General Motors Is Going Into Bankruptsy After Many Years In Business

GM out of business
Who would have thunk it? General Motors, the grandest
automaker in the world until recently, could file for Chapter 11 bankruptcy by Monday morning. This is despite last minute negotiations to try and get aid or a bailout for a couple of the companies European operations, particularly Opel and Vauxhall.

Negotiations also focus on cutting the company’s debt owed to the United Auto Workers Union. Impossible to believe, but just a few short weeks ago, Chrysler, another of the big three automakers, filed for bankruptcy.

General Motors is rumored to be all but certain to file for a Chapter 11 bankruptcy. The problems started with the global recession and the slowdown of sales in all cars, and particularly it’s profitable sport utility vehicles. All year, the company has been trying to cut costs, also making deals with the government to get billions in bailouts, and with the union for workers to reduce their labor cost and reduce wages and benefits and especially retirement commitments, which are enormous for the struggling company.

General Motors is also trying to find partners or buyers
for its, Saturn, Saab and giant Hummer operations. The goals are finding some traction, and GM has succeeded in making real progress, unfortunately, it all may be too late. By some reports, the bankruptcy filing will come Monday morning, only a day after a restructuring deadline set by President Obama expires.

General Motors is prepared to file its bankruptcy petition on Monday morning many say, which is also said to be followed by announcements about deals with their union and bondholders that are expected to speed its exit out of bankruptcy. GM is expected to, as part of its restructuring, will give the government a 60-percent stake in General Motors, effectively nationalizing the company. The United Auto Workers Union would get a 17 percent stake portion, and and bondholders would be left with roughly only a 10 percent stake.

General Motors will probably have to close quite a few more plants, maybe as many as 14 assembly and parts manufacturing facilities all over the U.S. and possibly some in Canada and Mexico. This is to try to align it capacity to match the reduced demand for autos worldwide. Unfortunately, that will also see many people out of work and the closure of some of GM’s brands like Saturn and Pontiac. Pontiac in particular has been around since the early days of GM, and it will be sad to see it go. Surprisingly enough, the Buick division is said to be retained.

After the bankruptcy is finished, GM should be a more lean company. Most of its debts will be wiped away, and it may be able to get rid of much of its health care obligations and high union labor costs. Even after the bankruptcy though, the company will be heavily indebted and will be effectively government controlled, not a recipe for future success.

As I have said for many a year, we will see many more of these zombie companies to come, too big to close, too unprofitable to be a growing successful company. Analysts are already saying it could be years before GM becomes even an independent organization again, much less makes money and grows. So sad to see it go.

If you are interested, read also money and credit cards and cell phones plans and services

Find useful points of view for online auto loan calculator – welcome to your own guide.

No related posts.