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State of the Big Three: Presentation to the United Auto Workers Stephen J. Girsky December 3, 2008

State of the Big Three: Presentation to the United Auto Workers Stephen J. Girsky December 3, 2008. sgirsky@yahoo.com. Overview. Girsky Background Wall Street Analyst covering Global Auto Industry for 20 years Special Advisor to the CEO/CFO of GM in 2005/2006

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State of the Big Three: Presentation to the United Auto Workers Stephen J. Girsky December 3, 2008

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  1. State of the Big Three: Presentation to the United Auto Workers Stephen J. Girsky December 3, 2008 sgirsky@yahoo.com

  2. Overview • Girsky Background • Wall Street Analyst covering Global Auto Industry for 20 years • Special Advisor to the CEO/CFO of GM in 2005/2006 • Centerbridge Partners - $7bn investment fund • Evaluated a number of significant auto-related investments • Lead Dana Corp.’s exit from bankruptcy in partnership with UAW/USW • UAW Assignment • Help evaluate possible GM/Chrysler tie up • Findings • GM/Chrysler merger difficult to accomplish • GM, Chrysler situation precarious • Where We Go From Here

  3. GM/Chrysler Potential Merger Observations • Logic of the merger based on significant cost saving opportunities including: • Purchasing • Product portfolio • White collar staffing • Questions around potential tie-up included: • Aggressive assumptions • Execution risk • GM has a lot on its plate • Would Chrysler be better off with a foreign partner?

  4. Diligence on a potential GM/Chrysler tie up exposed a different more significant issue • GM was running out of money

  5. Auto Sales Were Relatively Steady For Many Years… Source: Autodata, Company data

  6. …But Have Experienced Rapid Deterioration In 2008 Source: Autodata, Company data

  7. External Events Contributing to the Crisis • Gasoline prices soared leading to a significant demand shift away from high profit trucks/SUV’s towards lower margin cars • Commodity prices soared, pressuring material costs • Credit crisis on Wall Street spread to “Main Street” • Dealers can’t borrow to fund inventory • Consumers can’t borrow to buy cars • OEMs and Suppliers can’t borrow money to fund losses • Playing field has shifted dramatically toward companies with cash or access to it and companies with well-balanced product portfolios

  8. Not Just a US Problem; Western European Sales Are Starting To Weaken As Well Source: Autodata, Company data

  9. GM: Cash Crisis (1) (2) Source: Company data Debt ($) 12.2 15.8 16.2 17.2 32.4 32.4 32.5 32.6 34.2 34.3 38.7 39.3 39.4 40.1 40.5 43.3 Notes: 1. Excluding GMAC-related debt 2. Including readily available VEBA assets

  10. GM Stock Price Has Fallen In Response Source: Capital IQ

  11. GM: Not Just a North American Problem • The North American market has deteriorated significantly since 3Q2007 • However, European and Asian markets have also shown significant weakening

  12. GM: Significant Current Obligations

  13. Ford Situation Less Severe, Although Recently Burning Cash At A Rapid Rate (1) (2) Source: Company data Debt ($) 13.8 14.0 14.2 14.5 20.8 18.9 18.4 18.1 17.9 17.7 30.0 30.0 26.7 27.1 26.5 26.1 Notes: 1. Excluding Ford Credit debt 2. Including short-term VEBA assets

  14. Ford Stock Price Has Fallen In Response Source: Capital IQ

  15. Ford: Not Just A North American Problem • The North American market has deteriorated significantly since 3Q2007 • However, European and Asian markets have also shown significant weakening

  16. Ford: Current Obligations Not As Significant

  17. Chrysler Issues • Cerberus LP purchased Chrysler from Daimler for approximately $7.2Bn in August 2007 • Most of Cerberus’ investment is in the Finance Company, which was legally separated from the auto company at the time of purchase • Auto Company currently has $9bn in debt, backed up assets of the Company. VEBA obligations due in 2010 of roughly $3bn technically rank below the $9bn.

  18. Chrysler Liability Structure

  19. Where Do We Go From Here? • All constituents faced with painful choices • Need a plan with enough credibility among stakeholders that will keep the company on the field in the near term and allow it to thrive longer term • Every stakeholder needs to contribute • Stakeholder concessions today are an investment in the future • Alternative is a disaster • S&P estimates recovery on GM unsecured debt in a bankruptcy at $0.05 • All contracts can be rejected in a bankruptcy • UAW needs to be part of the solution but can’t be the only part • UAW can play a significant role in the process

  20. sgirsky@yahoo.com

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