Bankruptcy filing

DETROIT — General Motors’ bankruptcy filing will do what its past chief executives could not — cleanse the century-old company of burdensome labor costs, unprofitable old factories and a boatload of debt.

The price was one that no GM chief was willing to pay until now. The slimmed-down company will be a ward of the U.S. government, 60 percent owned by taxpayers, with half of its eight brands just memories.

Industry analysts, GM executives and even President Barack Obama say GM now has the cost structure to compete in the global automotive market and one day return to profits. The company says it can make money even if U.S. auto sales stay weak.

The question is whether GM can generate enough profit to free itself of government control before the president or Congress rethinks promises not to muck around in day-to-day management of the auto company.


Competing with Japan
First, though, GM needs people to start buying cars and trucks again. Worldwide sales are near historic lows. And GM has to convince buyers in its home market that its cars are as good as those made by the Japanese.
GM reached a pact with the United Auto Workers that it says bring costs more in line with Japanese automakers that have plants in the U.S.

Monthly debt payments will drop dramatically because GM will owe only $9 billion rather than $67 billion. GM says that will help it break even when the U.S. market is a paltry 10 million vehicles annually, far below the peak of 17 million earlier this decade.

That almost guarantees profits, said Tom Libby, an independent Detroit-area auto analyst.

"I’m very confident they’ll be highly profitable in years ahead because the industry is not going to stay at 10 million,” he said, adding that the number of people of driving age is rising and there’s pent-up demand for vehicles.

Bob Lutz, a GM vice chairman who is retiring after four decades in the auto business, maintains that the automaker sold hundreds of thousands of pickup trucks and SUVs because that’s what Americans wanted when gasoline was cheap.

The Obama administration wants a smaller, more efficient fleet to help end the country’s reliance on foreign oil and cut greenhouse gas emissions.



by the associated press