Expecting Bankruptcy: General Motors
It is expected that General Motors will declare bankruptcy by June 1, the restructuring deadline set by Washington. Bankruptcy, as a legal tactic, could present the best opportunity to revive the company. However, "the speed of the government-led transformation has triggered complaints that the rights of investors and dealers are being trampled." There are also fears that a declaration of bankruptcy could lead to a chain of supplier and dealership failures.
A GM bankruptcy filing would be "perhaps the biggest and most-watched in legal history": "Because of its size and scope, the bankruptcy would be the most complicated that any American company has gone through - more complex than those of Chrysler and Lehman Brothers, two other notable bankruptcy cases now making their way through the system." (NY Times)
The proposed plan is to split GM's good assets from the bad assets, creating a new viable company out of the good assets with the more desirable brands, and liquidating the bad assets. Before this can be done, the company must reach a deal with bondholders (concessions have already been reached with workers and the unions). The Treasury Department will work to negotiate with bondholders up until the June 1 deadline. A deal has not yet been reached and bondholders continue to reject restructuring plans.
Concessions have been achieved between General Motors and the United Auto Workers (UAW) and the Canadian Auto Workers (CAW). The UAW will own as much as 39 percent of the restricted GM, in exchange for giving up its claim to at least $10 billion that the company owes it. In spite of this, GM has revealed to Congress that it "plans to start importing small cars from China within two years. Union officials in both countries say the move will kill jobs in North America." American and Canadian automakers face trade barriers in China and South Korea. "In the U.S., the United Auto Workers union has complained to the government about GM's plan to close 16 plants while ‘dramatically' increasing auto imports from Mexico, South Korea, Japan and China." (The Toronto Star) An increase in offshore imports will decrease the number of jobs in North America. "China isn't putting up the money, and Mexico isn't putting up the money," said Tony Clement, Canada's Minister of Industry. "But if we're putting up the money, just as the Americans are, then we have the right to protect our production capacity." The U.S. government will own as much as 70% of the car marker. "Members of Congress will have a hard time explaining to constituents how the government could own 70 percent of the company and still have no control over deciding which factories stay open and which are closed". (NY Times)
Chrysler and GM have also both announced that they will terminate agreements with close to 2,000 dealerships in the U.S. alone.
Down the road, Detroit's auto industry must continue to tighten their belts and embrace alternative technologies to succeed.
Related:
- In the News: A Foreign Buyer Could Put Saturn's Image Into Orbit
- In the Classroom: The North American Auto Industry
- Past Feature: Washington in the Driver's Seat: Restructuring the Auto Industry
- Report: MARKETS: GM Bankruptcy Fears
- Research: The North American Auto Industry Beyond NAFTA
WSJ: Koenigsegg Agrees to Buy GM's Saab Unit
Swedish car maker Koenigsegg Group AB has reached an agreement to acquire General Motors Corp.'s Saab Automobile AB unit for an undisclosed sum, the companies said Tuesday.
Read more: http://online.wsj.com/article/SB124513981083118251.html#mod=rss_whats_ne...
Miami Herald: Lawmakers scramble to help auto dealers and consumers
Responding to consumers and car dealers upset by the upheavals in the American auto industry, lawmakers in Congress moved quickly Tuesday to provide relief from dealer closings and sluggish sales.
Read more: http://www.miamiherald.com/news/politics/story/1089700.html
General Motors industry is a very popular and huge company but because of the current economic meltdown and recession, it is now in a pretty tight spot. I wonder why a lot of people would love to buy an Aston Martin, or at least have enough money to be able to buy one. Aston Martin has long been at the forefront of handmade sports cars, and they've started to get a lot more attention lately. One of their new models will retail for about a million dollars a big personal loan for a car, a gutsy move when General Motors is filing for bankruptcy. The brand was first propelled to fame in the James Bond movie Goldfinger, when Sean Connery was 007, with the DB5. The most recent Bond films feature the newer models, but it takes more than credit cards to get an Aston Martin.
Will the GM bankruptcy work?
CNNMoney.com
Troy Clarke, president of GM's North American operations, said the company didn't have the option to push for every possible cost reduction because it ...
“I think the government auto bailout was a big mistake. We have Ford motor company here in Louisville, an American company that hasn't taken government money and is still producing automobiles. We've ended up exactly where I predicted we would. If we could have let these companies go through the bankruptcy process much earlier in the process without all of the additional government money and ended up in the same place.”
--Senate Minority Leader Mitch McConnell on CNN’s State of the Union http://tinyurl.com/lwh6sc
CNN: GM sells Hummer to mystery buyer
General Motors Corp. said Tuesday that it has signed a deal to sell its Hummer truck unit, just one day after filing for bankruptcy.
Read more: http://money.cnn.com/2009/06/02/news/companies/gm_hummer/index.htm?postv...
CNN: GM plant closings: 20,000 job cuts
General Motors unveiled plans to close 14 plants and three warehouses Monday in a move that could ultimately slash up to 20,000 workers from its payrolls, as the company undergoes an historic bankruptcy restructuring.
Read more: http://money.cnn.com/2009/06/01/news/companies/gm_facilities/index.htm?p...
CNN: GM bankruptcy: End of an era
General Motors filed for bankruptcy protection early Monday, a move once viewed as unthinkable that became inevitable after years of losses and market share declines capped by a dramatic plunge in sales in recent months.
Read more: http://money.cnn.com/2009/06/01/news/companies/gm_bankruptcy/index.htm
CNN: Why the market doesn't care about GM
It finally happened. General Motors has filed for bankruptcy. And like most other bits of bad news that have taken place in the past few weeks, investors didn't even blink.
Read more: http://money.cnn.com/2009/06/01/markets/thebuzz/index.htm?postversion=20...
NYT: Now a G.M. Owner, U.A.W. Faces Delicate Balancing Act
For decades, the United Automobile Workers had a simple strategy for getting what it wanted from the carmakers — it would go on strike. The tactic proved so successful that the mere threat of a walkout often won better wages, benefits and job security.
Read more: http://www.nytimes.com/2009/06/02/business/02uaw.html?_r=1&hp
Detroit Free Press: Sad day knocks us down -- but we're not out
Once upon a time, General Motors stood strong and mighty, the world at its feet. Today, the world prevails, and GM is on its knees.
Read more: http://freep.com/article/20090602/COL01/906020393/Sad+day+knocks+us+down...
CNN: Commentary: What bankruptcy could do for GM
AUSTIN, Texas (CNN) -- The screams produced by the Chrysler bankruptcy are nothing compared with the howling that will accompany General Motors' bankruptcy filing as various creditors claim that the case is going too fast and their rights are being trampled.
Read more: http://www.cnn.com/2009/US/06/01/westbrook.gm/index.html?eref=rss_politics
The New York Times: After Many Stumbles, Fall of an American Giant
It is a company that helped lift hundreds of thousands of American workers into the middle class. It transformed Detroit into the Silicon Valley of its day, a symbol of America’s talent for innovation. It built celebrated cars, like Cadillacs, that became synonymous with luxury.
Read more: http://www.nytimes.com/2009/06/01/business/01downfall.html?partner=rss&e...
Washington Post: As Overseer And Owner, U.S. Aims For Balance
The owner of a car company can decide how many cars to make, to paint red, to send to Maryland dealerships. The Obama administration, which plans to buy about 70 percent of General Motors, insists it does not want to be that kind of owner.
Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/28/AR200905...
CNN: GM bankruptcy still likely despite deal
The Treasury Department and a committee of major bondholders at General Motors have reached a deal that could give creditors a larger stake in GM than previously offered. But bankruptcy is still likely in the next few days despite the deal.
Read more: http://money.cnn.com/2009/05/28/news/companies/gm_bondholders/index.htm?...
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