Auto Blog

1/Big three ain't bankrupt

So General Motors went bankrupt, Chrysler went bankrupt and by default Ford is poised to be our leading domestic carmaker, or the sharpest butter-knife in the drawer. Also, cheeseburgers are now eating people. As for the world heavyweight auto title, the big whoopin’ belt now belongs to Toyota after GM was knocked off its mighty thrown by a three-punch combination consisting of:

1. Foreign cars
POW!
2. Gas Prices
CRACK!
3. The Recession 
BLAMO!

Down went GM. The 100 year-old King hit the mat hard in the largest-ever U.S. manufacturing bankruptcy and the third-largest overall filing in U.S. history. Switching metaphors, with two-thirds of the big three bleeding bloody bankruptcy in open waters the piranhas are moving in and looking to get a piece of the action.

"The immediate implication is that the companies (GM & Chrysler) are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo. (1)

"Now the hard part begins, which is making GM and Chrysler competitive, “ he said,“ If they don't do that, then we'll be doing this all over again in a few years." (1)

Chrysler’s bankruptcy, which was filed for April 30 is now being heralded as an example of how GM’s vastly larger and more complicated filing could pan out. On June 30, a bankruptcy judge allowed Chrysler to sell most of its assets to a group led by Fiat S.p.A as part of Chrysler’s mandatory alliance with the Italian car company. (2) 

The assets of the “new” Chrysler, dubbed Chrysler Group LLC will be 68 percent controlled by a United Auto Workers union health care trust, Fiat will control 20 percent and the U.S. and Canadian governments will control the remaining 12 percent. President Obama says that Chrysler should be done with its bankruptcy in just a few days, barely two months after the initial filing. 

Automotive News Europe calls GM's impeding bankruptcy, which is officially expected to last 60-90 days,” The most carefully orchestrated Chapter 11 filing in the history of American business.” (2) 

"Our goal is to get GM back on its feet, take a hands off approach and get out quickly," Obama said. (3)

Reuters reports “On the first day in bankruptcy court, lawyers for GM said they would ask Judge Robert Gerber to approve its proposed sale of its strongest assets in just 30 days.” (3) 

It is expected that the U.S government will take a 60 percent stake in the new GM, the UAW will get 17.5 percent, the Canadian government, which is giving GM an additional $9.5 billion in aid will take a 12 percent piece while GM Bondholders will retain 10 percent. (4)

Presumably to the chagrin of MotorSpaceNW.com's “Kramer”, GM will receive another $30billion of taxpayer money to aid in their restructuring process. As he posted on the comment board of the MotorSpace blog “Another $30 billion to GM?”: 

“If there is another bailout I am going to stop paying taxes. This is ridiculous.” – Kramer. (5)

Recently, GM’s new Chief Executive Fritz Henderson made it apparent that he understands such concerns regarding the viability of GM’s uncertain future, but remains confident that the rocky road ahead is leading in the right direction

"The GM that many of you knew, the GM that let too many of you down, is history," said Henderson at a news conference in New York.

"Today marks the beginning of what will be a new company, a new GM dedicated to building the very best cars and trucks, highly fuel-efficient, world-class quality, green technology development," he said. (3) 

“I'm surprised they didn't go bankrupt in the 80s, building the crap that they do,” typed Internet user “Stewby" in response to the Auto News article “GM, symbol of U.S. might, files for bankruptcy." (1) 

Harsh words Stewby, harsh critical words, and perhaps there’s a considerable amount of truth in them. But it would also be fair to say that the American auto industry has now officially shifted into survival mode. In the coming months we’ll have the unprecedented opportunity to see what the big three can produce when they’ve got their backs against the wall and the whole house is threatening to collapse. Whatever the outcome, it should be quite a show. 

Sources: 

(1) http://www.autonews.com/apps/pbcs.dll/article?AID=/20090601/ANE02/906019981/1042
(2) http://www.autonews.com/article/20090601/COPY/306019892/1057
(3) http://www.reuters.com/article/newsOne/idUSN3044658620090602 (4) (4)http://www.autonews.com/article/20090601/VIDEO/306019819/1219
(5) http://motorspacenw.com/member/blogentry.php?b=565&u=144




You must be logged in to post comments. Please log in here or click the comment box below for options.

comments powered by Disqus
« Back to Auto Blog
Auto Blog

The latest news, reviews and commentary about cars, trucks, and more, automotive technology and car culture







Close

Sections


Profile

Close

Contact the Spokesman

Main switchboard:
(509) 459-5000
(800) 338-8801
Newsroom:
(509) 459-5400
(800) 789-0029
Customer service:
(800) 338-8801