General Motors Files For Bankruptcy

Photograph of news trucks parked outside the GM Building on Fifth Avenue this morning by Mark Lennihan/AP

General Motors, an "icon of American business," has filed for Chapter 11 bankruptcy this morning at US Bankrutpcy Court in New York's Southern District. The NY Times reports, "The company was forced into the filing by President Obama, who is betting that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive."

The government is providing $30 billion to GM—on top of the $19 billion already given to the automaker, which has seen its sales drop 50% this year—during the bankruptcy. The government's contribution will become a 60% stake in the company. Of course, as the Wall Street Journal puts it, "The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?"

The WSJ also details some of the issues ahead, from not knowing when "consumer demand for new cars will rebound" to the "possibility of meddling by Congress in the company's daily operations and business plans," plus "closing more than a dozen factories and shedding the Pontiac, Saturn, Saab and Hummer brands...[which]could take years, with potential extra costs to taxpayers if the process bogs down." The Obama administration is also dealing with claims that the restructuring plan is more favorable to UAW workers, than to other stakeholders.

Cantor Fitzgerald's chief global strategist in London, Stephen Pope, told Bloomberg News, "It’s been a long time coming, but the reality of a GM bankruptcy is still a bitter pill to swallow -- it’s a bit like the Titanic sinking. This is a step they should have taken more than a year ago, which could have put them in much better shape before the economy went down.” The NY Times lists some missteps by the automaker, such as "bungl[ing] efforts in the 1980s to cut costs by sharing the underpinnings of its cars across different brands, blurring their distinctiveness" and giving "in to union demands in 1990 and created a program that paid workers even when plants were not running, forcing it to build cars and trucks it could not sell without big incentives."

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By Jen Chung in News on June 1, 2009 8:24 AM

Comments [rss]

mage0213

as far as the UAW wanting the auto makers to earn a profit.. Bolshevich!! the only profit they will allow the auto makers to earn is that which they (the UAW) will steal from them through their members. the UAW will find ways to sue the compoany for failing their employees and take even that little profit from the automaskers.. UAW==profiteers!!!! USW==profiteers.. they are all crooks in my opinion and don't deserve to breath the same air I breath (even if it IS polluted )

mage0213

Sad but true, GM will declare bankruptcy again but only after their upper echelon has squandered (or stolen) the 50 Billion more the feds are loaning (err may as well be truthful-GIVING them) because they will complete chapter 11 probably within 6 months and all the money they have gotten has probably already found it's way into overseas accounts, the upper echelon will conveniently take a vacation, leave the country right under the feds noses and they will be living high ion the hog at your and MY expense!!!! I say GM should go bankrupt before the taxpayers take another blood bath.. all their patents should be thrown away and let some Entrepreneur who KNOWS what he is doing redesign and register the patents and make a go of it.. one big difference NO UAW!!!

r1b2

So, what happens to the $30BB the US Gov't loaned already? Forgiven?

r1b2

So, what happens to the $30BB the US Gov't loaned already? Forgiven?

raaa

Hey GM asses and liars. General Motors Deliberately Destroyed Public Transit in Los Angeles.

General Motors Deliberately Destroyed the Electric Car, the EV1 which would have been hugely popular today as it was in the 90's.

And now you have some green wet behind the ears punk rehabilitating the company?

You disgust me. Michael Moore was right about you, greedy archaic monster of a company. You've proven you don't care about America, so why did America buy you?

GM Go away. You betrayed us too many times already. Just go away.

PKinNYC

well it's all happening according to the New World Orders plans. Their plan to pare down our companies and banks into a more controllable number to further aid in the control by our government, the central bank, fat cats and the NWO's master plan. Enjoy America.

drewo

The great God Automobile -- whether routinely killing Americans on our roadways or dragging down the economy -- is there nothing it cannot destroy?

Spirit of 76

Noooo! Am I ever going to get the chance to buy a Puma?

Mr Mel

GM Bankrupt, FAO Schwarz bankrupt. I think Apple ought to buy the building since they're the only company there making a profit.

r1b2

To everyone who said the recession is softening and the markets are picking up, watch how this drags us back down below 6000 by mid-summer.

Felix Hoenikker

I agree, but the Dow is up 2.4% as of 11am.

Felix Hoenikker

YOU get a car (company)! YOU get a car (company)! YOU get a car (company)!

(shamelessly stolen from John Stewart)

Too many divisions, marginal product, low on innovation, dependent on high-profit gas guzzlers for survival (and allowed to do so through protectionist law)...

This was inevitable and over a year too late. With the feds involved, Congress will never make the tough decisions to save the company.

Kojak

Giving the UAW this much control over GM is a mistake. The UAW is one of the reasons GM is in this position to begin with. The concessions GM has made to the UAW over the past few decades have greatly handicapped GM's competitiveness against foreign automakers.

Also as a Union their goals conflict with the Goals of any For-Profit organization.

S.D.

"Also as a Union their goals conflict with the Goals of any For-Profit organization."?

Um, No.

Oddly enough, the UAW wants car companies to make a profit as that ensures the work force stays employed...

Politburo

It appears the UAW may not have much control under this plan. Their stake, through a health care trust fund, is 17.5%, however they will only have the power to appoint one director to the Board. They will otherwise have no voting rights, according to published reports.

Kojak

If that is indeed the case then that doesn't sound so bad. Original estimates put their future control at 40% or more.

Cautious Pessimist

The UAW is a parasite and failed at following their only rule: Don't kill the host. They took millions to build golf courses for the union bosses, forced the company to pay people not to work, and paid people whose job it was to put a tire on a car anywhere from $50 to $80 an hour depending on who you believe.

17.5% is 17.5% more than they deserve. As much as I like the new administration for all their other policies, the union stuff is one thing I think they're dead wrong about. Getting rid of the UAW would be the best thing to happen to the American automotive industry.