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GM: 2010 Profit Expected, May Reinstate Hundreds Of Dealers

Gm Profits Dealers

TOM KRISHER   01/ 7/10 08:50 AM ET   AP

DETROIT — General Motors Co.'s chairman expects the automaker will be profitable this year and says hundreds of the 1,350 GM dealers who lost their franchises last year could see them restored.

Chairman and interim CEO Ed Whitacre Jr. also said that new Chief Financial Officer Chris Liddell is a candidate to take the CEO post permanently. And Whitacre said he's not confident about selling the Swedish Saab brand.

In a wide-ranging talk with reporters at GM's Detroit headquarters, Whitacre predicted that GM would be profitable this year, although he said that was dependent on the economy and other factors.

"Do we have obstacles in our way? Of course we do," Whitacre said, adding he's confident that GM's management team has the company moving forward.

A full-year profit for GM, which left bankruptcy protection in July, would be the company's first since 2004 when it made $2.7 billion. It has posted more than $88 billion in losses since then.

Dealers are getting a chance to regain lost franchises as a result of a congressionally mandated arbitration process that begins later this month.

The 1,350 GM dealerships, which were allowed to stay open until October 2010, were targeted as part of an effort to dump poor performers and better align its dealer base with much lower consumer demand for autos. In many cases, GM had dealerships too close to one another and were competing on price, the company said.

Congress passed legislation late last year that forces GM and Chrysler Group LLC, which shed 789 of its dealers last year, to give the dealers who lost franchises a chance to appeal the decisions. Like GM, Chrysler went through bankruptcy protection earlier this year and both companies are receiving government aid.

Whitacre said GM had a "pretty arbitrary cutoff point" for shedding dealers, and that it probably made mistakes in getting rid of some of them.

When pressed, he said his estimate of "hundreds of dealers" may be closer to 100 than a thousand, but added it's a "substantial number."

Restoring some dealerships could be good for the company because they would sell more cars for GM. But it also could be bad if a "lousy dealer" with a poor storefront got a franchise back, Whitacre said.

When the franchises were revoked last summer, GM officials said dealers were judged on whether they met sales goals, customer service scores, the condition of their buildings and other criteria. They were allowed to stay open through October of this year to sell their inventories.

Under pressure from dealer groups and lawmakers, GM and Chrysler put out proposals that would have allowed dealers to challenge closures in arbitration. But a bill passed by Congress allows them to bring a much wider range of proof that they are profitable.

Dealers have until Jan. 25 to tell the automakers if they will appeal.

Whitacre also told reporters that he would consider the newly-hired CFO Liddell in the search for a permanent new CEO. Liddell, 51, was CFO at Microsoft Corp. but had indicated he wanted to pursue a higher-ranking position.

Liddell, hired late last month as GM's CFO, was the first permanent top manager hired from outside the traditionally insular GM since the company left bankruptcy protection in July. He replaced Ray Young, who transferred to GM's China operations.

At Microsoft, Liddell developed a reputation for holding down costs while building up cash. He instituted a plan to cut $3 billion from the technology company last year that included its first mass layoff, wage freezes and cuts in travel and other expenses.

GM has hired a search committee to find CEO candidates, but it has not presented any yet, Whitacre said.

GM is majority owned by the federal government and Liddell was granted an exemption from government imposed pay caps to take his post. He will be paid $750,000 this year, but will get up to another $5.45 million in stock starting in 2012 if GM successfully sells its shares to the public.

Such a sale, Whitacre said, would come late this year if it happens in 2010. He said it's possible he could still be CEO at that time.

GM received $52 billion in U.S. government aid and has begun repaying $6.7 billion of that as a loan. The rest would be repaid through the stock sale.

Whitacre also said he is not optimistic for a deal to sell its Swedish Saab brand, but he expects the sale of Hummer to a Chinese heavy equipment maker to close on Jan. 31. GM is phasing out Saab and expects to start closing plants this week.

GM has been in talks to sell Saab during the past month with Dutch exotic car maker Spyker Cars. It has also heard from other suitors after an attempt to sell the brand to a consortium led by Swedish sports car manufacturer by Koenigsegg Automotive AB fell apart in November.

But Whitacre said he is not confident a deal can be reached.

"It's real easy. Just show up with the money and you can have it," he said. "Nobody's come with the money, so were in the wind down deal here."

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AP Business Writer Stephen Manning in Washington, D.C., contributed to this report.

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