GM considers Chapter 11, new company – reports
February 16, 2009 by David Twomey
It’s been talked about a lot in recent months but now it seems that General Motors headquarters in Detroit is seriously considering a Chapter 11 bankruptcy filing ahead of a deadline tomorrow for a plan to deal with the company’s current financial crisis.
A report on Reuters newsagency says that General Motors Corporation, nearing a Tuesday deadline to present a viability plan to the US government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company.
The plan was also reported on in the highly reputable Wall Street Journal, which said in its Saturday edition: “One plan includes a Chapter 11 filing that would assemble all of GM’s viable assets, including some US brands and international operations, into a new company.”
The newspaper said: “The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked.”
Citing “people familiar with the matter,” the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.
GM declined to comment, the story said.
General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving US$17.4 billion in federal loans.
Carmakers have struggled as US car sales have tumbled amid a recessionary economy. US car sales in January tumbled to a 27-year low.
GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about US$28 billion in debt for the auto maker, sources have told Reuters.
However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.
GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar US workers and has offered buyouts to its 62,000 US workers represented by the UAW.
In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.
Print it: 
If only 380 was RWD, there would have been a totally different outcome for Mitsu Australia for sure. FWD sucks…
Ah well. The way I see it is that people won’t buy your stuff if it’s crap. They’re only going down the drain because no one is buying their shit and the staff upstairs are lining their pockets with nice green pieces of paper they call “money”.
Poor design, bad management and greed will eventually die. GM’s time has finally come where the poor design, bad management and greed have caught up.
SteveC
wednesday is sure shaping up as an interesting day…
i would love to know whats going on at holden right now.i reckon it will make interesting reading in the future.december-holden slashes prices,sale’s spike,it runs right out of stock,then…it goes on holidays for a month,and EVERYBODY goes on holidays.it re-opens end of jan with a severely reduced output,its yards still chocka full of g8’s.then it cancels its guild(sales awards)cancels viva,and starts giving away captiva and colorado.is no news good news?are any dealers worried yet?
Wheelnut, the fact that Holden is viable doesn’t necessarily mean that GM will hold onto it. They will be looking to downsize and restructure, and if Holden is really viable, they will be getting top dollar for it! So its really a catch 22
It had to happen for GM. They will have to close up or be taken over by some asian company. Looks like the end for holden to. Looks like Ford is the only one that can survive these tough times Ford 20 championships Holden only 15. It says it all…… Lowndsy for 2009 championship
BK writes, “Looks like the end for holden to.”
That should be “too”, Sunshine. Get your English right if you want your arguments and opinions to hold up.
Too write golfie…ha ha
Hey Dingo “OH WHAT A WARM AND FUZZY FEELING” does this mean along with your social personality malfunction that you have a bladder problem as well. Seems the beer is talking again.
Toyota’s new logo should be “5 million recalls in 5 years”.
Welcome back Bozo
Yoomah, Cupid Stunt. Yoomah!
Andrew M,
You have lost the context. We aren’t talking about a normal business environment; we are talking about a court-controlled administration. The company no longer makes the decisions; it has to reach a deal with its creditors for a reduction in its liabilities. The creditors want their money back and GM would likely be forced to sell non-core viable assets and shut down loss-making assets. Maintaining market share at the price of further losses won’t be an option.
Holden is non-core; GM would likely retreat to its North American and European operations. If Holden is viable then it would be sold. But ask yourself this question; is anyone going to buy it as a stand alone operation? Viewed as a business case on its own, Holden is hopeless. It hasn’t made any money in nearly five years; and the market conditions in which it last made money are unlikely to be replicated any time soon. If it can’t make any money then there would have to be some other reason to buy it; to get RWD expertise that nobody seems to want? There isn’t one.
If you think a Chapter 11 process will result in Holden running on chalking up further losses solely in the name of maintaining market share then you are dreaming. And you clearly don’t understand in corporate insolvency.
BJ Saying that Building and Selling Cars [Which is what Holden do] is a Non Core business as far as GM is concerned is like saying International Air Travel is a Non Core business for Qantas; selling Hamburgers is a Non Core business for McDonalds or that S-e-x is a non core business for a Prostitute..
Its non-core because GM doesn’t need to build and sell right-hand drive RWD cars in Australia; in fact GM doesn’t need to be in Australia at all. If GM goes into Chapter 11, the only question is for how much longer it will remain in Australia.
Sorry people, but you have me a tad confused.
So many of the responses here are saying that is would be agood thing for GM to leave and Holden to go down????
It shows how little understanding that there is in the manufacturing business in Australia and how closely entwined they all are. Holden makes parts for Ford & Toyota, Toyota makes parts for Holden & Ford, Ford makes parts for Holden & Toyota. Take one of these three away and the everyones business case looks less viable. Take one of these away and then the small parts manufacturers & the extrusion people and the wheel people will struggle to remain viable. If we lose those small parts suppliers and have to import from overseas then the loacal manufacturing becomes less viable. Once these start to happen yes Ford will pull out, if not beaten in it’s exit by Toyota it would be closely followed. Without manufacturing in this country then everything will be imported, the unemployment would force inflation up and the Euro & Japanese vehicles would become to expensive leaving us coverting Koreans as desirable whilst saving hard to buy a chinese or Indian vehicle.
This is the extreme scenario but a very real one for Australia as we are such a small economy.
GM-Daewooo-Holden will save themselfs, just like ToyBota did, maybe some more brainwashing ads to make us feel sorry for all their stupid mistakes should do the trick..
SAAB anyone ? >>>> wouldn’t touch one in my lifetime.
FR
I think you have answered your own query Frontman. We are a small economy and in the past we have proven to be quite a resilient one as well. I think we need to detach ourselves from being dependent on large global company’s and develop our own industry with an Aussie only car. Possibly government owned. If we don’t then your assumption “extreme scenario” won’t be far from the truth.
I suggest we call it the MT, what do you think?
Salesman, no govt owned car copmpanies thanks. Have you ever driven a Lada?
Sheesh, what a load of apples.
GM will get the money.
Chapter 11 most likely July or so.
Can’t wait to read this blog when they kill the Corvette, will be better than the circus!
Wheelnut comparing GM to Alan Bond seems about right :)
“Its non-core because GM doesn’t need to build and sell right-hand drive RWD cars in Australia; in fact GM doesn’t need to be in Australia at all. If GM goes into Chapter 11, the only question is for how much longer it will remain in Australia.” BJ
This is spot on, its only an Oz platform in reality, 30000 units to the middle east, the US market does not want them, rwd is dead at GM, a good platform that the world market does not want.
Its pretty obvious to me that Holden are building a small car as they are going to have the production capacity(ie, reduced ve sales)longer term…well think about it.
Wheelnut if they cannot export the platform in any great numbers, if Holden is losing market share in Oz, if Holden is not making any money In Oz, how is it of any value to GM?
By the way, a transfer of funds back to it’s parent company is not an expense item, its a capital item(balance sheet) which does not effect profit or loss in any way. Please don’t add it back, thats just plain BS.
MT???
Ummm no. Cannot think of any reason why I would call a vehicle MT ;-) (bearing in mind that MT is a way of letting your wholesaler know that the car has no air or steer thus eMpTy)
Government run car industry hey? Just like the Education Industry and the Health industry, The Road and Infrastructure industry??? Sheeesh next thing you’ll think we should all dress like the red head ;p
I think Salesman could be a closet communist :)
BJ,
Ill start with this,
so which of GM’s brands would you see viable???
remember that only a profit turning brand should be considered viable according to you.
please list the viable and profit turning GM brands….
Andrew in its major markets Gm is competing against itself, chev/buick/pontiac/saturn, all divisions incurring fixed costs, dev costs, blabla.
The question is what divisions/brands could make money if they clean their act up(union included, I reckon keepers are Chevrolet, Cadillac, GMC(all trucks?) and Saturn.
In terms of Holden, GM does not want its RWD platform, either we will see big changes at holden, such as fwd and serious reduction in platforn design and dev expenditure, it has to make money, or it will be sold.
I agree with the comments that viable does not necessarily mean it has to have made profits. As long as there is a steady demand for the product, and a large enough market share, the business can be viable. Of course would need to be restructured accordingly, costs would need to be cut somewhere etc.
Andrew M,
Trying reading the earlier posts; I have never said profitability is the only measure of viability.
The brands who can fund their continuing losses are viable. Those who cannot are not viable.
If Holden’s own revenue isn’t self-sustaining then it needs support. Precisely who do you think is going to fund Holden’s future losses; because if GM goes into Chapter 11 it certainly won’t.
You don’t seem to understand that a Chapter 11 filing is administration in insolvency. You know what that means; GM can’t pay its debts.
Axe sorry to tell you this but Saturn wasn’t mentioned in the list of Car Companies that GM says it will keep – when they made the announcement oulining their restructuring plans in December last year.. yet Holden was.
Why? well Bob Lutz said that they could [finally] see that Holden has alot of potential to offer as well as a wealth of experience and expertise – particularly in terms of medium/large RWD cars.. he said the Holden operations [which includes the factory and the new design studio]
is one of the most “flexible” he has ever seen in the world
He also said that Holden helps GM maintain a “presence” in the Pacific Region….So GM will be Holden on to Holden
BJ,
well to add a bit of humour and lighten the mood, wont the aussie government keep funding holdens losses?? ha ha ha
down to it………
doesnt the way of self funding losses come from profits???
therefore it would mean you only anticipate profit making brands to live on
what i was getting at when i asked which ones turn a profit is if you have a look through the GM closet and toss all those that made a loss, there wont be any GM.
They are forming a restructuring plan. The niche brands will go even if they are/were the only ones turning a profit. Why?? if you only kept brands such as Hummer and Saturn for eg, they wouldnt have enough market share to even exist.
Without market share they cant turn anything around.
To stabilise they first need some “volume brands” to work with. GM keeping holden has nothing to do with “RWD expertise” or “flexible assembly” aswell as nothing to do with what profit they do or dont turn.
GM has valuable market share in the aussie market through the “Holden” brand.
Come on Dingo,
they have a wealth of knowledge in being able to sell them to the public.
surely you must agree that is a solid trait on their side???
ha ha ha
you either dont read my posts, or simply have zero comprehension skills.
heavy crap coming my way???? WHY???
im on the bus that has been saying for ages that they should have filed 6 months ago and not “passed go” in collecting government money
Andrew wtf are you on about, stick to kmart and big wally or whatever.
Wheelnut, bob who?
GM has valuable market share in the aussie market through the “Holden” brand. – Andrew
Yes 13% and shrinking, and Oz is such a HUGEEEE market isnt it. Gee 1 million cars last year, maybe 800,000 this year, get a grip.
so last year holden sold 140,000 out of GM’s what 10 million sales, you do the math.
das ist gut Golfschwein. Ihr Englisch ist wie Ihr Chinese. Gebildet im Porzellan und durch Taiwan errichtet. Sie können unser Klassenzimmerlehrer des Grades 3 heute sein und uns alle zeigen, wie man Querwortpuzzlespiele tut. Tun wir müssen Ihnen einen Apfel holen, um uns zu zeigen, wie wir auf Sie alles stolze sind. Ohh ein welches glaubendes Golfschwein. hohoho
..see that Holden has alot of potential to offer as well as a wealth of experience and expertise – particularly in terms of medium/large RWD cars..wheelnut
Who cares, nobody wants the platform, newsflash, G8 is dead. NOBODY WANTS THIS PLATFORM.
GM has killed rwd dev in the US. Bob Lutz is no more, he took his pension, and thanks for the mmmmmmmoney.
BK says “that is well gulf pig. Their English is like your Chinese. Formed in the porcelain and by Taiwan establishes. They can be our classroom teacher of the degree of 3 today and show us all, how one does transverse word puzzle plays. Do we must you an apple get, in order to show us, how we are all proud of you. Ohh a which believing gulf pig. hohoho”
Ok what was that all about ?
After reading the above comments all I can say is “schadenfreude”
Alex,
Holden, Ford Australia and Toyota Australia will all survive. They will ALL either be making cars here, or ALL importing only.
Of Holden’s sales only about 50% are locally manufactured, the rest are imported Deawoos.
Ford sales 60% locally built, Toyota 17.5% locally built.
Read into those numbers what you will.
you almost got it right bavarian. ask Golfschwein hes our classroom teacher today. haha.
Axe,
I knew business priciples 101 would have been over your head.
we are talking basic business models.
they way you spin numbers or they way you interpret them is irrelevant
Andrew, no need to explain basic business models to me.
Let me provide you with a simple model.
GM competes against itself in major markets, Saturn, Buick, Chev, Pontiac and has done so for a long time, it incurs fixed costs and development costs in each division, this is called duplication, not to mention.
Its agreements with unions are killing it, a little thing which is often overlooked is that GM willingly signed these agreements.
1.GM, net liabilities(not assets) of around 60 billion dollars.
2. US Taxpayer loans to GM of approx 13 billion dollars.
3. US taxpayer loans to GMAC of approx 6 billion dollars.
4. Swedish Tax payer loans to GM AND Ford of approx 3.1 Billion dollars.
5. Canadian taxpayer loans of approx 3.3 billion dollars to GM, Ford & Chrysler, GM have not taken these funds as yet.
6. Oz taxpayer loans to all producers of approx 3.2 Billion dollars re green scheme.
As for Holden, Oz is not a major market for GM, reps about 2% of total GM sales. RWD is dead at GM, its a platform that GM cannot sell in great numbers, read demise of Pontiac(G8 is dead), 30000 units sold to the middle east is great, but..
Due to the billion dollars spent on the Zeta platform, Holden is making losses(they can’t export it in sufficient numbers), the current market will ensure they continue to do so(they will be in good company).
Now just to hep get this thru your head, the above comments re Holden equally apply to Ford and Toyota.
Now as to your comment “we are talking basic business models.” I hardly think basic business models applies in GM case, but here is one – they are f$#@$ and NEED to go chapter 11.
Wheelnut, you really need to get over Bob Lutz and we will be Holden onto Holden stuff, maybe they will, the point is though, they don’t need to as Holden simply, because of sales volume is really not relevant, same with Ford and Toyota Oz(read TRD).
1.GM, net liabilities(not assets) of around 60 billion dollars.
2. US Taxpayer loans to GM of approx 13 billion dollars.
3. US taxpayer loans to GMAC of approx 6 billion dollars.
4. Swedish Tax payer loans to GM AND Ford of approx 3.1 Billion dollars.
5. Canadian taxpayer loans of approx 3.3 billion dollars to GM, Ford & Chrysler, GM have not taken these funds as yet.
6. Oz taxpayer loans to all producers of approx 3.2 Billion dollars re green scheme.
Andrew I’m not making this up, I am not spinning these numbers they are real, we are talking billions of dollars here, before all this is finished,the Japs will be taking taxpayer loans as well. Think about this and free trade, how can toyota compete with GM when GM has so far received almost 20 billion dollars in taxpayer loans, toyota is being forced to use its own cash reserves(built from profits) to survive, whilst GM and Chrysler are being GIVEN money, also please understand this, these loans will NEVER be repaid.
Max,
I know what you are saying, but i think you are just shooting it one further.
it all strarted when “BJ” said/implied that the only viable products would be those that currently turn a profit.
what i was getting at is that they need to focus on brands that hold a decent market share in certain regions. They dont currently have profits, so what else do they do??? they must choose brands to take forward that can potentially become profitable, and the biggest factor in that is chosing brands that currently have volume.
all the numbers you spin are irrelevant. Whether or not RWD is dead is irrelevant.
What im saying is they need to pick brands to go forward with that can sell numbers in their respective regions.
Yes, as you already said, the duplication needs to go first.
Toyota doesnt really have much duplication, hence they arent as affected,
Ford has already culled duplication and is working further to make each model more efficient, hence why they arent in as bad of a position as GM (and yes i know it even goes further than that too)
Andrew GM is a mass producer, so yes it needs volume.
Some of you guys seem to think that OZ is an important market, the reality is, its not, as evidenced by the fact that the OZ market contributes 2% to GM’s sales. Same with Toyota and Ford, indeed to any manufacturer.
You cannot substitute “regions” for volume, there is only volume for mass producers.
“all the numbers you spin are irrelevant. Whether or not RWD is dead is irrelevant.” Andrew
I am not spinning numbers, they are reality. Those number represent what happens when a company like GM loses its way. They are in fact an outcome.
In fact, the Falcon and VE highlight this issue, development costs are substantial(partic VE),limited exports for VE, none for Falcon, tiny market in global terms, can’t recover platform costs, all equals lose money.
The VE and Falcon represents duplication, why, RWD is dead, tiny market share(global sense), small or no exports, see, both Ford and GM would make more money by converting and shipping a product here, sales wont be as high, but they would not lose money(one less platform, less duplication), they would also be supporting an existing division of both GM and Ford(opel, wharever).
The fact is, Holden and Falcon cannot generate the numbers to support their existence. Holden and Ford are not “players” they are extra’s only.
Max,
i never said you made the umbers up did I??
i simply stated they were irrelevant to the topic being discussed
you have gone off n a tangent, and now that you have come down a little bit, from wha i mak out, the only thing you disagree with me about is that Holden is or can be made viable???
why didnt you just tell me that to strat with???
And on platform sustainability…..
how may years has the commodore and falcon been in OZ???
and after proving a history of stainability you now say they arent sustainable????
they seem to have done fine in the past when it came to recouping development costs.
yes they are moing less numbers nowdays, but they are starting to adjust their developmental budgets to compensate particularly in fords case)
so whats your opinion????
Automotie manufacturing cant be sstained in OZ after many ears of having been able to because our market versus the rest of the world doesnt even register????
^^^
ooops a few typos there, i thought i caught em all….