GM Reducing Output To Align With Market Demand

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General Motors Corporation (NYSE:GM) announced today that, due to certain business developments, it is scheduling multiple down weeks at 13 assembly operations in North America. Under this plan, approximately 190,000 vehicles will be removed from GM's North American production schedule in the second and early third quarter of this year.

There are three primary reasons for this scheduled downtime:

1. Dealer vehicle inventories are at high levels, given the current depressed market.
2. The shutdown will allow GM the opportunity to bring production in line with current market demand.
3. The downtime actions also consider the possible production implications of the complicated and difficult negotiations with Delphi and its debtor in possession lenders.

"We're taking aggressive steps to accelerate our inventory initiatives that have worked well since the first of the year. While sales have been performing at or close to our plan estimates, and dealer inventories have been reduced accordingly, we want to more closely align inventories with even more conservative market assumptions," said Troy Clarke, GM North America president. "By reducing our inventories even more aggressively we reduce pressure on GM and our dealers, and set ourselves up well for a clean 2010 model year start-up."

GM's Total Confidence program, which reinvents the ownership experience by providing payment, equity and vehicle protection for owners and their families, is a strong incentive for customers to feel comfortable getting back into the new-car market. Additionally, Federal programs to make credit more available, and proposals to provide additional consumer incentives such as tax credits or scrappage programs, could rekindle additional market demand in the months ahead.

"Our dealers will continue to have plenty of high-quality, fuel-efficient cars, trucks and crossovers at tremendous value for customers. It's still a great time for customers to buy a new GM vehicle," added Clarke.

With regard to Delphi, GM has been actively engaged with Delphi management and the various constituencies involved since the inception of Delphi's bankruptcy case almost four years ago. More recently, in light of adverse developments in the industry, at GM and at Delphi, GM has been in negotiations with Delphi and its lenders to arrive at solutions that would ensure GM's source of supply under fair and reasonable terms. While GM has proposed a potential solution that would allow for the successful and rapid resolution of Delphi's bankruptcy case, its lenders have rejected this proposal. Without the successful resolution of this dispute, it is General Motors' view that Delphi or its lenders could force GM into an uncontrolled shutdown, with severe negative consequences for the U.S. automotive industry.

In the actions announced today, the plant down weeks are staggered and vary in duration, based on current inventory levels and expected demand for the products. Corresponding down weeks are also scheduled at GM's stamping and powertrain facilities. The scheduling actions do not impact operations that are in the process of launching new products, including the all-new Chevrolet Camaro built at Oshawa, Ontario, Canada and the Buick LaCrosse launching soon at the Fairfax, Kan. assembly plant.

At the end of March, approximately 767,000 vehicles were in U.S. dealer stock, down about 108,000 vehicles (or 12 percent) compared with the same period last year, and down 105,000 vehicles from year-end 2008. These new scheduling actions will help reduce U.S. dealer inventory levels to a level of approximately 525,000 vehicles by the end of July.

(source: GM)

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