Regardless of the restructuring plan, the auto companies -- in particular GM and Chrysler -- may be in serious trouble within the next few months. GM would be unlikely to be able to file Chapter 11 according to some analysts, so the company would be forced to liquidate all its assets to pay off parts suppliers whom it has been borrowing from and then exit the market in a worst case scenario. Such a development would be devastating for the already struggling U.S. economy. It states, "Failure by GM will likely trigger catastrophic damage to the U.S. economy."
And failure may indeed come if GM does not get the $4B USD loan it’s requesting. It says it will go out of business by the end of the year, otherwise, as it will run out of cash. It's saying that it will need to borrow $18B USD over the next year in order to stay in business and restructure.
GM's CEO Rick Wagoner came to Washington yesterday along with the CEOs of Ford and Chrysler to try to convince the government to give it an emergency bailout loan. He drove a test mule of the Chevy Volt for part of the trip, one of the most anticipated vehicles in GM's upcoming green lineup.
Congress has already received GM's plan and it details some big changes. While GM says it won't go for a "quick fix", it says it will largely move out of the truck and SUV market and produce primarily small vehicles, as well as continuing to invest in alternative energy. The company will also now focus almost exclusively on Chevrolet, Cadillac, Buick and GMC.
GM's Saturn, Saab, and Pontiac brands will likely be cut in the near future. Pontiac, already down to five vehicles, is being designated a "specialty brand" which could lead to an eventual phase out. GM is looking to sell Saab. GM is going to "explore other options" with Saturn, presumably either a sale or a phase out.
While not getting into detailed specifics, GM, unlike Ford, has pledged to cut deeper into its salary load and manufacturing, indicating that many more job cuts are in store. Even CEO Wagoner is taking a paycut to $1/year total compensation and the company has pledged to sell or lease all seven of its private jets.
In its eleventh hour, GM is drawing some criticism from some analysts. They say that CEO Rick Wagoner, after serving for eight and a half years should resign. They suggest COO Fritz Henderson as a more aggressive successor that could turn the company around. They also suggest that the company change its name to Chevrolet Motors, as the fact that no cars are sold under the GM brand name is cited as a cause of customer confusion. They also argue that GM should reorganize into a holding company to soften the blow of bankruptcy.
Additionally the majority of the public was found in a recent opinion poll to be opposed to the bailout, with the primary reasons being that they did not feel the collapse of GM or Chrysler would affect them directly and that they felt the auto executives were irresponsible in receiving perks such as private jets.