GM said in its earnings release that barring some change, liquidity will start to get tight come early next year. Ergo, it would seem, bankruptcy is a real possibility. Yet CEO Rick Wagoner told CNBC's Phil Lebeau that bankruptcy isn't being considered, and that the only plan is to keep running the business. That must be why Wagoner has been palling around with politicans like Nansy Pelosi so much. Some key points from his interview:
- On bankruptcy, "We don't think about it for a second." (how is that possible?)
- As for a bailout, he hopes to see action during the lame duck session. (By the time Obama's January inauguration comes about, the may already be in the red zone... also, Democrats in Congress may look to do a favor to Obama by wrapping something up before he comes into office, sparing him a difficult political situation).
- On Chrysler, Wagoner says it offered significant synergies, but, he won't mention Chrysler by name. Surely it has somethign to do with lawyers.
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Full Transcript:
Phil LeBeau: WELCOME BACK TO "POWER LUNCH." I'M PHIL LEBEAU LIVE AT
GENERAL MOTORS HEADQUARTERS IN DETROIT, MICHIGAN AND JOINING ME FOR A
FIRST ON CNBC INTERVIEW TO DISCUSS GENERAL MOTORS' THIRD-QUARTER
RESULTS, CHAIRMAN AND CEO OF GENERAL MOTORS, RICK WAGONER. THANKS FOR
JOINING US FOR A FIRST ON CNBC INTERVIEW.
Rick Wagoner: THANKS, PHIL, GOOD TO BE WITH YOU.
LeBeau: THE NUMBERS ARE NOT PRETTY. LOSE BASICALLY 4.2 BILLION IN THE
THIRD QUARTER AND THE RELEASE FOR THE FIRST TIME BRINGS UP THE QUESTION
OF LIQUIDITY. HOW CLOSE IS GENERAL MOTORS RIGHT NOW TOWARDS BANKRUPTCY?
Wagoner: WELL, WE'VE GOT, AS WE CLOSE THE QUARTER AND INDICATED, WE'VE
GOT 16.2 BILLION IN AVAILABLE LIQUIDITY, THAT'S WELL ABOVE WHAT WE THINK
OUR MINIMUM CASH OPERATING REQUIREMENT IS BUT THE CONCERN IS WITH THE
CONCERN YOU RAISE WITH THE DRAMATIC WEAKENING IN THE ECONOMY AND THE
FALL IN SALES. WHERE'S THAT GOING TO LEVEL OUT AND WHAT DOES THAT MEAN
FOR OUR FUTURE CASH FLOW AND WE ANNOUNCED TODAY A WHOLE BUNCH OF
ADDITIONAL MEASURES ON THE SELF-HELP SIDE AND IN ADDITION TRY TO PURSUE
THE ASSET SALES AS AGGRESSIVELY AS WE CAN AND YOU KNOW ABOUT
CONVERSATIONS IN WASHINGTON THAT PICKED UP IN EARNEST YESTERDAY.
LeBeau: YOU BURNED THROUGH ROUGHLY 2.3 BILLION A MONTH IN THE THIRD
QUARTER. WILL THAT BE THE BURN RATE ROUGHLY SPEAKING IN THE FOURTH
QUARTER AND IF SO HOW LONG BEFORE YOU SAY WE'RE HITTING THE MINIMUM AS
TO WHETHER TO GO TO BANKRUPTCY OR NOT TO GO TO BANKRUPTCY?
Wagoner: GLAD YOU ASKED THAT. WE EXPECT IN THE FOURTH QUARTER THE CASH
BURN TO BE MORE LIKE THE FIRST TWO QUARTERS OF THE YEAR. IN THE THIRD
QUARTER WE HAD A COUPLE OF THINGS, WE SHIFTED OVER FROM THE KIND OF
INCENTIVES FROM FINANCING INCENTIVES TO CASH INCENTIVES. THAT HAD A
FAIRLY SIGNIFICANT NEGATIVE WORKING CAPITAL IMPACTED A ONE TIME AND WE
BUILT INVENTORY IN EUROPE AND NOW FRANKLY WE'VE CUT A LOT OF PRODUCTION
IN EUROPE SO WE EXPECT TO NORMALIZE TO A LOWER LEVEL OF CASH BURN, BUT
IT CERTAINLY RAISES THE POINT OF THE NEED FOR US TO TAKE THE ADDITIONAL
ACTIONS AND TO WORK EVERY ANGLE THAT GENERATE CASH THAT WE CAN.
LeBeau: IS THERE A DROP DEAD POINT WHERE YOU SAY, LISTEN, IF THINGS
DON'T CHANGE, COME JANUARY OR FEBRUARY OR COME THE END OF THIS YEAR,
WE'VE GOT TO MAKE SOME HARD DECISIONS?
Wagoner: WELL, WE'VE SAID THIS BEFORE SO I'M REPEATING WHAT I'VE TOLD
YOU. WE HAVE NO PLANS WHATSOEVER TO CONSIDER ANYTHING OTHER THAN
CONTINUE TO RUN THE BUSINESS. WE DON'T THINK ANYTHING POSITIVE WOULD
COME OUT OF CONSIDERATION OF REORGANIZATION. I'VE SEEN PUNDITS WRITE
THIS STUFF BUT YOU CAN'T SELL CARS TO PEOPLE UNDER THAT CIRCUMSTANCE SO
I THINK IT WOULD BE A DEVASTATING IMPACT, NOT JUST FOR GM, IT WOULD BE A
DOMINO EFFECT ACROSS THE WHOLE INDUSTRY.WE HAVE THE RESPONSIBILITY TO DO
WHATEVER WE CAN TO MAKE SURE WE BUILD LIQUIDITY TO GET THROUGH WHAT'S AN
UNPRECEDENTED CRISIS.
LeBeau: WHAT WOULD AMERICA LOOK LIKE IF GENERAL MOTORS WERE NOT AROUND
BECAUSE WE'VE HEARD PEOPLE SAY LET THEM GO INTO BANKRUPTCY, WE DON'T
NEED GENERAL MOTORS IN THE UNITED STATES? WHAT WOULD THE U.S. LOOK LIKE
WITHOUT GM?
Wagoner: I'M NOT GOING TO SPECULATE BECAUSE WE DON'T THINK ABOUT IT FOR
A SECOND. IT'S NOT AN ISSUE OF GM, BUT THE WHOLE DOMESTIC INDUSTRY.THE
INTEGRATED SUPPLY BASE IN 50 STATES, DEALERS. THE IMPACT WOULD BE
DEVASTATING FOR THE U.S. ECONOMY AND, YOU KNOW, I READ THE PUNDITS LIKE
YOU DO, I SUSPECT THESE ARE THE GUYS THAT WERE SAYING LET LEHMAN
BROTHERS GO, TOO, AND WE SEE THE IMPACT THAT THAT HAD. THAT'S A PIVOTAL
ISSUE FOR THE U.S.THE FACT IS THAT THE PROBLEMS IN THE AUTO SECTOR ARE A
DIRECT CONSEQUENCE OF THE CREDIT CRISIS AND WHILE GREAT INITIATIVES HAVE
BEEN TAKEN TO TRY TO ADDRESS IT, IT HAS NOT MOVED INTO THE REAL SECTOR.
NOW THE PROBLEMS ARE MOVING TO MAIN STREET AND WE CERTAINLY HOPE THAT WE
CAN COUNT ON THE SIMILAR KIND OF SUPPORT FROM THE GOVERNMENT AS WE SAW
IN RESPOND TOGETHER FINANCIAL ISSUES.
LeBeau: YOU MEET WITH NANCY PELOSI YESTERDAY IN WASHINGTON. YOU CLEARLY
SPELL OUT IN VERY BLUNT TERMS WHAT YOU'RE FACING, AND YET AT THE END OF
THE MEETING WHAT WE GET IS A VERY DIPLOMATICALLY WORDED STATEMENT SAYING
WE UNDERSTAND THE CHALLENGES AND WE'RE CONCERNED ABOUT THE AUTO
INDUSTRY. A LOT OF PEOPLE ON MAIN STREET MIGHT BE SAYING WE NEED TO KNOW
IF THE GOVERNMENT IS GOING TO DO SOMETHING OR NOT DO SOMETHING. HOW
QUICKLY WOULD YOU LIKE WASHINGTON TO MAKE A DECISION IN TERMS OF HELPING
THE AUTO INDUSTRY?
Wagoner: OH, I THINK IT'S CRITICAL THAT WE MOVE FAST, NOT ONLY CRITICAL
FOR THE AUTO SECTOR BUT I THINK FOR A LOT OF OTHER SECTORS AS WELL, AND
SO I THINK IT'S THE KIND OF THING, AND I HOPE THE CONGRESS TAKES IT UP
IMMEDIATELY. WE'VE HAD CONVERSATIONS WITH A NUMBER OF MEMBERS OF
CONGRESS. WE MET SENATOR REID YESTERDAY WHO ISSUED I THINK A GOOD
STATEMENT IN SUPPORT OF THAT DIRECTION, AND SO WE'RE GOING TO BE WORKING
VERY CLOSELY WITH OUR ELECTED REPRESENTATIVES AND THE ADMINISTRATION TO
ENCOURAGE MOVEMENT AS FAST AS POSSIBLE.
LeBeau: BUT YOU NEED SOME ACTION, WOULD YOU SAY, BY THE END OF THIS
YEAR?
Wagoner: OH, I THINK ACTION -- WE CERTAINLY WOULD HOPE ACTION TO BE
TAKEN IN THE UPCOMING LAME DUCK SESSION.
LeBeau: SO AS QUICKLY AS POSSIBLE?
Wagoner: SURE, SURE.
LeBeau: IN YOUR RELEASE TODAY YOU INDICATE THAT DISCUSSIONS ABOUT A
MERGER OR AN ACQUISITION OF ANOTHER AUTO COMPANY, AND WE ALL KNOW WE'RE
TALKING ABOUT CHRYSLER, AND I KNOW YOU DON'T WANT TO TALK ABOUT ANOTHER
COMPANY BY NAME, BUT YOU'RE PUTTING THOSE ON HOLD WHILE YOU CONCENTRATE
ON LIQUIDITY. WOULD ACQUIRING CHRYSLER, WOULD IT HAVE HELPED YOU GUYS?
Wagoner: THERE WAS A LOT OF CONFUSION AND SPECULATION AROUND THAT, BUT
BASICALLY AS WE LOOKED AT THIS POTENTIAL ACQUISITION, AND I'M NOT GOING
TO MENTION THE NAME OF A COMPANY FOR A VARIETY OF REASONS-IT OFFERED
SIGNIFICANT SYNGERIES WE FELT BUT THE FACT THOSE SYNERGIES TENDED TO
COME IN THE MEDIUM AND LONG TERM. WASN'T A NEGATIVE IN THE NEAR TERM. A
LOT OF THE PRESS COVERAGE ON THIS BEING A HUGE ISSUE FOR NEAR-TERM
LIQUIDITY HAD GOTTEN TO BE CONFUSING THE FACTS. THE ISSUE ON SHORT-TERM
LIQUIDITY IS THE STATE OF AUTO INDUSTRY. WE SAID WE'RE GOING TO PUT ALL
OF OUR EFFORTS ON FOCUSING ON THAT ISSUE FOR NOW.
LeBeau: YOU'VE GOT AROUND $16 BILLION, $17 BILLION CASH. I'VE TALKED TO
SOME PEOPLE SAY YOU NEED $10 BILLION TO $14 BILLION. TO RUN THIS
COMPANY. WHERE IS THE BOTTOM WHERE YOU SAY YOU CAN'T DROP MUCH BELOW
THERE?
Wagoner: WE TRY TO OPERATE WITHIN $11 TO 14. WE WANT TO TRY AND STAY
ABOVE OR STAY IN THAT RANGE. THAT'S WHAT WE'RE COMPLETELY FOCUSED ON
NOW.
LeBeau: YOU HAVE INDICATED YOU'RE PRESSURED NOT ONLY HERE IN THE UNITED
STATES BUT OVERSEAS. SEEING CREDIT IF YOU WILL CRISIS SPREAD TO EUROPE
AND TO LATIN AMERICA AND TO ASIA, TO THE POINT WHERE YOU'RE SEEING YOUR
REVENUES DROP IN THOSE AREAS?
Wagoner: SURE. IF YOU SAW THE THIRD QUARTER RESULTS, WE SAW PARTICULARLY
TOWARDS THE END OF THE THIRD QUARTER THE EUROPEAN MARKET TURN DOWN
SIGNIFICANTLY. PART OF IT WAS CREDIT RELATED. WE'VE SEEN SLOWDOWNS IN
OTHER PARTS OF THE WORLD MORE RECENTLY. I THINK IT'S FAIR TO SAY THAT
THIS CREDIT CRISIS CONTAGION IS MOVING IN TO MANY OF THE COUNTRIES
AROUND THE WORLD. IN SOME CASES IT'S SLOWING GROWTH FROM 30% TO 10%. BUT
IN OTHER CASES, LIKE EUROPE, FOR EXAMPLE, PUTTING THEM IN NEGATIVE EURO.
IT IS ADDING ADDITIONAL PRESSURE.
LeBeau: YOU MENTIONED LEHMAN BROTHERS AND THE FACT THEY WERE ESSENTIALLY
LEFT TO GO, GO OUT OF BUSINESS. HOW DOES YOUR SITUATION COMPARE WITH
WHERE LEHMAN BROTHERS WAS AND THE IMPACT IT WOULD HAVE ON THE ECONOMY?
Wagoner: NO COMPARISON WHATSOEVER. LOOK AT THINGS LIKE EMPLOYMENT,
IMPACT ACROSS THE ENTIRE COUNTRY AND ACROSS THE WORLD, THE CONTRIBUTIONS
TO THE TECHNOLOGY BASE IN THE U.S., MANUFACTURING BASE, IT'S REALLY A
COMPLETELY DIFFERENT DISCUSSION. I THINK --
LeBeau: FAR GREATER IMPACT BY LETTING YOU GO THAN LEHMAN?
Wagoner: BUT I THINK THE LESSON FROM LEHMAN IS VERY IMPORTANT TIME AND
DIFFICULT TIMES WE'RE IN, REALLY REQUIRES POLICYMAKERS TO TRY TO BE
AHEAD OF THE PROBLEM RATHER THAN REACTING TO THE PROBLEMS. SO I THINK
IT'S TIME, CERTAINLY OUR VIEW IS, WE'VE BEEN GLAD TO SPEND TIME WITH THE
ADMINISTRATION AND GOVERNMENT TO TALK ABOUT THE FACT, LOOK, SIGNS WE SEE
WHEN AUTO SALES FALL TO THEIR LOWEST LEVEL IN 50 YEARS IT'S TIME FOR
ACTION AND THE TIME IS NOW. DELAYS BRING SIGNIFICANT RISKS.
LeBeau: RICK WAGONER, CHAIRMAN AND CEO OF GENERAL MOTORS FIRST ON
CNBC.YOU HEARD IT THERE, GUYS. THEY DO NOT HAVE TIME TO WAIT AROUND FOR
A LOT OF DISCUSSION. EITHER WASHINGTON HELPS THEM OR DOESN'T HELP THEM.
OTHERWISE, WE'LL SEE WHAT HAPPENS.
