GM Said to Plan June 1 Bankruptcy as Debt Plan Gains

[frigidmagi]

Bloomsberg

[quote] General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.

GM’s path will be smoothed by an accord today giving some of its biggest bondholders an equity stake in the reorganized automaker. The U.S. Treasury is requiring that an unspecified percentage of debt holders accept the terms by 5 p.m. New York time on May 30, Detroit-based GM said in a regulatory filing.

“If bondholders agree to this up front, this would essentially be a prepackaged bankruptcy,â€

[The Minx]

44 billion dollars short of cutting costs, compared with the trillion dollars the banks received. I know that the banks failing would have had massive effects right across the economy, but there's undeniably a double standard here. :(

[SirNitram]

44 billion dollars short of cutting costs, compared with the trillion dollars the banks received. I know that the banks failing would have had massive effects right across the economy, but there's undeniably a double standard here. :(

Manufacturing is over. Didn't you hear? We can buy cheap imports and make allllll our money off investments! Wall Street is God! Worship at the Golden Bull!(Sadly, when this started, a bunch of people DID pray to the golden bull statue on Wall St, which I think merits a divine asskicking.)

[General Havoc]

Pardon me, but we are talking here about a bankruptcy, not a damned liquidation fire sale. It is not evidence of rank double-standards and plutocratic conspiracy that the government did not wish to continue funding the bottomless pit that is GM.

Let them go bankrupt, let them re-organize, and let them come back thereafter, I say.

[frigidmagi]

Let them go bankrupt,

Which will drive attending industries under through no fault of their own, great idea.

let them re-organize,

"Re-organize" in this case by GM's own admission is slash everything to try and satisfy the stock holders.

and let them come back thereafter, I say.

There won't be any coming back Havoc. Where are they going to get the capital? From nonlending banks? From faltering competitors? From consumers who aren't buying?

And yes this is a damn rank double standard when GM wants at worse 40 billion and the banks get 2.35 trillion dollars. Bottomless hole my damn ass.

[General Havoc]

Which will drive attending industries under through no fault of their own, great idea.

So what, now it's the government's responsibility to take action to bail out any business that is going to go bankrupt? Because all of them have attending industries that get hurt by their going out of business, including banks. I didn't notice you insisting that Lehman Brothers be saved from Bankruptcy, nor Washington Mutual, nor Indymac, nor Circuit City, nor any of the other major businesses who've gone under, including Chrysler, even though all of them have the same attending industries that got badly hurt. What exactly is so different about GM?

"Re-organize" in this case by GM's own admission is slash everything to try and satisfy the stock holders.

Re-organize means just that, Frigid. It means re-organize the company so as to permit it to return in some form or another, whether as part of another company, as many smaller companies, or as a re-organized version of itself. It is in no way a matter of liquidating the company to satisfy stock holders. In fact, by law, the stock holders are the ones left holding the bag. I've read GM's bankruptcy plan. It involves shedding unprofitable divisions and focusing capital on profitable ones. It does not involve a Chapter 7 Fire sale.

There won't be any coming back Havoc. Where are they going to get the capital? From nonlending banks? From faltering competitors? From consumers who aren't buying?

And yes this is a damn rank double standard when GM wants at worse 40 billion and the banks get 2.35 trillion dollars. Bottomless hole my damn ass.

So if they have no resort for money from either banks, competitors, or consumers, how exactly is the company supposed to survive even with a bailout?

GM has been dying for forty years due to endemic problems that they manifestly refused to face. Do you actually think a one-time bailout at the 11th hour was going to save them? Or was it going to vanish into the bottomless hole along with all of the rest of the investment money poured into GM over the years, and leave the government as one of the stockholders holding the bag when GM went bankrupt anyway a few months from now? GM's problems did not emerge overnight. They are not going away because the government threw some one-off money at them.

I fear that you have a very flawed understanding of what bankruptcy actually involves. It does not mean that the company shuts down overnight and everyone is laid off. Many companies that enter bankruptcy do come back, and the vast majority of those who do not are simply bought in pieces or in full by other companies. Only in a few cases does Bankruptcy result in a Chapter 7 liquidation (as it did with Indymac), and nobody has been talking about that happening with GM. United Airlines went bankrupt earlier this decade, along with Delta Airlines. Both of them came back, and in fact, both of them exited bankruptcy and are now operating normally again. Outside the airlines, I could cite Texaco, Conesco, even Worldcom/MCI, as companies that have all made it through bankruptcy (though I'm not sure of Worldcom's status as of right now, the problems there ran very deep).

Plus, the US Government has publicly stated that should GM go bankrupt and produce a reasonable restructuring program (something they have flatly refused to do, thanks to the dual pressures of their stockholders and the UAW), the US is prepared to take as much as a 50% equity stake in General Motors. That's well beyond a 40 billion dollar bailout, that's practically Nationalization! The government is prepared to invest up to FIFTEEN TIMES the amount requested by GM if GM will kindly provide us with some kind of plan to indicate the path they wish to take out of this mess, something they can frankly do easier from within bankruptcy protection than they can without.

What the government will NOT do, is throw 45 billion MORE dollars into GM after the first 15 billion was swallowed up for no alteration. GM has been selling their cars below marginal cost for ten years in an effort to maintain sales figures. General Motors lost 50 billion dollars in 2007 alone, and their sales in 2008 dropped by nearly HALF. It's a bit much to now turn around and claim that GM was killed off by the tight-fistedness of the US government. I would not invest my money in GM right now, given the track record and the complete lack of any meaningful change at work within the corporate structure there. I fail to see why the government should be expected to do any differently, just to postpone an inevitable bankruptcy by another couple of months.

And I really can't believe that we've gotten to the point where General Motors Corporation, the largest car company in the United States, is supposedly the poor and downtrodden underdog being discriminated against by the evil plutocrats. That's rather like claiming that Newscorp is a plucky news agency underdog being silenced by an evil conspiracy of media conglomerates...

[General Havoc]

And so we see...

GM enters bankruptcy protection

Car giant General Motors (GM) has filed for bankruptcy protection, marking the biggest failure of an industrial company in US history.

The widely expected move comes after GM had seen its losses widen following a steep fall in sales in recent years.

The move into bankruptcy protection has been backed by the US government, which is now expected to take a 60% stake in the company.

The White House is also going to put another $30bn (£18.5bn) into GM.

President Barack Obama described the move as "tough" but said it was "also fair" and added it would "give this iconic American company a chance to rise again".

He said that the US government, which will own 60% of the carmaker, would be a "reluctant shareholder" and that he had no interest in running it.

As part of the plan, President Obama said that the share of GM cars sold in the US that had been made in the US would rise for the first time in 30 years.

GM, which had already received $20bn of emergency loans since the end of last year, said in its bankruptcy filing that its current debts total $173bn.

US Chapter 11 bankruptcy protection gives an American company time to restructure its finances while being protected from its creditors.

'Sacrifice'

The restructuring will drastically change GM, with some 20,000 US workers thought likely to lose their jobs as the firm streamlines its operations. It currently has 173,000 employees across the US, Canada and Mexico.

President Obama made a direct appeal to the people who are to lose their jobs.

"I know you've already seen more than your fair share of hard times," he said.

"I want you to know that what you're doing is making a sacrifice for the next generation - a sacrifice you may not have chose (sic) to make, but a sacrifice that you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things."

It is expected that GM may be able to exit bankruptcy protection in between 60 and 90 days.

GM's chief executive Fritz Henderson appealed to customers to give them another chance, saying "the GM that let too many of you down is now history".

He also offered "sincere thanks" to US and Canadian taxpayers who are funding the rescue of GM.

'An icon'

Its main European business, Opel, and its UK brand Vauxhall, will not be affected by the bankruptcy protection move. This is because their ownership has been transferred to a trust fund ahead of their sale, GM Europe confirmed in a statement.

Canadian car parts maker Magna International last week agreed to buy Opel and Vauxhall.

While the US government is set to take a 60% stake in GM, the Canadian government is due to own 12.5%, with GM's unions having 17.5%, and bondholders 10%.

Car industry analyst Gary Chaison, a professor of labour relations at Clark University, said the GM announcement marked the end of an era.

"It'll have a huge impact in the US because it's more than just a corporation - it's an icon," he added.

"It represented manufacturing supremacy and good jobs for American workers - that's gone."

GM is now the second of the "Big Three" US carmakers to enter bankruptcy protection, following Chrysler's lead.

Alastair Beveridge, a partner at restructuring specialists Zolfo Cooper, said it would now be interesting to see what happened at Ford, the other member of the big three.

"Ford has so far avoided going into bankruptcy protection, or even needing state support," he said.

"However, if its two main competitors have now taken this radical approach, it will be difficult for them to resist."

Falling sales

GM, once the largest company in the world, has been losing market share since the early 1980s.

It has been driven to bankruptcy by high production costs and the collapse in credit markets and consumer spending. It made losses of $30bn last year.

GM was also slow to move away from producing gas-guzzling SUVs when consumers were looking for more fuel-efficient vehicles.

Toyota sold more vehicles than GM in 2008, putting an end to the US company's 77-year reign as the world's biggest carmaker.

I grant that this is hardly ideal, but it is not a matter of a governmental cabal applying a double-standard to hose manufacturing jobs. GM did a perfectly good job of hosing itself. Now it's time to let them hack their way out of it.

[frigidmagi]

GM did a perfectly good job of hosing itself

Expect the banks pretty much did the same damn job. So why do they get trillions?

[SirNitram]

GM did a perfectly good job of hosing itself

Expect the banks pretty much did the same damn job. So why do they get trillions?

Because they donate three times more, and spend about the same on constant lobbying, and this is ON TOP OF the worship finance culture.