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
AdBrite
AdBrite
Showing posts with label Bankruptcy. Show all posts
Showing posts with label Bankruptcy. Show all posts
Tuesday, June 2, 2009
Saturday, May 23, 2009
Bankruptcy might be good thing for GM
DETROIT — With General Motors’ long-anticipated day of reckoning a little more than a week away, nearly all signs are pointing to the wounded auto giant limping its way into bankruptcy court, but experts say that might not be as bad as once expected.
Car and truck buyers, they say, may not be as fearful of Chapter 11 as once thought, as evidenced by Chrysler’s stronger-than-expected sales in the two weeks after it took the dreaded step into court.
"I think in this case and in the eyes of the consumer, uncertainty is the enemy,” said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
GM has received $15.4 billion in federal loans and faces a June 1 government-imposed deadline to finish restructuring or be forced into bankruptcy court. Restructuring demands from President Barack Obama’s administration include cutting labor costs, reducing debt, shedding dealerships and brands, and closing excess factories.
The company this week reached cost-cutting deals with Canadian and U.S. unions that still have to be ratified by members, but GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. They say that’s too small a stake for the amount they are owed.
But even if GM files for Chapter 11, Chrysler’s performance since its April 30 bankruptcy filing has made some analysts optimistic that GM sales won’t "fall off a cliff” as the company’s CEO had predicted in February.
Chrysler’s sales to individual buyers are down 40 percent so far this month when compared with May’s sales of last year, a little worse than the overall market, which is down around 35 percent, the company has said.
Schuster said that’s better than he expected, and he predicted that GM might fare even better if it goes into Chapter 11.
by the associated press
Car and truck buyers, they say, may not be as fearful of Chapter 11 as once thought, as evidenced by Chrysler’s stronger-than-expected sales in the two weeks after it took the dreaded step into court.
"I think in this case and in the eyes of the consumer, uncertainty is the enemy,” said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
GM has received $15.4 billion in federal loans and faces a June 1 government-imposed deadline to finish restructuring or be forced into bankruptcy court. Restructuring demands from President Barack Obama’s administration include cutting labor costs, reducing debt, shedding dealerships and brands, and closing excess factories.
The company this week reached cost-cutting deals with Canadian and U.S. unions that still have to be ratified by members, but GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. They say that’s too small a stake for the amount they are owed.
But even if GM files for Chapter 11, Chrysler’s performance since its April 30 bankruptcy filing has made some analysts optimistic that GM sales won’t "fall off a cliff” as the company’s CEO had predicted in February.
Chrysler’s sales to individual buyers are down 40 percent so far this month when compared with May’s sales of last year, a little worse than the overall market, which is down around 35 percent, the company has said.
Schuster said that’s better than he expected, and he predicted that GM might fare even better if it goes into Chapter 11.
by the associated press
Friday, May 8, 2009
Revenue falls in quarter, For GM they might need bankruptcy
DETROIT — General Motors drew closer to bankruptcy Thursday, acknowledging its revenue fell by nearly half as car buyers worldwide steered away from showrooms for fear that the auto giant would not be around to honor its warranties.
The company lost $6 billion in the first three months of the year. The results were bad enough to bring a warning from Chief Financial Officer Ray Young, who acknowledged the difficulty of climbing out of a steep decline even if the company cuts costs.
"Once you start losing revenue, you get yourself into a vicious circle in which you cannot recover,” he told reporters on a conference call.
GM is living on $15.4 billion in federal loans and faces a June 1 government deadline to finish a restructuring plan or join Chrysler in Chapter 11 bankruptcy reorganization. The company would prefer to restructure out of court, but even its own executives say the obstacles are formidable.
"I think bankruptcy is highly likely, not because the losses are so bad, but because everyone has realized that this company needs fundamental restructuring,” said Douglas Baird, a University of Chicago law professor who specializes in bankruptcy cases. Chapter 11 "seems the best way to clean up the balance sheet, clean up the problems, get a fresh start,” he added.
Young conceded that the second quarter also will be tough for GM because it is shutting many of its U.S. factories for up to 11 weeks to slash dealer inventories. But he expects revenue to bounce back once the automaker gets through inventory cuts.
He said GM is making more money on new products than it did on their predecessors, including the Chevrolet Malibu and Cadillac CTS.
More funds needed
General Motors Corp. spent $10.2 billion more cash than it took in from January through March, mainly because revenue fell by $20 billion from the first quarter of last year, to $22.4 billion.
Young expects GM to need another $2.6 billion in federal loans this month and $9 billion more during the rest of the year.
All the talk about bankruptcy, Young said, is scaring some car buyers away. Detroit rival Chrysler filed for bankruptcy protection last week.
"People are concerned about bankruptcy, and that’s the reason why we want to avoid it if at all possible,” he said.
by the associated press
The company lost $6 billion in the first three months of the year. The results were bad enough to bring a warning from Chief Financial Officer Ray Young, who acknowledged the difficulty of climbing out of a steep decline even if the company cuts costs.
"Once you start losing revenue, you get yourself into a vicious circle in which you cannot recover,” he told reporters on a conference call.
GM is living on $15.4 billion in federal loans and faces a June 1 government deadline to finish a restructuring plan or join Chrysler in Chapter 11 bankruptcy reorganization. The company would prefer to restructure out of court, but even its own executives say the obstacles are formidable.
"I think bankruptcy is highly likely, not because the losses are so bad, but because everyone has realized that this company needs fundamental restructuring,” said Douglas Baird, a University of Chicago law professor who specializes in bankruptcy cases. Chapter 11 "seems the best way to clean up the balance sheet, clean up the problems, get a fresh start,” he added.
Young conceded that the second quarter also will be tough for GM because it is shutting many of its U.S. factories for up to 11 weeks to slash dealer inventories. But he expects revenue to bounce back once the automaker gets through inventory cuts.
He said GM is making more money on new products than it did on their predecessors, including the Chevrolet Malibu and Cadillac CTS.
More funds needed
General Motors Corp. spent $10.2 billion more cash than it took in from January through March, mainly because revenue fell by $20 billion from the first quarter of last year, to $22.4 billion.
Young expects GM to need another $2.6 billion in federal loans this month and $9 billion more during the rest of the year.
All the talk about bankruptcy, Young said, is scaring some car buyers away. Detroit rival Chrysler filed for bankruptcy protection last week.
"People are concerned about bankruptcy, and that’s the reason why we want to avoid it if at all possible,” he said.
by the associated press
Friday, May 1, 2009
Chrysler and bankruptcy
DETROIT — After months of struggling to stay alive on government loans, Chrysler finally succumbed to bankruptcy Thursday, pinning its future on a top-to-bottom reorganization and plans to build cleaner cars through an alliance with Italian automaker Fiat.
The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York, with ambitions to emerge in as little as 30 days as a leaner, more nimble company. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
"It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry,” President Barack Obama said from the White House
Future of the plants
Starting Monday, Chrysler said, it will close all its plants until it comes out of bankruptcy. At least three Detroit-area factories sent workers home Thursday after suppliers stopped shipping parts over fears they would not be paid.
CEO Robert Nardelli announced he would step down when the bankruptcy is complete and take a post as an adviser with Cerberus Capital Management LP, which will give up its 80 percent ownership of Chrysler under the automaker’s plan.
Vice Chairman Tom LaSorda, who once ran the company when it was owned by the German automaker Daimler, said he would retire.
"A lot of us are scared,” said Steve Grabowski, 33, who has worked at a Warren, Mich., parts stamping plant for seven years and was sent home Thursday. "We knew something like this was going to happen, but we didn’t think it would be so soon.”
Industry faces trials
Chrysler’s bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes moving away from the gas-guzzling sport utility vehicles that once were big money makers.
The administration has sunk about $25 billion in aid into Chrysler and rival General Motors Corp.
GM faces its own day of reckoning on June 1, a date the administration has set for it to come up with its own restructuring plan. GM has announced thousands of job cuts, plans to idle factories for weeks this summer and has even offered the federal government a majority stake in the company as it races to meet the deadline.
"We understand that there will be more pain for people in Michigan,” said Sen. Debbie Stabenow, a Michigan Democrat.
When Chrysler emerges from bankruptcy, the United Auto Workers union will own 55 percent of the automaker and the U.S. government will own 8 percent.
The Canadian and Ontario governments, which are also contributing financing, would share a 2 percent stake.
What Fiat deal means
Under the deal, Chrysler would gain access to Fiat’s expertise in small, fuel-efficient vehicles.
The U.S. automaker eventually wants to build cars that could get up to 40 mpg, far more economical than its current fleet focused on minivans, Jeep SUVs and the Dodge Ram pickup.
In exchange, Fiat would initially get 20 percent of the company, but its share could rise to 35 percent if certain benchmarks are met, and Fiat said Thursday it could get an additional 16 percent by 2016 if Chrysler’s U.S. government loans are fully repaid.
Fiat also would gain access to the North American auto market through Chrysler’s factories and its dealerships.
Fiat CEO Sergio Marchionne said he planned to spend time meeting Chrysler employees and touring its plants over the next few weeks. He said Fiat was preparing for Chrysler to "re-emerge quickly as a reliable and competitive automaker.”
Fiat also plans to reintroduce brands such as Alfa Romeo in the North American markets.
First, though, bankruptcy court Judge Arthur Gonzalez will have to sort out the issue of Chrysler’s creditors, who hold $6.9 billion of the company’s debt. The company’s first hearing is set for today.
by the associated press
The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York, with ambitions to emerge in as little as 30 days as a leaner, more nimble company. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
"It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry,” President Barack Obama said from the White House
Future of the plants
Starting Monday, Chrysler said, it will close all its plants until it comes out of bankruptcy. At least three Detroit-area factories sent workers home Thursday after suppliers stopped shipping parts over fears they would not be paid.
CEO Robert Nardelli announced he would step down when the bankruptcy is complete and take a post as an adviser with Cerberus Capital Management LP, which will give up its 80 percent ownership of Chrysler under the automaker’s plan.
Vice Chairman Tom LaSorda, who once ran the company when it was owned by the German automaker Daimler, said he would retire.
"A lot of us are scared,” said Steve Grabowski, 33, who has worked at a Warren, Mich., parts stamping plant for seven years and was sent home Thursday. "We knew something like this was going to happen, but we didn’t think it would be so soon.”
Industry faces trials
Chrysler’s bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes moving away from the gas-guzzling sport utility vehicles that once were big money makers.
The administration has sunk about $25 billion in aid into Chrysler and rival General Motors Corp.
GM faces its own day of reckoning on June 1, a date the administration has set for it to come up with its own restructuring plan. GM has announced thousands of job cuts, plans to idle factories for weeks this summer and has even offered the federal government a majority stake in the company as it races to meet the deadline.
"We understand that there will be more pain for people in Michigan,” said Sen. Debbie Stabenow, a Michigan Democrat.
When Chrysler emerges from bankruptcy, the United Auto Workers union will own 55 percent of the automaker and the U.S. government will own 8 percent.
The Canadian and Ontario governments, which are also contributing financing, would share a 2 percent stake.
What Fiat deal means
Under the deal, Chrysler would gain access to Fiat’s expertise in small, fuel-efficient vehicles.
The U.S. automaker eventually wants to build cars that could get up to 40 mpg, far more economical than its current fleet focused on minivans, Jeep SUVs and the Dodge Ram pickup.
In exchange, Fiat would initially get 20 percent of the company, but its share could rise to 35 percent if certain benchmarks are met, and Fiat said Thursday it could get an additional 16 percent by 2016 if Chrysler’s U.S. government loans are fully repaid.
Fiat also would gain access to the North American auto market through Chrysler’s factories and its dealerships.
Fiat CEO Sergio Marchionne said he planned to spend time meeting Chrysler employees and touring its plants over the next few weeks. He said Fiat was preparing for Chrysler to "re-emerge quickly as a reliable and competitive automaker.”
Fiat also plans to reintroduce brands such as Alfa Romeo in the North American markets.
First, though, bankruptcy court Judge Arthur Gonzalez will have to sort out the issue of Chrysler’s creditors, who hold $6.9 billion of the company’s debt. The company’s first hearing is set for today.
by the associated press
Subscribe to:
Posts (Atom)