GM/Chrysler on verge of Bankruptcy

August1991 · February 23, 2009

Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors Corp. and Chrysler LLC, in case the two auto makers need it, said several people familiar with the matter.
While acknowledging the grimness of the task, administration officials involved in the auto talks said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings. They stressed the latest efforts were "due diligence" on the part of the government advisers, and that bankruptcy financing may not be necessary.

WSJ

It may appear like a feint in a game of chess, and they may present it as "due diligence", but I think this is the real thing. They're getting the funds to put the stake through the heart.

Now, this doesn't mean the end of Pontiacs and Chevrolets. It's the shareholders and unions that are going to lose. (Are government claims protected?)

Oleg Bach · February 23, 2009

There may be a few utlity vehicles produced in the future such as cop cars etc. All the re-structuring in the world will not get rid of the fact that imports are the new domestic. What are we to do - send every last import back and protect GM etc.? There will never be the glory days again - it's over - time the executives got real jobs and stopped living off their fathers reputations...and favours granted in the form of luxury assistance should end now.

Wilber · February 23, 2009

All depends on whether they can come up with a business plan that has a chance. If they can't, bankruptcy will come eventually anyway. If they can, government has a chance of recouping at least some of its money and North America will be able to hold on to an industry that provides a lot of manufacturing jobs and requires a lot of high tech expertise. I think there will be no more Pontiac's pretty soon, one problem with these companies is too many brands. Pontiac will go, Saturn will go. GMC will go. Hummer will be sold off. They will be left with Chevrolet, Cadillac and possibly Buick. Don't know about Chrysler, they are down to three brands already, Chrysler, Dodge and Jeep so they need to focus on models more than brands. Jeep is too iconic a name to get rid of so maybe the Dodge name will become exclusively for trucks. I can also see Mercury disappearing at Ford. Who knows, being forced to do what they weren't willing to do in the past could be a good thing for them in the long run.

Look at the other top ten world auto manufacturers. A minority of them have more than two brands, some only have one in their home market. VW is now the #3 manufacturer and has VW and Audi, very different cars aimed at very different customers. Peugeot Citroen is another, Fiat owns Alfa Romeo and the sports car division of Ferrari. Renault also has Dacia and that is about it. Toyota has Toyota and Lexus in North America. There is no such thing as Lexus in Japan, they have the same cars but they are all called Toyota's. Same goes for Nissan and Infinity, Honda and Acura. The Japanese just figured they needed names with a little more cachet to compete with German products in North America. They don't need that in Japan. I see Hyundai has done the same thing with the new Genesis, I bet it's just a Hyundai in Korea.

Oleg Bach · February 23, 2009

A smaller company is not so bad. Just hope that there is still a will to create. The executives may be a bit burned out after all of this stress and may lose heart. As for the loss of jobs - all will surive. I had a writer friend of mine who wanted more cash so he got into one of these plants...His job was to stay up all night with a rubber hammer and tap...For a guy who is a grad I am sure it was good simple work - but is it worth what they paid him to go tap tap...not!

Wilber · February 23, 2009

A smaller company is not so bad. Just hope that there is still a will to create. The executives may be a bit burned out after all of this stress and may lose heart. As for the loss of jobs - all will surive. I had a writer friend of mine who wanted more cash so he got into one of these plants...His job was to stay up all night with a rubber hammer and tap...For a guy who is a grad I am sure it was good simple work - but is it worth what they paid him to go tap tap...not!

There is often a greater will at smaller companies, that's how they came to be big companies in the first place. The assembly jobs are important but much less important than the technical innovation that makes them possible. It would be a real shame to lose that kind of expertise. As far as the executives go, I can see your point. It's hard to be creative if all your energies are concentrated on keeping the wolf from the door. On the other hand, possibly leaving a legacy of being the next Lee Iaccoca at Chrysler wouldn't be so bad either.

Oleg Bach · February 23, 2009

There is often a greater will at smaller companies, that's how they came to be big companies in the first place. The assembly jobs are important but much less important than the technical innovation that makes them possible. It would be a real shame to lose that kind of expertise. As far as the executives go, I can see your point. It's hard to be creative if all your energies are concentrated on keeping the wolf from the door. On the other hand, possibly leaving a legacy of being the next Lee Iaccoca at Chrysler wouldn't be so bad either.

Success peaks and ends - to reverse time and go back and repeat the process is sometimes the only way to re-structure a gloomy future before it gets more gloomy. The experts and the best will prevail - cars and the creation of them is art - Look at the body designs of the 50s and 60s...the fin and chrome era...simply beautiful..they were not computer genated but created out of the human mind by gifted individuals...ero-dynamics can be adjusted... To make this work and work well and suppass the imports - we must return to an era where it's not just reliablity - but to create icons for the car clad westerner and the world - Take beauty and re-kindle it..Utility has seen it's day - make a piece of moving art and it will sell...we should grasp the opportunity of making moving machines that are amazingly sweet to look at - leave the Germans and Japan scratching their heads - give it 20 years and they will copy us again.

guyser · February 23, 2009

Any mention of what happens to the pensions ?

jdobbin · February 23, 2009

Any mention of what happens to the pensions ?

The U.S. government has to take the hit.

Wilber · February 23, 2009

Success peaks and ends - to reverse time and go back and repeat the process is sometimes the only way to re-structure a gloomy future before it gets more gloomy. The experts and the best will prevail - cars and the creation of them is art - Look at the body designs of the 50s and 60s...the fin and chrome era...simply beautiful..they were not computer genated but created out of the human mind by gifted individuals...ero-dynamics can be adjusted... To make this work and work well and suppass the imports - we must return to an era where it's not just reliablity - but to create icons for the car clad westerner and the world - Take beauty and re-kindle it..Utility has seen it's day - make a piece of moving art and it will sell...we should grasp the opportunity of making moving machines that are amazingly sweet to look at - leave the Germans and Japan scratching their heads - give it 20 years and they will copy us again.

I love those cars and am in the process of restoring a 60's chrome boat myself. Unfortunately todays cars have to be light and aerodynamic enough to have the required performance and economy while providing enough room for people and stuff. This results in most of them looking pretty much the same. If price is no object, beauty, performance with a certain amount of fuel efficiency can still be done.

Audi R8 TDI

guyser · February 23, 2009

Audi R8 TDI

Yes well we agree on that.

Just wish I had an extra $183,000 lying around. And you know whats funny? A 20 yr old in 2000 Honda would pay more in insurance than the Audi guy would.

Oleg Bach · February 23, 2009

Yes well we agree on that.
Just wish I had an extra $183,000 lying around. And you know whats funny? A 20 yr old in 2000 Honda would pay more in insurance than the Audi guy would.

Typical..The gardener is entrawled by the richness of the rose in full bloom and will water it but not the poor spout - God bless the child that's got his own...those who have get more and those who have not get nothing. Rich are kind to the rich.

August1991 · February 24, 2009

The U.S. government has to take the hit.

I think not.

But this bankruptcy may turn into an ugly divorce, so ugly, that the house, cottage and cars will all be in ruins before possession is finally decided. The UAW has that mindset.

----

Sadly, the real story is GMAC. GM became a financing company, not a car company. So when credit markets sank, GM sank.

The lesson for managers is: focus on what you can do. The lesson for our politicians: by what right can you take $100 from my pocket and give it to some GM manager?

Edited February 24, 2009 by August1991

blueblood · February 24, 2009

I think not.
But this bankruptcy may turn into an ugly divorce, so ugly, that the house, cottage and cars will all be in ruins before possession is finally decided. The UAW has that mindset.

if there is one guy to take on the UAW, it is Obama. He may as well put his popularity to good use.

jdobbin · February 24, 2009

I think not.

You're right.

The Ontario government does as well.

http://business.theglobeandmail.com/servle...l_gam_mostemail

One idea that has been floated internally by the government is to have the province assume responsibility for the pension liability, thus relieving GM of the obligation, said the official, who asked not to be identified.

I'm sure that will only happen if it happens in the U.S. as well.

But this bankruptcy may turn into an ugly divorce, so ugly, that the house, cottage and cars will all be in ruins before possession is finally decided. The UAW has that mindset.

Actually, the market has that mindset. Without debtors in possession protection, there will be a market driven liquidation.

Sadly, the real story is GMAC. GM became a financing company, not a car company. So when credit markets sank, GM sank.

GMAC has been around since 1919. GM sold the majority of it away in 2006.

The lesson for managers is: focus on what you can do. The lesson for our politicians: by what right can you take $100 from my pocket and give it to some GM manager?

Probably from the right that the government has been asked to do something in the event of a collapse of the market where millions could be unemployed with a liquidation of all three U.S. auto manufacturers.

August1991 · February 24, 2009

if there is one guy to take on the UAW, it is Obama. He may as well put his popularity to good use.

True, and terrifying.

The US society is about to face some changes. The bankruptcy of GM and Chrysler, and the bankruptcy of Bank of Amerirca and Citibank.

While I am not American, I have faith in America. Go figure.

charter.rights · February 24, 2009

True, and terrifying.
The US society is about to face some changes. The bankruptcy of GM and Chrysler, and the bankruptcy of Bank of Amerirca and Citibank.

While I am not American, I have faith in America. Go figure.

Don't be surprised if Obama pushes changes to match our Bank Act. He seemed impressed that we were sheltered from most of the real problems with our economy.

GM and Chrysler have to be forced not only to restructure but to boot those at the top who sunk the ship. Recessions are truly the time to get rid of poorly performing executives and bloated members of the Board of Directors. Certainly as majority shareholders, taxpayers have a right to hold those at the top accountable.

While a stimulus package to get people buying might help recovery the problem never was about production, wages, pensions etc. Their problems are from poor investment. While the law requires that GM maintain 100% (and no more than 200%) liability in their pension funds, GM apparently has been dipping into theirs and now are billions into a hole over it.

blueblood · February 24, 2009

GM and Chrysler have to be forced not only to restructure but to boot those at the top who sunk the ship. Recessions are truly the time to get rid of poorly performing executives and bloated members of the Board of Directors. Certainly as majority shareholders, taxpayers have a right to hold those at the top accountable.

Also a great time to negotiate those ridiculous expensive union contracts.

Taxpayers also have the right to hold any part of the organization costing too much money accountable.

GostHacked · February 24, 2009

Let the markets run the course. Sure we are in for bad times, but if it is not done now, it will hurt even more in the long run if the problem is not addressed.

jdobbin · February 24, 2009

Let the markets run the course.

How far? The market downturn and the job losses could lead to chaotic outcomes.

GostHacked · February 24, 2009

How far? The market downturn and the job losses could lead to chaotic outcomes.

As far as it has to go before it recovers on it's own.

jdobbin · February 24, 2009

As far as it has to go before it recovers on it's own.

That might be pretty far down and for a very long time.

GostHacked · February 24, 2009

That might be pretty far down and for a very long time.

Buckle up for the bumpy ride then. I'd prefer a long tough ride wth some light at the end of the tunnel than a rapid all out colapse.

jdobbin · February 24, 2009

Buckle up for the bumpy ride then. I'd prefer a long tough ride wth some light at the end of the tunnel than a rapid all out colapse.

The market might have led to an all out collapse. It is why I Paulson was afraid of Depression-like collapses in multiple industries and tens of millions unemployed.

charter.rights · February 25, 2009

As far as it has to go before it recovers on it's own.

If that were feasible then the proper course would be to let the big three go bankrupt. Once we introduce taxpayer money into funding these failures then it is no longer the free market at play. It is government subsidy and government has every right to call the shots.

Oleg Bach · February 25, 2009

If that were feasible then the proper course would be to let the big three go bankrupt. Once we introduce taxpayer money into funding these failures then it is no longer the free market at play. It is government subsidy and government has every right to call the shots.

In order to get a subsidy someone lobbied - and that someone got what was wanted. It does not make sense that governement would have all the power to "call the shots" - apparently some one called the shots and government responded. Everyone from welfare clients to industrial executives are all dipping into the public purse...maybe this is the begining in the development of a more fair playing field for all? Bankruptcy should never be an option...besides if they stiff the creditor who would that creditor be? :rolleyes: