GM Hopes It is Restructuring for the Last Time

The new mantra at General Motors is that GM has begun the last restructuring it will ever need.

“There are no second chances. We won’t need one,” said Fritz Henderson, GM president and CEO, in a press conference following GM’s filing for bankruptcy protection on June 1.

In the last couple of days, Henderson and his lieutenants found several ways to express the same thing: This time, for sure.

“We are going to do it once and do it right,” Henderson repeated on June 1.

Ray Young, GM executive vice president and CFO, echoed that remark in another press conference on June 2. “Our promise is we will fix General Motors once and for all,” he said.

At the same time, Henderson and his team are dramatically lowering expectations for what constitutes “fixing” GM once and for all.

That starts with a lower target for U.S. market share. Five or six years ago, GM’s previous regime handed out lapel pins to its executives, showing the number “29,” symbolizing a U.S. market share target of 29 percent.

That would have been a marginal improvement from GM’s market share at the time, but in effect it meant that GM drew a line in the sand and said it would shrink no further. It was a futile gesture, especially when gas prices began to rise in 2004, exposing GM’s dependence on big pickups and SUVs.

If Henderson were to hand out similar lapel pins – which is unlikely – they would say, “18.” That’s GM’s newest market share target. Not only is that a much lower share than GM’s share in the early part of this decade, it’s a smaller share of a much smaller number.

Back when GM’s target was 29 percent, that was 29 percent of 16 million or 17 million units per year. Henderson’s business plan is built around hitting the breakeven point at a market share of 18 percent to 18.5 percent, with U.S. industry sales of only around 10 million units per year.

That’s even lower than GM’s share today. Through April, GM’s U.S. light-vehicle share for 2009 year to date was 19.1 percent, according to AutoData Corp.

In the past, GM was in the position of having to reverse years of decline, just to break even. With GM in U.S. Bankruptcy Court, Henderson can tear up old contracts and stand that logic on its head. Henderson’s plan is to shrink GM so small that it can break even at a much lower, more realistic level of business. Any improvement will mean greater profits.

Granted, that represents a bet that U.S. sales won’t get much lower than they are now. Considering sales are the lowest they’ve been since around 1970, that’s a safer bet than “old GM,” which was always staking everything on an unlikely turnaround.

Graphic: Bnet Autos