NEW YORK (CNNMoney.com) -- General Motors announced plans Monday to cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40% of its dealer network in its latest bid to stay out of bankruptcy.The new restructuring proposal will leave the Treasury Department, and thus U.S. taxpayers, owning a significant stake in GM. Treasury would accept GM stock, rather than cash, for repayment of about $10 billion that the government has already lent to GM.
Trust funds controlled by the United Auto Workers union would also hold a significant stake in the company. Between them, Treasury and the unions would own 89% of GM. GM also announced an offer to its bondholders to swap $24 billion of the company's $27 billion in unsecured debt for stock. GM is offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal.
GM CEO Fritz Henderson warned in a press conference Monday that a bankruptcy is still very likely unless bondholders agree to the swap. "It's not impossible but it's a tough task," Henderson said about the company's ability to get enough bondholders to accept the company's stock. "That's why I think [bankruptcy] is more probable."
The moves are GM's latest efforts to cut costs and stem losses that have dogged its North American auto operations since 2005. But Monday's restructuring announcement goes much further than the viability plan GM unveiled to President Obama's auto industry task force in February.
The company had announced many of the job cuts in February, but Monday's news that GM would have about 38,000 hourly U.S. employees by 2011 represents an additional reduction of 7,000 to 8,000 jobs beyond what GM disclosed in its previous viability plan. The job cuts come as GM is set to announce the closing of more plants in the next few weeks. Henderson would not comment on which plants could be on the chopping block.
The company said its goal is to cut costs to the level where GM can break even even with industrywide U.S. sales of only 10 million vehicles, rather than the 11.5 million to 12 million sales range that had been its previous break-even target. Henderson added he's hoping that the company could be profitable as soon as 2010 under the new restructuring plan.
While the cuts will leave GM a much smaller company, Henderson said this does not concern him. He admitted that results at GM have not been acceptable for quite some time. "I'm much more focused on getting results than being big," he said.
GM also confirmed reports that surfaced Friday and officially announced plans to drop its Pontiac brand altogether. In its earlier restructuring plan, GM had signaled that Pontiac would survive, albeit as a niche offering.
The company also said it would make more cuts to its dealership network than it announced in February, and at a much faster pace. GM said Monday it will cut the number of its dealers by 42% to 3,605 by 2010, up from its original plan to reduce its network to 4,100 dealers by 2014.
The Obama administration's task force, which found that GM's February turnaround plan was not viable, said Monday that the new plan "reflects the work GM has done since March 30 to chart a new path to financial viability." But the task force added that it "has made no final decision regarding the treatment of its current loan to GM or with respect to any future investments in the company."
The administration has given GM only until the end of May to reach deals with creditors and unions to cut costs or be forced into bankruptcy. But the Treasury Department did extended GM an additional $2 billion in loans last week, bringing its total federal assistance to $15.4 billion.
