GM Filing Chapter 11, Chrysler to be Sold

According to multiple news sources, GM has filed for Chapter 11 Bankruptcy protection at 8:00 AM this morning.  It should also be noted that even before this filing, GM was negotiating with the various stakeholders for agreements for who will own how much of the “new” company after it emerges from bankruptcy.  The news that is being reported has the following highlights:

  • 11 plants are to close, with 3 to be idled.  (specific plants to be announced later)
  • 21,000 employees will be cut (34% of the workforce).
  • The US Government will own 60% after “contributing” another $30.1 Billion
  • The UAW will own 17.5%.
  • Canada will have a 12% stake after loaning $9.5 Billion to the new company.
  • GM Bondholders will have 10% with the possibility of owning up to 25%.
  • Four brands (Saturn, Saab, Hummer and Pontiac) will be discontinued.
  • Approximately 2,600 dealers will be closed.

An additional note is that the Administration has stated that the government will not interfere in day to day operations.  What the Administration has not stated is that they would stay out of the direction of the new company.  And that doesn’t bode well for the car-maker and for the taxpayer.

We have all heard of the new CAFE standards that were “agreed to” by the automakers.  I thought that Jerry Flint put it best with this:

Most amusing is the government’s estimate that it would cost $1,300 or so per car to accomplish this. It’s always wonderful how our government, which paid $7,000 for a coffee thermos and $240 million for a fighter airplane and $3 billion for a new presidential helicopter–money it doesn’t have–always figures that private industry can produce miracles for next to no cost.

Here are a few points to remember:

It’s seven years to 2016 and there will be a new president and a new Congress and a different economy by then. Many rules change over time.

There’s always a possibility that we will have no domestically owned auto industry by then, so no one will be upset about kicking foreign automakers who can’t meet our rules.

And there’s usually a fine for those who can’t meet the requirements. If you figure a $3,000 per vehicle fine for each one missing the target–and that’s a modest number–that’s $45 billion in fines in a 15 million-car year if they all miss the target. That’s enough to build four $250 million “Bridges to Nowhere” in every state. That might appeal to Congress.

And well all know how fiscally responsible our government is, so we shouldn’t worry, right?

Of course, the whole deal smells of politics to high heaven, and we have to remember – the companies will not pay the increased costs, the consumer (you) will.

That is, of course, if we still have jobs to buy these vehicles…

On a related note, the bankruptcy judge has approved the sale of Chrysler to Fiat.  How Fiat is going to buy Chrysler without putting any cash down is a mystery to me…

About Tom Roland

EE for 35 Years, Two Patents - now a certified PMP. Married twice, burned once. One son with Asperger's Syndrome. Two cats. Conservative leaning to the Right. NRA Life Member.
This entry was posted in Automotive, Business, Government, Politics, Union and tagged , , . Bookmark the permalink.

6 Responses to GM Filing Chapter 11, Chrysler to be Sold

  1. Mustang says:

    Øbama is dismantling our Constitution. He is dismantling our economy. Those who suggest that Mr. Øbama does not have a socialist/Marxist agenda have their heads up their … well, you know.

    At least we now understand the mantra, “Hope and Change.”

  2. Teresa says:

    I am not sure what I think about any of this. I do know that SOMETHING had to be done; but not sure if this is right. And, we won’t know for years.

  3. HoosierArmyMom says:

    Teresa, having worked on the line at GM years ago and now I have worked as an IT Professinal for 23 years, I can assure you, THIS is more or less completely Unconstitutional, Nothing HAD to be done, Billions of taxpayer dollars later and they are still filing bankruptcy! If the market is left alone, it will correct itself. You can’t spend your way out of a hole. I don’t think it will take years to know. A trillion dollars was printed against nothing of value, OUT DEBT. In a few months time when you must live through hyperinflation, when you see the cars that Obamanation is forcing GM to make and that no one will want to buy (lawyers are rarely good business men and know nothing about manufacturing, engineering or economics for that matter!) then come back and tell us then what you think of Hope and Change.

  4. theresa, et al, as a business systems consultant of more than 23 years, i have worked hand-in-hand with more court appointed “trustees” than anyone should have to meet in a single lifetime. invariably these people are lawyers and/or cpa’s who may know the law, but know SQUAT about business. or manufacturing. or sales. or marketing. or – well you get the picture.

    more often than not, companies do not emerge from bankruptcy reorganization profitably because they are not allowed to run their business the way it needs to be run. in very few instances has the trustee permitted us to put systems and processes into place to actually effect a turnaround. when that does happen the companies are successful, but that is the exception rather than the rule.

    what obama and company are doing to this country – re: banks, mortgages, cars, etc. – is more than even the most ridiculous of trustees have done in my experience. no one wants the cars that they are mandating be built. no one wants the union or the government to be in charge of this industry. and no one “in charge” has ever run a lemonade stand let alone a manufacturing plant. cripes more than half of his car czar’s administration have ever had a driver’s license much less owned a car.

    this is akin to having people who know nothing about medicine or health (mental OR physical) determining how healthcare is going to be rationed. oh wait, my bad, we’re gonna do that too.

    sheesh. the inmates ARE running the asylum.

  5. Z says:

    so, where are the outraged Republican and government lawyers agreeing THIS IS ILLEGAL?

    silence WHY?

  6. Tom says:

    Mustang – Obama did promise change. That he is doing. I do wonder about the hope…

    Teresa – Sometimes the best thing to do is NOTHING. Doing something will sometime make things infinitely worse. And you are correct – it could be years before we know the full effect of the policies that are being enacted now.

    HoosierArmyMom – With people now used to the government taking care of them and screaming help, our government felt obligated to step in.

    heidianne – The main beneficiaries of this fiasco will be the attorneys, the accountants, and in the short term, the UAW and politicians (at least until the next crisis comes along…)

    Z – Why? Ask yourself – Who is up to this mess past their eyeballs? Also, to try and oppose “the anointed one” without a majority in Congress is tantamount to committing political suicide.

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