General Motors Corp. is set to emerge from bankruptcy into an economic downturn that presents a major challenge for the country's largest auto maker -- and for the White House that saved it.
Sunday's late-night ruling from the bankruptcy court cleared away objections to GM's reorganization. Later this week, GM Chief Executive Frederick "Fritz" Henderson plans to introduce a revamped GM as a greener, more customer-focused company with a leaner management, people briefed on the plan say.
The new company carries substantial baggage when it comes to fuel economy, in part because of its dominance of the truck market and years of fighting emissions legislation. Mr. Henderson's announcement will be supported by a litany of new products aimed at shattering that image, ranging from a compact Chevrolet and small Buicks to the battery-powered Chevrolet Volt and a similar Cadillac model.
Mr. Henderson's management team largely consists of lifetime employees with decades of service. These executives have presided over continuing market-share declines and produced billions in red ink in recent years.
Since taking over in April, Mr. Henderson has repeatedly said the executive ranks must be thinned. GM is expected to axe 4,000 white-collar workers by October, and not offer jobs to about a third of the management team Mr. Henderson inherited from his predecessor, Rick Wagoner.
Nonetheless, the new GM still has a rough road ahead. The company, soon to be 60% government-owned, continues to lose market share to foreign rivals, having shed nearly two percentage points of its U.S. share in just the past six months. Some buyers have flocked to GM's chief U.S. rival, Ford Motor Co., allowing Ford to substantially narrow its market-share deficit with GM in June.
GM, meanwhile, is spending nearly $500 more per vehicle than the industry average on sales incentives, and it carries the highest inventory levels among its peers, according to Autodata Corp. Plans to sell the Hummer brand and other lines remain in limbo.
For the Obama administration, risks also abound as voters and political opponents wait to see a return on the huge sums taxpayers have invested in the auto companies. By the end of the year, the U.S. government will have put $50 billion into GM and more than $12 billion into Chrysler, along with tens of billions more to suppliers, lenders and GM's former credit company, GMAC.
Senior administration officials say from now on they will take a back seat, leaving day-to-day operations to the companies' revamped boards. "We are not going to micromanage," says Steven Rattner, a principal member of the Treasury-led auto task force.
Mr. Rattner says GM could make an initial public share offering as early as the first half of 2010, though the government will be judicious in selling its stakes to get the best deal for taxpayers.
By shedding brands, dealers and significant chunks of debt, GM and Chrysler are better set to survive the sharp downturn in car sales. A deeper and longer slump, though, could upset their plans.
The industry's car and light-truck sales last month came in at an annualized rate of 9.7 million vehicles, down from 9.9 million in May but up from earlier in the year. GM officials say the company should be able to break even if those sales are just above 10 million units a year.
In a sign of how rapidly GM's position has deteriorated in the U.S., the auto maker said Monday that its vehicle sales in China in the first half nearly surpassed the 954,356 vehicles it sold in the U.S.
With 82 days' worth of unsold vehicles stacked on dealer lots, GM has significantly more inventory than any major rival. To clear the glut, GM ran a fire sale over the weekend, offering buyers 0% financing on 72-month loans.
"The share loss has to stop at some point in order for the company to be truly viable," Mr. Rattner acknowledged.
Mr. Henderson is racing to broker the sale of three brands -- Hummer, Saab and Saturn -- and a stake in its former German subsidiary, Adam Opel GmbH.
The Obama administration is putting great stock in its appointment of Edward Whitacre, former chief executive of AT&T Inc., as GM's first independent, nonexecutive chairman since the mid-1990s.
Mr. Whitacre is expected to be introduced as chairman as early as Thursday.
The administration picked him primarily because it didn't think GM's management team had proper oversight or could deliver quick results, according to a person familiar with the matter.
