Europe will continue to operate as normal, just as we will in the U.S. as it completes its restructuring and we complete the negotiation of the definitive agreements with Magna International. Those negotiations are ongoing, but in the end we anticipate that the new General Motors will maintain a substantial but still minority stake in the assets in the businesses that we commonly refer to as our Opel and Vauxhall business in Europe.
To our customers, we appreciate the confidence that many of you have placed in us over the years. Going forward, we intend to offer you nothing less than best in class cars and trucks, and even better service than before. And to those of you who have never tried a GM vehicle or have tried one and given up on us, we look forward to the chance to win your business and earn back your trust. Give us another chance.
The GM that many of you knew, the GM that, in fact, had let too many of you down, is history. Today marks the beginning of what will be a new company, a new GM dedicated to building the very best cars and trucks -- highly fuel efficient, world class quality, green technology development, and with truly outstanding design. And above all, the new GM will be rededicated in our entirety as a leadership team to our customers.
A number of our cars and trucks from the Chevy Volt, the Buick LaCrosse, the Chevrolet Camaro and Equinox, the GMC Terrain and the Cadillac SRX, amongst others, are already world class or, in the case of advanced technology, are breaking new ground. We need to make sure that all of our products are world class, and that will be our focus going forward.
The days when General Motors would have 15 launches of which we would count on five or six of them being hits and the rest of them being OK are history. We need to make sure every single one of our vehicle launches is an outstanding car or truck.
Finally, on behalf of the entire GM team, some sincere thanks are in order, starting with President Obama and his automotive task force of the U.S. Department of the Treasury, and especially the American and Canadian taxpayers for the opportunity that's being provided to us to reinvent General Motors.
We know we need to prove ourselves, and to do it every day. And we will. And we will do it right, and we will do it once.
From here on, we move up. This is not the end of General Motors, but the start of a new and better chapter, one that needed to happen and one that begins today.
As we move forward, I want to continue to put a high priority on making sure we are open and transparent. One way we'll do that is through increased use of Web chats and other information sources, and you'll be seeing and hearing a lot of me.
I'll kick things off later this week on Thursday, followed by a steady stream of GM leaders available to answer questions and talk about our progress.
Thank you very much for your time.
With that, let's open it up for questions.
Thank you.
UNIDENTIFIED MALE: We're going to start over here on the right with a question from (INAUDIBLE) from Mexico.
Can we get the microphone to this young lady right there? Right behind you is the microphone.
QUESTION: Yes, I would like to ask you, you say you're not going to close plants abroad, but what will be the impact? It just is going to be temporary for these 60 days that you guys are going to be restructuring the company? How will this affect Mexico, that has 13,000 employees from GM and floor plants?
HENDERSON: Buenos tardes.
QUESTION: Buenos tardes.
HENDERSON: Our Mexico operations are not included in the U.S. filing. Our Mexico operations, like our operations in the U.S., Canada are being affected today by substantially reduced levels of demand. And so, therefore, as we reduce the level of capacity and reduce our level of production to equate with the level of demand, we've seen an impact in Mexico, obviously, as well as in Canada and the U.S.
That's been a function of the market. But let me just reinforce, our Mexico operations are not part of the U.S. bankruptcy process, are not intended to be. And we expect -- and they are a part of the new General Motors going forward.
Thank you.
Phil Lebeau on the other side.
PHIL LEBEAU, CNBC: Hi, Fritz.
HENDERSON: Hey, Phil.
LEBEAU: Right now, people around the country and around the world are watching this press conference. And a lot of people are probably saying, you know, we've heard this from General Motors in the past. We've heard about the plant closings, the restructuring, that there's a new day approaching for GM.
How should the American public look at this today and say, we have confidence that this is -- finally, GM's getting it right? How can you convince people that this is the last time GM will have to restructure?
HENDERSON: Well, I'll say at the beginning, that the only way to convince people is to produce results. But let me at least try to answer your question sitting here today.
If I think about this business and being successful in the business, there's never been a successful turnaround done in the automotive business in its history without having success on both the product and the revenue side of the business and getting your costs right. Nobody ever gets to do a turnaround with one or the other, you get to do both.
If I think about the situation we found ourselves in, the work being done on restructuring the business, the work that has been done, and the work that we have done recently with our partners, and the sacrifices that are being made, we find ourselves in the position where we feel confident that we are competitive. And we will be competitive from a cost perspective.
The second is the impact on our balance sheet, the leverage. The various claims on the company really were to a point where it was just untenable. We're solving that problem. So, we're getting the issues and the operations behind us, we're getting the issues within the balance sheet behind us, so that the leadership team can spend the time where it needs to spend the time, which is on products and on customers.
Share of time in a day is extremely important thing for a leadership group. And I think what this does is allow us to permanently address problems that we've not been able to permanently address until today.
And so I think we can say that when we exit this process and the new GM comes forward, we will have taken some of these historic problems, address them in a permanent way to allow us to spend our time on where we should be spending our time -- products, customers, reinventing the technology. And then we have to prove that the investment in the confidence and the sacrifice of people are worth it. So, I do think that there is a very different approach here, and one that addresses some of these traditional chronic problems in a permanent way and, frankly, frees us up to focus on exactly what we need to do to win.
Thank you.
UNIDENTIFIED MALE: If you can identify yourselves when you go to speak.
Mickey Maynard will go next here.
HENDERSON: Hi, Mickey.
MICKEY MAYNARD, "THE NEW YORK TIMES": Hello, Fritz.
Mickey Maynard from "The New York Times."
You're in a different position than any other General Motors chief executive. You're the first one that's ever had to file for Chapter 11 protection. You will have a new chairman, although you already know him, Kent Kresa. You will have a chief restructuring officer.
What will this mean to your role running General Motors? I know that everyone is emphasizing that you'll run General Motors. The government will stay out. But your role has changed. And how do you view that?
HENDERSON: Interesting. As I came up from our offices here, there was a painting there of Mr. Sloan, Alfred Sloan, this morning. And I see paintings in our building in Detroit and I ask myself the question, well, I wonder what he would do if he were in my shoes. And he never was. Although at the beginning of General Motors, there was a crisis.
UNIDENTIFIED FEMALE: (INAUDIBLE).
HENDERSON: Exactly. And what he did is, he did his job. He led the company through it. And I would say that if he were sitting here today, he'd say, do your job. And so if I look at what my job is, yes, we have a chairman. Kent is interim term and he's repopulating the board. We'll have a world class board.
I personally am a big believer in separating the chairman's role from the CEO's role. I've got my hands full running General Motors, let alone running the board of directors. So I'm very appreciative of that and the job that Kent is doing. Working for Kent is a pleasure and working for the General Motors board of director has been a pleasure. An exceptionally hard working board.
With respect to the government and the major shareholders, you heard the president. Certainly the only thing I can tell you is that the automotive task force has been rigorous in its analysis in basically dissecting our plan, but with no real interest in running our business. They've basically said, you need to run your business. We should hold you accountable. The board of directors should hold you accountable. We're fine with that. I'm fine with that. Couldn't ask for -- I couldn't ask for a better environment.
So, yes, it's different, but I would say that leaders in the past at General Motors, were they in my shoes, they'd be doing exactly the same thing to lead the company through the situation. And in terms of the change in governance, I think, Nikki (ph), I'm quite confident it's going to work out just fine.
UNIDENTIFIED MALE: Fritz, we'll go to the back row here.
ALLAN CHERNOFF, CNN: Allan Chernoff from CNN.
HENDERSON: Hi, Allan.
CHERNOFF: Your predecessor had said that bankruptcy is not an option and clearly was concerned about GM losing market share. Are you concerned about that. And can you also put that into context of your target of being profitable if auto sales are just at 10 million units a year?
HENDERSON: Well, so, there's I think a three or four part question in there. So let me see if I can't take them apart.
First, when I look at the situation in the market today and the possibility of losing market share and the possible erosion of sales through a bankruptcy process, the most important thing that needs to happen is we need to move fast. Speed is of the essence. I can assure you that we've gotten ourself ready to move fast.
And the 363 (ph) process and the tools that come with that, with the support we have, we're quite confident. There's always risks, but we're confident that we will move fast. Not with a sense of urgency. I'm talking about pure unadulterated speed. Obviously the process is driven by a court supervised process, but with a team of people and professionals that we have, I'm quite -- well, we're confident that, you know, we'll face this and we'll move through it fast.
The second thing is, we're open for business today. We're providing customers outstanding products. GMAC is in business providing customer financial services, wholesale financing for dealers, retail financing for customers. And, in fact, we feel very good about the support of GMAC through this process. So that would be a second thing.
Third is, we're planning to run our business on an ordinary (ph) course. We have a series of first day motions later today that we expect to be approved. The court needs to consider it, obviously. But if approved, it would allow us to run our business in the ordinary course. And we move fast.
The issue of the acceptability of a bankruptcy process, if one steps back and looks at the broad picture here of what's being accomplished in term of the restructuring of the operations and the balance sheet, it's a remarkable opportunity for us to address both the competitive issues we found and the operating structure of the business and the significant excess leverage that we had in the balance sheet. And in the end, this was the best tool for us to be able to address both of those issues and do it in a thoughtful way.
So, yes, we are concerned about the impact on our sales and bankruptcy. We are doing everything we possibly can. We are in business. We're servicing customers. We're taking care of customers. We're in the market with outstanding offers. And we've got great products to sell. So that's what we're going to be doing. In the meantime, we're going to be moving fast through our bankruptcy filing.
UNIDENTIFIED MALE: We're going to take two more in the room on this side, then we'll go to the phones. We have one right here in the front row.
HARRIS: All right. We're going to leave now though. We need to move through bankruptcy with pure, unadulterated speed. Did you hear that just a second ago? The CEO of GM, Fritz Henderson, really saying the survivability of the company depends on how quickly GM gets out of court. Henderson also talking us through what this bankruptcy filing means for GM's domestic and international operation. Henderson telling us that a leaner, less debt-ridden GM will emerge from this bankruptcy. We will get a little more analysis on the GM bankruptcy filing in just a couple of minutes.
But first, we will cover a controversial abortion provider shot dead, killed in his church. What we're learning about the suspect.
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HARRIS: Kansas police have arrested a suspect in the shooting death of a doctor who performed rare late-term abortions. CNN's Ted Rowlands has more from outside the church where Dr. George Tiller was gunned down just yesterday.
(BEGIN VIDEOTAPE)
TED ROWLANDS, CNN CORRESPONDENT: Dr. George Tiller was killed at his church on Sunday morning during an actual service. He was serving as an usher. And according to authorities, he was in the foyer of the church, a front area of the church, greeting people as they come in, while the service was just getting underway. His wife, in fact, was singing in the choir at the time of his murder.
Authorities say a gunman came in and fired a single shot, hitting the doctor and killing him. It is not clear where the doctor was hit, but paramedics pronounced him dead shortly after they arrived, after 911 was called.
There were witnesses in that foyer area and they were able to get an ID on the suspect and, more importantly, the license plate of the car that he was driving. That information was used by investigators. They were able to make an arrest. A short time later, a few hours later on Interstate 35 here in Kansas, 51-year-old Scott Roeder was arrested without incident. They did not recover a gun at the time of the arrest. They did, however, say that Roeder had a single rose in the back of his car. That is a symbol of anti-abortion activists. It was in the car at the time of the arrest.
Roeder was brought in back to Wichita. He is not going to make a court appearance today. His initial court appearance is expected to take place tomorrow and is expected to face first degree murder charges.
Ted Rowlands, CNN, Wichita, Kansas.
(END VIDEOTAPE)
HARRIS: The shooting death of Dr. George Tiller is likely to reignite the abortion debate. Tiller provided rare late-term abortion. That's usually when the pregnancy is terminated in the second trimester due to complications. Tiller was one of the few doctors in the United States who, under special circumstances, performed abortion into the third trimester. Under Kansas law, late- term abortions can be performed on a viable fetus if two doctors agree that giving birth would cause irreparable harm to the mother.
GM in bankruptcy and the government in the driver's seat. Will the plan work? We will talk with an economist and an auto analyst next.
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HARRIS: President Obama says the bankruptcy filing by GM today is part of a viability plan to help the company rise again. Here's the question, will it work? And joining us to talk about that, Peter Morici, economist and professor of international business at the University of Maryland.
Peter, good to see you again.
PROF. PETER MORICI, UNIVERSITY OF MARYLAND: Nice to be with you. HARRIS: Peter's in Washington. In Buffalo, New York, automotive analyst Lauren Fix, the car coach.
Lauren, it's good to see you.
LAUREN FIX, AUTOMOTIVE ANALYST: Good to see you, Tony.
HARRIS: Hey, is Ali with us as well? Let me see Ali.
VELSHI: Yes, I'm here.
HARRIS: Ali Velshi, CNN's chief business correspondent, is with us as well.
And, Ali, let me start with you. Fritz Henderson, just moments ago, the CEO of GM, said moments ago, we need to move through bankruptcy with pure, unadulterated speed. Do you agree with what I think I heard in that, which is that the long-term viability of GM depends on how quickly it gets out of court?
VELSHI: Yes, but this has been problems that have been in the making for so long, I don't know why pure, unadulterated speed all of a sudden matters.
Let me tell you what -- there's three things that have to happen for GM to emerge from bankruptcy and be a viable company. Only one of them is in GM's control. They have to make cars that people want to buy that are small and fuel efficient and interesting. The other two things are that we have to loosen up credit so that people who want to buy cars can actually buy cars. And the economy has to recover so that people can actually afford to buy them.
So two of the three things GM can have nothing to do with it. And one of them isn't the kind of thing that happens in the course of six or nine months. GM would have had to have been planning for this for a long time. So not sure about the speed.
HARRIS: Let me tee up Lauren on this point.
Lauren, the idea that GM has to -- the only way GM survives is if it makes small vehicles and that's the only way it can remain viable moving forward. I know you don't like that idea very much, do you?
FIX: Well, you know, this green initiative thing kind of just freaks me out because, you know what . . .
HARRIS: Yes, it does.
FIX: Well, you love it (ph). The fact is, is that they don't check with consumers. That's what I've said from the beginning. This automotive task force is a group of people that every once in a blue moon will get somebody's opinion and we'll still do what we want because of the masters of politics and it's all about politics.
And General Motors doesn't operate on politics. They operate on product. And if you're not producing products that consumers want, I doesn't make a difference what the price is, people aren't going to buy it. And that's why we have (INAUDIBLE) cars (ph).
HARRIS: And this administration is saying that GM, we're going to help you, but at the end of the day, you're going to produce a car that is smaller, more energy efficient and you're going to help us . . .
FIX: Right. Sort of like the flex fuel cars that they said everybody had to have, but three quarters of the country can't get ethanol. Now we've got plants sitting in the Midwest that aren't even functioning. But, hey, we've got ethanol.
HARRIS: Yes.
Peter Morici. Peter, let me ask you today, what do you think about this GM filing? Is the glass half empty or half full on this for you?
MORICI: Well, it's half empty for me. Unfortunately, General Motors emerges with a lot of debt. It's going to have to pay about $100 million a year to the union and to the government in interests and dividends on preferred shares. A scaled down GM. We're talking $400 or $500 a car that Toyota doesn't have on its back. The second thing is, by compelling them to make smaller cars that people want to buy . . .
HARRIS: Compelling them.
MORICI: Compelling them, yes. There's going to be a lot of pressure here to make smaller cars that people want to buy. Remember, the bread and butter vehicles at Toyota that are making so much money are the Highlander, the Camry, that are gas powered. Those are good cars, but they're not these little, you know, Ford Escorts or whatever that they're going to bring over here. They're just aren't the same thing.
No, my feeling is that General Motors has got a long way to go to get its costs down. It's also going to have a higher labor rate than Toyota. And it's going to be -- still have early retirement and all the rest of those benefits. They really aren't (ph) going to get a clean slate on the labor agreement either.
HARRIS: Yes, the government owning, boy, 60 percent of the business.
FIX: Seventy-two.
HARRIS: Is it 72?
MORICI: Exactly.
HARRIS: Is it 72, Lauren, or 60? I can't . . .
VELSHI: Sixty percent.
MORICI: It's 60 percent U.S., 12.5 percent Canadian.
VELSHI: Yes, that's right.
FIX: They've got Canadian involved, yes.
MORICI: Remember, there's (INAUDIBLE) 20 (ph) percent of General Motors to Canada.
HARRIS: Either way, Lauren, how comfortable should we be with this idea? Was there any other way to do this?
FIX: You know what? You know, when you were a little kid and you had a wound, you would tell your mother to take the bandage off a little bit at a time. As an adult, you just tear it off. I think, I'm sorry to say this because I was always a fan of trying to help General Motors, when we were at the point a while ago, it's either just tear the bandage off, let's try to restructure.
Ford saw it coming four years ago. They shut down a bunch of their dealerships. They are bringing in world class platform cars. And as Peter was saying, I'll tell you the Ford Fiesta is a great car and so is the Ford Taurus. Ford is figuring it out. And when you see their numbers tomorrow, you'll see that they're up.
VELSHI: Yes.
FIX: And when you look at what GM has been producing, they do have some good cars -- the Equinox is good, the Buick Lacrosse and the Enclave. But people don't want to be forced into buying cars that go 40 miles an hour, that are totally electric (ph) . . .
VELSHI: I don't know that that's not . . .
FIX: Doesn't work for this country.
HARRIS: All right, Ali. Jump in here, Ali.
VELSHI: The reality is, the best thing -- I don't think you have to force anybody to buy the car. I think $4 gasoline made people run away from trucks and SUVs and made them want to get into small cars. So you've got to . . .
MORICI: Well, but there's a -- yes, but you've got to have moderation here. You have to have moderation. They're not going to go (INAUDIBLE) tiny cars.
VELSHI: But we should assume that gas could go up again.
MORICI: But something that gets 30 miles to the gallon.
VELSHI: I totally agree with you. I agree with you, Peter, but look at the portfolio of these things. Chrysler had virtually nothing at the lower end. Ford has now developed. They've got two cars or three cars smaller than the Taurus. GM doesn't have any. They're not competitive in that area, so they (INAUDIBLE)
FIX: (INAUDIBLE). MORICI: Yes, but what I'm getting at is they're also not really competitive in mid-sized vehicles either. They have the Malibu and that's it.
VELSHI: Which is a nice car and that could work.
MORICI: Yes, I understand, but they have to sell 2.5 million cars a year to make this plan work. And I don't see enough cars in the middle to make it work.
VELSHI: Yes.
HARRIS: How do we get out of this? How do we get out of the automobile industry? Come on, now, the . . .
MORICI: We're not going to get out of it. This company's going to lose money over this cycle simply because its cost structure is higher. It's paying more for labor. It has more cumbersome work rules. And it's carrying a lot of debt on its back still. I don't know how it competes with Toyota with those disadvantages. It might have been politically correct to favor the union, but it's going to be a terrible burden to carry.
HARRIS: Wow. All right, Peter, let's leave it there.
Ali, let's leave it there.
Lauren, great to see you, as always.
FIX: Great to see you too, Tony.
HARRIS: That's what I'm talking about here.
All right. The General Motors bankruptcy filing will mean more job cuts and plant closings. We're sure of that. CNN's Deborah Feyerick is outside a GM plant in Warren, Michigan.
And, Deborah, you're actually talking to those GM worker. What are they saying to you?
DEBORAH FEYERICK, CNN CORRESPONDENT: Well, you know, we spoke to the head of the union here after President Obama's speech and the comments by the CEO of GM and he said, the union leader said today is not a good day. That this was effectively a revolution without a war. That the anchor that was once the American auto industry no longer exists and he said that that was not a good thing.
Now President Obama, when he addressed the nation, tried to convey that. In fact, this is necessary. And he spoke directly to the workers here at GM, saying that he understands that they've made sacrifices and that it's going to get worse before it gets better.
(BEGIN VIDEO CLIP)
OBAMA: I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost. More plants will close. More dealerships will shut their doors and so will many parts suppliers.
But I want you to know that what you're doing is making a sacrifice for the next generation. The sacrifice you may not have chose to make, but a sacrifice you were nevertheless called to make so that your children and all of our children can grow up in an America that still makes things, that still builds cars, that still strives for a better future. As our autoworkers and auto communities pass through these difficult times, we as a nation must do our part.
(END VIDEO CLIP)
FEYERICK: Now, the autoworker I spoke to said, OK, well that's fine for the next generation, but what about this generation? Saying that communities would be torn apart and that was the big concern. Now, ironically, it's the taxpayers who are going to be owning GM, at least 60 percent of the company. The rest to be divided up by the union workers, the bondholders, as well as the Canadians.
But the interesting thing is that the first big customer possibly will, in fact, be the U.S. government. The president also saying at the same time that he was going to try to push through Congress a move to update the entire fleet of federal vehicles -- Tony.
HARRIS: OK. All right. Deborah Feyerick for us in Warren, Michigan.
Deb, appreciate it. Thank you.
Let's broaden this a bit. You know we've seen this kind of thing before. Nicole Lapin is here now with some perspective on the biggest bankruptcy bust.
Nicole.
NICOLE LAPIN, CNN CORRESPONDENT: Yes, from Lehman, to Texaco, Tony, these mighty, mighty companies have fallen before and have taken down billions and billions of dollars with them. The biggest bankruptcy was Lehman, of course, with almost $700 billion in assets. It really was one of the biggest calamities of this current recession. It was the largest corporate filing in history.
Also, at number two, we have Washington Mutual with $327 billion in assets. It was one of the nation's largest savings and loans. Now it's almost a shadow of its former self.
We also take you back to 2002. WorldCom in July of '02, with $103.9 billion in assets. It filed bankruptcy after the discovery of an $11 billion accounting scandal.
And that brings us to number four. That brings us to today, Tony, with General Motors. $91 billion in assets. We talked about the largest corporate filing. This is the largest industrial filing in American history.
And I know you by now. I know what you're thinking.
HARRIS: Yes.
LAPIN: We go way back, Tony, when we were on weekends.
HARRIS: Right.
LAPIN: Now you're big time. You're thinking, but it got a lot of bailout money, right?
HARRIS: That's right.
LAPIN: We have a graphic. Let's pull that up.
HARRIS: Thank you.
LAPIN: Even with the $19.4 billion in federal help, that wasn't enough for the nation's largest automaker. We actually have to revise this because we heard this morning that it was $19.8 billion with that warranty added on. Now the government is pouring another $30 billion into GM to fund operations during its reorganization. So that's a lot of zeros.
And you know what we're hearing right now? Got to read this. TARP money, which was meant for the banks, now more TARP money is going to the auto industry bailout than is going to foreclosure mitigation, to Citigroup, to Bank of America, to the banks it was meant for.
HARRIS: Exactly. Think about that for a second.
LAPIN: So, yes, wrap your head around that. It's now topping the $70 billion for AIG.
HARRIS: Appreciate it, Nicole. Thank you.
LAPIN: You're welcome.
HARRIS: Just horrible news here. All 228 people aboard a missing airliner are now feared dead. That's according to Air France officials. Air France Flight 447 left Rio de Janeiro for Paris last night. It ran into severe thunderstorms and heavy turbulence over the Atlantic Ocean. The last communication from the plane was an automatic signal reporting electrical failure and a loss of cabin pressure. That was about 15 hours ago. No word since. Brazil's air force is searching an area of the Atlantic for the missing plane.
All right. CNN NEWSROOM continue in just a moment with Kyra Phillips.
(COMMERCIAL BREAK)
KYRA PHILLIPS, CNN ANCHOR: Pushing forward on GM's new beginning. It comes at an awesome price and not just for the carmaker's dwindling workforce. We've got nuts and bolts on the largest industrial bankruptcy in U.S. history.
Heavy storms, electrical failure, then nothing. Catastrophe strikes an Air France airliner somewhere over the Atlantic. The question is, where?
Stricken with cancer, then fired. A New Hampshire teacher suffers insults on top of illness. She says it's nothing personal. We say it's an outrage.
Hello, everyone. I'm Kyra Phillips, live at the CNN world headquarters in Atlanta. You're live in the CNN NEWSROOM.
Well, we knew it was coming and it may be for the best. Still, the very idea of General Motors in bankruptcy is a shock. And it's not the end of the road. In fact, the company and the White House say it's the opposite. It's the only route back to prosperity. But the new GM will be -- well, will never be the company that it used to be just a few years ago.
For one thing, its majority owners will be us, you and me, the taxpayers. And for that reason, some already are calling it government motors. The government's putting in another $30 billion and the company's cutting another 20,000 jobs and closing more factories. President Obama pushed the story forward in comments you may have seen live right here on CNN.
(BEGIN VIDEO CLIP)
OBAMA: If all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades. Now, any time a business as large as General Motors goes through a restructuring, it is extremely difficult to find common ground among all of the company's stakeholders. Though while the deal that has been worked out is tough, it is also fair.
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PHILLIPS: Well, CNN's Sean Callebs is at a GM plant that was built to be a model for the industry. Now it's being idled. And Ali Velshi charged the carmaker's one-way journey to an uncertain future but even uncertain would be an improvement.
Let's go ahead and take a look at this map. Each dot is a GM factory or parts center that's actually being closed in Chapter 11. All but two are new additions to the downsizing plan.
