Truck Stop: Industry News

Preparing for Longevity

GM Presents U.S. Government with an Updated Plan for a Sustainable Company

Change is a necessary part of a successful business. To thrive in trying times, a company needs to adjust its operations accordingly to address the limitations of a slow economy. So when the Big Three automakers discussed the need for government assistance in late 2008, it became apparent that change was required to keep these industry giants alive.

To encourage the possibility of a brighter financial future, General Motors (GM) has presented the United States Department of Treasury with an updated plan that responds to the weaker global auto market conditions and details the company’s long-term viability. The plan, which provides a comprehensive review of key aspects of GM’s restructuring, is the first of two status reports required by the loan agreement signed by GM and the U.S. Treasury on Dec. 31, 2008.

The plan submitted addresses the key restructuring targets required by the T.A.R.P. (Troubled Assets Relief Program) loan agreement, including a number of the critical elements of the turnaround plan that was submitted to the U.S. government on Dec. 2, 2008. Among these are: U.S. market competitiveness; fuel economy and emissions; competitive labor cost; and restructuring of the company’s unsecured debt. It also includes a timeline for repayment of the Federal loans, and an analysis of the company’s positive net present value (NPV).

The plan also details the future reduction of GM’s vehicle brands and nameplates in the United States, further consolidation in its workforce and dealer network, accelerated capacity actions and enhanced manufacturing competitiveness, while maintaining GM’s strong commitment to high-quality, fuel-efficient vehicles and advanced propulsion technologies.

GM’s viability plan actions result in a projected GM North America earnings before interest and taxes (EBIT) breakeven point of 11.5 to 12 million units in the United States, compared to the 12.5 to 13 million unit range indicated in the Dec. 2, 2008, plan. The operating and balance sheet improvements outlined in GM’s viability plan are forecasted to result in a significant enterprise value and positive net present value, positive adjusted EBIT in 2010 and positive operating cash flow for its North American operations in the same year.

Overall adjusted operating cash flows are expected to approach breakeven levels in 2011, and improve to more than $6 billion in the 2012-2014 period, reflecting both the full effect of GM’s global restructuring initiatives and recovering industry volumes.

GM’s need for government support was driven by the global financial market crisis, dramatically weaker economy and the resulting precipitous decline in vehicle demand. These conditions have impacted the entire auto industry, which in the United States is down approximately 40 percent from its peak in 2005, to the lowest per capita sales rate in 50 years. Though the impact has been most severe in the United States and Western Europe, automakers around the world are reporting large losses, with many seeking government assistance to weather the downturn.

Following the steep decline in U.S. industry sales in December 2008 and January 2009, GM responded by further lowering its forecast for 2009 U.S. industry sales to 10.5 million units (57.5 million units globally) for viability planning purposes. These industry planning volumes are more conservative than those being used by most other industry sources.

“The U.S. and global auto industries are facing times of unprecedented challenge,” says GM chairman and CEO Rick Wagoner. “These conditions dictate that we must take very tough actions to accelerate GM’s restructuring efforts. We’ve made a lot of progress since the plan we submitted on Dec. 2, 2008, and we have more to do before March 31. The plan we delivered today to the U.S. Treasury is aggressive but achievable. It provides a clear pathway for GM that continues to support American manufacturing and technology innovation, which are vital to the future of our nation’s economy.”

Survival Skills National Truck Equipment Association Offers Guidance in Bleak Economic Times

It’s a winding and difficult road ahead for those in the work truck industry. According to the National Truck Equipment Association (NTEA), companies are facing consolidation pressures and increased competition, and the current economic climate only makes the future more challenging. Over the last two years, the NTEA has commissioned two unprecedented marketplace studies to analyze the changing work truck industry to provide members with a comprehensive overview and plan of attack for surviving and thriving in the years ahead. The Industry Overview and Strategic Bundle consists of two detailed reports designed to assist NTEA members and industry professionals in understanding the factors shaping and changing the industry and their implications on truck equipment firms. This Bundle highlights the challenges in today’s marketplace, along with clear opportunities for growth. Key findings indicate compressed distribution and sales channels are imminent, with more sales occurring through fewer outlets and with a reduced number of suppliers and upfitters. Strategic use of technology, market positioning, finding and promoting core competencies and identifying global opportunities are examples of ways to prepare for a consolidated industry. The Bundle consists of the North American Truck Equipment Industry Outlook and the Profitability, Cost and Technology Playbook: Strategic Insights and Best Practices for Truck Equipment Manufacturers and Distributors as well as an Executive Summary overviewing the two reports and is available to members for $249 and to non-members for $399. “These reports include specific planning tactics and strategies to help our members navigate and compete in these challenging times,” says Jim Carney, NTEA executive director. “We aim to help our members understand the threats and the opportunities facing them today in order to position themselves for a successful tomorrow.” A special educational session at the upcoming NTEA Convention From Tactical to Practical: A Playbook for Identifying Profitability and Survivability further explores these findings. The convention is held in conjunction with the Work Truck Show at Chicago’s McCormick Place (March 3-6, 2009). For more information or to order the Bundle, visit www.ntea.com or call (800) 441-NTEA (6832).