Furthermore, in the current plan, GM has retained too many unprofitable nameplates that
tarnish its brands, distract the focus of its management team, demand increasingly scarce
marketing dollars and are a lingering drag on consumer perception, market share and
margin.

However, it is important to recognize that a great deal more progress needs to be made, and that GM’s plan is based on
fairly optimistic assumptions that will be challenging in the absence of a more aggressive restructuring.
• The plan contemplates that each of its restructuring initiatives will continue well into the future, in some cases
until 2014, before they are complete.
o The slow pace at which this turnaround is progressing undermines the Company’s ability to compete
against large, highly capable and well-funded competitors. GM’s plan forecasts it to catch up to (and, in
some cases, surpass) its competitors’ current performance metrics; however, its key competitors are
constantly working to improve as well, potentially leaving GM further behind over time.
• Given the slow pace of the turnaround, the assumptions in GM’s business plan are too optimistic.
o Market Share
􀂃 GM has been losing market share slowly to its competitors for decades. In 1980, GM’s US
market share was 45%; in 1990, GM’s US share was 36%, in 2000, its share was 29%. In 2008,
its share was 22%. In short, GM has been losing 0.7% per year for the last 30 years.
• Yet, in its forecast, GM assumes a much slower rate of decline, 0.3% per year until 2014,
even though it is reducing fleet sales and shuttering brands which represent a loss of 1.8%
market share, of which only a fraction will be retained. Management’s plan to achieve
this is driven by a reduction in nameplates and an ensuing increase in marketing spend
per nameplate.
• Furthermore, in the current plan, GM has retained too many unprofitable nameplates that
tarnish its brands, distract the focus of its management team, demand increasingly scarce
marketing dollars and are a lingering drag on consumer perception, market share and
margin.
o Price
􀂃 In 2006 and 2007, GM North America achieved a 30.4% contribution margin. Then, the plan
assumes, despite a severely distressed market, that margins increase to 30.8% in 2009 and 30.7%
in 2010. These figures remain at 30.9% in 2013 and 30.3% in 2014, despite GM’s plan to
increase its focus on passenger cars and crossovers, which have traditionally earned lower
margins.
􀂃 Fundamentally, the lingering consumer perception is that GM makes lower-quality cars (despite
meaningful improvements in the last few years), which in turn leads to greater discounting, which
harms GM’s price realizations and depresses profitability. These lower price points are an
important impediment to enhanced GM profitability and need to be reversed over time in order
for GM to bring its margins into line with its best-in-class peers.
EMBARGOED UNTIL MIDNIGHT ET
Determination of Viability Summary March 30, 2009
General Motors Corporation
4
o Brands/dealers
􀂃 GM has been successfully pruning unprofitable or underperforming dealers for several years.
However, its current pace will leave it with too many such dealers for a long period of time while
requiring significant closure costs that its competitors will not incur. These underperforming
dealers create a drag on the overall brand equity of GM and hurt the prospects of the many
stronger dealers who could help GM drive incremental sales.
o Europe
􀂃 GM’s European operations have experienced negative results for at least the last decade with a
sharp decline in market share from 12.9% to 9.3% between 1995 and 2008, leaving the Company
with high fixed costs and low capacity utilization.
􀂃 The European business is seeking additional capital beyond the funds requested from the
Treasury. These funds have not been allocated and thus represent a risk to the viability of GM’s
current plan.
o Product mix and CAFE compliance
􀂃 GM earns a disproportionate share of its profits from high-margin trucks and SUVs and is thus
vulnerable to energy cost-driven shifts in consumer demand. For example, of its top 20 profit
contributors in 2008, only nine were cars.
􀂃 GM is at least one generation behind Toyota on advanced, “green” powertrain development. In an
attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the
Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled
peers and will likely need substantial reductions in manufacturing cost in order to become
commercially viable
􀂃 Absent the successful introduction of a number of new-generation nameplates, as described in the
Company’s plan, GM’s product portfolio is more vulnerable to CAFE standard increases than the
portfolios of many of its competitors (although GM is in compliance today with current
standards). Many of its products fail to meet the minimum threshold on fuel economy and rank in
the bottom quartile of fuel economy achievement.
o Legacy liabilities – cash costs
􀂃 As GM moves through its forecast period, its cash needs associated with legacy liabilities grow,
reaching approximately $6 billion per year in 2013 and 2014. To meet this cash outflow, GM
needs to sell 900,000 additional cars per year, creating a difficult burden that leaves it fighting to
maximize volume rather than return on investment.
• Even under the Company’s optimistic assumptions, the Company remains breakeven, at best, on a free cash flow
basis throughout the projection period, thus failing the fundamental test of viability.
o Under its own plan, GM generates $14.5bn of negative free cash flow over its 6 year forecast period.
Even in 2014, on its own assumptions, GM generates negative free cash flow after servicing legacy
obligations.
o Given the highly challenging current market, the Company is already behind plan in its overall volume
expectations and market share for calendar year 2009.
o Since the Company has built a plan with little margin for error, even slight swings in its assumptions
produce significant and ongoing negative cash flows. For example, a 1% share miss in overall global sales,
all else being equal, in 2014 would lead to a $2 billion cash flow reduction in that year.