Updated: General Motors Declares Bankruptcy

General Motors Declares Bankruptcy

Update #4 June-01-2009 10:00 PDT:
Want to know where GM thinks it's headed? Check out the new "GM Reinvention" website that features the latest blogs, press releases and media mentions direct from the "New GM."

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Update #3 June-01-2009 09:30 PDT:
In a press conference this afternoon in New York, General Motors' CEO Fritz Henderson promised the "New GM" will provide better customer service and every new car and truck will be world class. During the BK, GM is open for business, continuing to provide warranty, service and customer support uninterrupted. 

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Update #2 June-01-2009 06:30 PDT:
General Motors filed for Chapter 11 bankruptcy protection today. The move marks a dramatic fall from the pinnacle of American manufacturing might and prowess to the beginning of a smaller company that will be majority taxpayer-owned for the foreseeable future.

GM will be split into two companies: a trimmed-down “New GM” and an “Old GM,” which will include the pieces of the company that will be shut down.

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Update #1 May-31-2009 10:19 PDT:
The Obama administration's statement on GM's bankruptcy filing has been published online. Key points:

  • "On March 30, 2009, President Obama laid out a framework for General Motors to achieve viability that required the Company to rework its business plan, accelerate its operational restructuring and make far greater reductions in its outstanding liabilities. After two months of significant management engagement, General Motors has developed such a plan and has already begun to make progress toward its achievement. The Company has also secured commitments of meaningful sacrifice from all of its major stakeholder groups, sacrifices sufficient for this plan to proceed forward. As a result, the President has deemed GM’s plan viable and will be making available about $30 billion of additional federal assistance to support GM’s restructuring plan. To effectuate its plan, General Motors will use Section 363 of the bankruptcy code to clear away the remaining impediments to its successful re-launch."
  • "For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world. Today will rank as another historic day for the company — the end of an old General Motors, and the beginning of a new one."
  • "GM is undertaking a significant operational restructuring that will address past failures, dramatically improve its overall cost structure, and allow the company to move toward profitability even if the auto market recovers slowly. As a result of this restructuring, GM will lower its breakeven point to a 10 million annual car sales environment. Before the restructuring, GM’s breakeven point was in excess of 16 million annual car sales."
  • "The Governments of Canada and Ontario will participate alongside the U.S. Treasury by lending $9.5 billion to GM and New GM. The Canadian and Ontario governments will receive approximately $1.7 billion in debt and preferred stock, and approximately 12% of the equity of the new GM. Based on its substantial financial contribution, the Canadian government will also have the right to select one initial director."
  • "The government will protect the taxpayers’ investment by managing its ownership stake in a hands-off, commercial manner. The government will not interfere with or exert control over day-to-day company operations. No government employees will serve on the boards or be employed by these companies."
  • "GM will continue to honor consumer warranties. This past week, the U.S. Treasury made available the Warranty Support Program to GM and $361 million was funded to a special vehicle available to provide a backstop on the orderly payment of warranties for cars sold during this restructuring period."

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According to numerous business publications and news outlets, General Motors is expected to enter Chapter 11 bankruptcy protection Monday morning, June 1, with the U.S. federal government taking control of up to 60 percent of the court-restructured company.

GM is the second-largest auto manufacturer in the world, after Toyota. It produces the No. 2 best-selling vehicle in the U.S.: the Chevrolet Silverado light- and heavy-duty pickup trucks, which are second behind  the Ford F-Series light- and heavy-duty pickups.

President Barack Obama is expected to officially announce the bankruptcy move early Monday. GM is expected to receive as much as $30 billion in financing from the government, in addition to $20 billion previously injected into GM by the U.S. Treasury. The bankruptcy proceedings are expected to take 60 to 90 days and create a smaller GM that can be profitable even if new-vehicle sales remain at only 10 million units a year in the United States.

To achieve its smaller footprint, GM will likely have to lay off up to 21,000 more workers and close or idle up to 14 factories. Forty percent of the company’s 6,000 dealers are also expected to be shuttered.

The federal government will continue to stand behind GM's new vehicle warranties.

Developing...

[Sources: Bloomberg, New York Times, The Wall Street Journal]

Comments

The Government owning GM!!!!! Obama is really getting his way. A fast track to Socialism... I'll never buy another GM product. I am making the move to FORD!

Be very sad for American business and the auto industry.
Be very ready to vote in 2010.

And other one bites the dust: Buy bail out free buy Ford

All of you who are screaming "socialist" and "commie"" need to give your heads a shake. It was the Republicans who setup this disaster in the economy. It was Dubya that started throwing money at corporations. This issue is not an idealogical one. If two of the largest three American automakers had been allowed to collapse, CAPITALIST economists think the economy might not survive. Whether or not these turn out to be the best ways to get things back on track, these guys are trying to save your jobs. I for one am thankful that people a heck of a lot smarter than you people are at the rudder.

Do you guys really think that Ford is going to make it though these times too? Ford will be bankrupt by the end of the year. After Chrysler and GM come out, they will be a streamline companys and kicking Fords butt. They wont have to worry about debt and just worry about making great vehicles. I think it is great that Ford tried to do this without government help, but they are in too poor of shape to make it much longer.

You morons talking up Ford will be nowhere to be found by the end of the year when Ford declares bankruptcy! By then, GM will have emerged and be doing very well. GM still makes the best truck and diesel engine in the business! Combine Chevy and GMC truck sales and they top Ford! Therefore, you can conclude that GM is actually the Top Selling Truck Maker in the World!!! How's that Ford lovers? LOL!!

The survivorbility of Ford,GM & Chrysler doesn't look good,Ford is in better shape than the other two for now. The auto industry is saturated with too many car companies. Toyota & Honda has been at the top of the reliability ratings for a very long time & Hyundai & KIA is close behind. The American car buyer has become very educated & knows where to look to find reliable vehicles. GM vehicles has been plague with poor quality & terrible reliable for over 30 yrs & Chrysler vehicles has been so crappy the last 30 yrs that most Americans don't even consider them. Cadillac has made some of the best cars around the last 3 yrs & the Chevy Malibu is a very nice car but it might be a little to late.

First of all, Bush is not a conservative and is not the one who bought GM. Obama bought GM and gave it to the UAW, a campaign contributor. This is socialism because he is controlling the means of production.

Randy, You're the moron. Ford is not going bankrupt anytime soon. All of GM's customers are going to go to Ford now.

If the Federal government wants to help the American auto industry Chrysler has to fold & let Ford & GM pick up the slack.

The financial situation of these companies is NOT an indication of the quality of the product. They are MASSIVE companies with huge amounts of overheads. They don't run very efficiently, but they did employ loads of people. Too many people (but the companies still got by), all those people benefited and so did their families. People are buying less cars now. The manufacturers need to restructure according to how many cars they are selling. Because there is no point having 5 times the amount of dealerships than Toyota, if they are now down to selling on par. This is not Obama's fault. It's not Bush's fault. It's just the way things are going now. Don't complain, don't blame, just support American jobs and buy American. These are companies that are set up to pump out high volumes. They are not Mercedes, which builds much fewer cars, and pretty much is set up to build according to demand.

Socialist Obama and the Socialist Congress are buying union votes with our tax money, and/or our increased national debt. Perhaps Government Motors will announce a new model called “Peopleswagon”? Who in his or her right mind would buy a Government Motors car or truck? Taxpayers are going to pay to keep this sucker alive until we vote the Socialists out of office. The waste will likely exceed $200 billion.

But the GOP “leaders” are so timid they don’t even dare to call the Demos by their true name: Socialists. Tens of millions of us have taxation without representation.

What's with all the negative comments regarding auto bailouts? ... Americans won't buy American cars entirely or opt for only Ford vehicles just because GM and Chrysler request loans to help them through this global economic turmoil.

I have news for you all ... Toyota and now Mazda are requesting loans from their government. Does it mean that people will also stop buying Toyota and Mazda cars too?

GM is clearly on the right track to profitability. Cutting brands and downsizing its dealer networks is the right choice, even if unpopular. Reducing those ridiculous union labor wages is icing on the cake. The United Auto Workers clearly brought the Detroit car makers to their current state. Yes, management is partly to blame, but realistically, how can you expect them to build cars at a profit when it costs them more than 1500 (according to experts) to build a car than their japanese counterparts.

With all these labor concessions and debt reductions, GM and Chrysler are given a fair playing field to compete with other car makers ... lets see what they'll do before we pass judgment on them. If they fail again, then let them rightfully go away. If they succeed, it's good for the auto industry and for us all.

well look it here another bankrupcty of an american company................ WHY THE F*CK ARE WE STILL GIVIN MONEY AWAY TO FAILING COMPANIES!!!!!!!!!!!!!!

Every one needs to take a step back and look at the whole picture. Ideologies are not perfect, capitalism is largely to blame for the mess we are in now. I'm not talking about Detroit or even the US, I'm taking about the entire world.

The problem is that people are greedy by nature. Given the position to acquire more, people almost always over indulge. It doesn't matter if it's Government, UAW, GM, Chrysler, or Wall Street. If every one is only looking out for number one, then we will be in the same situation in a few years. Plain and simple.

Don't get me wrong, I'm no Communist, you do have to look out for yourself but not by stepping on your neighbors throat to do so.

Some people have to open there eyes. The Cold War is over, if you haven't noticed most products purchased in the United States come for a Communist country....China!?!?!

The real problem is consumer spending. Everyone's wallet is puckered up and no one has been buying cars for nearly a year.

AIG brought us the phrase 'Too big to fail'. Some consider GM TBTF. I say put everyone to work making propane cars, solar cells and wind turbines. Those investments will pay off eventually.



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