GM & Chrysler on the brink of bankruptcy?-UPDATED
5 Comments Quote selected text Published February 24th, 2009 in NASCAR News
UPDATE:
Days after General Motors Corp. outlined three possible bankruptcy scenarios, the U.S. Treasury Department acknowledged Monday that it is exploring how it might fund a court-protected bankruptcy by GM and Chrysler LLC. An Obama administration official indicated Monday that the efforts do not reflect any decisions about the auto industry’s future.
In its viability plan filed last week, GM said a traditional Chapter 11 reorganization bankruptcy could cost more than $100 billion — hurting sales as consumers reject GM products and causing turbulence during a process that could take years. But the automaker, which has resisted bankruptcy and emphasized its risks, also said that other bankruptcy scenarios could cost half that much. For example, a prepackaged bankruptcy, in which GM and its stakeholders would come to terms prior to the filing, could cost an estimated $45 billion. Under that scenario, GM estimates the impact on revenue would be “quite severe near-term.” However, the long-term consequences would be “less severe” than a full-blown Chapter 11.
Some outside experts have argued that a court-supervised bankruptcy would allow GM and Chrysler to more easily overhaul their debt and contracts.
But GM has resisted the idea, citing all the damage such a move could cause to its sales and image. “Our primary efforts continue to be on transforming our business and executing GM’s viability plan outside of bankruptcy court,” GM CEO Rick Wagoner said last week.
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General Motors Corp. (GM) said Tuesday it is counting on $6 billion in aid from foreign governments and could potentially need billions more from the U.S. government in coming years to cover pension obligations, even if it gets the additional aid it requested Tuesday.
GM, in a revamped restructuring plan submitted to the U.S. Treasury on Tuesday, said it needs up to $16.6 billion in federal assistance on top of the $ 13.4 billion in loans it’s received since December. A dramatic sales slide and worsening global economy forced the auto maker to accelerate and expand restructuring plans laid out when it asked for federal loans in December.
“We have to restructure the business so we can be viable at a sales level that is dramatically lower than what we ever anticipated,” GM Chief Executive Officer Rick Wagoner said at a news conference Tuesday. “We are still going at this with a great sense of urgency.”
The largest U.S. auto maker, which reiterated that bankruptcy isn’t a good option, is in talks with bondholders and the United Auto Workers to reduce $47 billion in debt obligations. Wagoner said the union agreed to concessions that take a “big bite” out of labor costs, but the two sides are still negotiating a deal that would change an agreement under which the union agreed to take over $ 20 billion in retiree obligations.
The auto maker’s latest plan involves deeper cuts than those outlined in December. Steps include shuttering 14 factories by 2012 rather than nine, eliminating 47,000 hourly and salaried jobs this year globally, and closing its Hummer truck brand this year and Saturn in 2011 if no alternatives arise. The company also said its Saab AB (SAAB-B.SK) unit could file for reorganization this month if the Swedish government doesn’t provide financial support.
The largest U.S. auto maker, which reiterated that bankruptcy isn’t a good option, is in talks with bondholders and the United Auto Workers to reduce $47 billion in debt obligations. Wagoner said the union agreed to concessions that take a “big bite” out of labor costs, but the two sides are still negotiating a deal that would change an agreement under which the union agreed to take over $ 20 billion in retiree obligations.
The auto maker’s latest plan involves deeper cuts than those outlined in December. Steps include shuttering 14 factories by 2012 rather than nine, eliminating 47,000 hourly and salaried jobs this year globally, and closing its Hummer truck brand this year and Saturn in 2011 if no alternatives arise. The company also said its Saab AB (SAAB-B.SK) unit could file for reorganization this month if the Swedish government doesn’t provide financial support.
Pension Fund Concerns
GM and Chrysler faced a Tuesday deadline to present their updated viability plans to U.S. authorities. Chrysler, which is surviving on a $4 billion federal loan, asked for an additional $2 billion on top of its original $7 billion loan request.
White House Press Secretary Robert Gibbs said late Tuesday that it’s clear more will be required of creditors, suppliers, dealers, unions and auto executives to ensure the viability of the companies.
Shares of GM were up one cent at $2.19 in after-hours trading. The stock was the biggest decliner among Dow Jones Industrial Average components in Tuesday’s regular session, falling 13%. Chrysler, owned by investment group Cerberus Capital Management, doesn’t have publicly traded shares.
Industry experts said the updated plans contained significant cost cuts, but warned that the economic environment will continue to cast a cloud over the prospects for the companies.
“Even if these plans are approved, and agreements with the union and lenders secured, bankruptcy risk will remain high because of very uncertain consumer demand and other serious risks such as potential supplier failures,” Standard & Poor’s credit analyst Gregg Lemos Stein said.
More at CNNMoney.com
What happened to the money we gave them a few fortnights ago? Oh that’s right exactly what me (and many many others) had said, it did nothing but delay the inevitable.
Going Bankrupt is the best thing for them so they can rework and cut the union contracts so it’ll actually be possible for them to make a profit.
Fisha
the money got a few months ago went to corprate and jets and big ole, weekend get aways, oh yeha and they even bought some hookers
Perhaps get rid of the big guns of the guns of the company and maybe they will survive. Like Fisha said money will only delay their bankruptcy.
Amen, Fisha! Amazing how all that money that was going to save those companies just disappeared and now here they are looking for another handout! Bankruptcy would do wonders for them.
Iwould have rather seen GM -And yes even goofy chysler get a freebee and survive than the Idiot Banks that we paid not only once with the publics [ Customer] money directly but Twice with our tax dollars. remember the Stimulus bill was Originally meant to save jobs & what Little Industry the U.S. has left. PFFFT!! WthE !!
The merged bank’s Boards promply laid off 30,000 employees as gratitude for being the stupidest fools walking the earth. Who is paying the unemployment for those folks??
Who is going to have to support the automakers 35,000 laid off X-employees??
We can add another 40-50,000 X-workers & ??? X-co’s that supply the Auto Makers to the so called Stimulus Bills Success in wrecking the economy even more.
Remember the old saying There Are No Accidents ?? See explanation in the Plans for a Global World Economy and I think one can see the Big Picture on the walls of Congressional Hall & the U.N. building .
I’m surprised that any of the original U.S. Auto makers have survived as long as they have .
We need to remember that the Automakers are not only strapped because of Out of Control & common sense Unions but Big Bro and the Greenies [ also out of control] MPG and Emission standards have added approx. $6-7,000 to the cost of each unit produced. Add what the Finance Crooks did to the Economy and ,well , There we are , Up the proverbial Creek.
Has anyone not wondered Why Big Bro is dissing the Auto makers but letting the corrupt Bankers & Wall streeters Slide .??
One main reason —UNIONS –UAW– Big Bro is the real perp in this game , WHY?? Big Bro and the Global Money Masters want the Unions Gone or Else!!.
Any way it goes ,the Unions are outta here and thus Global equalization of Wages Is IN. Place Bets Here !!
BTW–IMO–GM builds a pretty durn good vehicle for the money , can Toyota ,Nissan Mightybitchi match GM Quality ? Nope, imo .,
If one actually looks at the Foreign transplant’s Units they are nice but the saftey issue is way short and they are built cheaper ,structurally & Labor wise , At 10-20% more retail cost . They also are NOT outlasting GM’s Units, Mileage / Maintenence wise.