The end of the General Motors saga may be nearing. After months of bailouts and pleas for more money, the U.S. government ruled that GM's recovery plan was unacceptable. They ordered GM to reorganize, removing CEO Rick Wagoner, a veteran of 30 years at GM and 8 years as CEO, as the first step.
However, according to a new report the government has now reached a decision that GM's debt may be too heavy for it to reorganize outside of a bankruptcy. The New York Times reports that the U.S. Treasury Department has ordered GM to prepare a bankruptcy filing, despite GM's continued public claims that reorganization without bankruptcy is possible.
Currently, GM is on life support -- emergency bailout loans -- to support its reorganization. The government is managing GM's efforts to cut costs and reduce its debts carefully. President Barack Obama's auto task force has given GM 60 days to complete the restructuring. However, according to the report, the feds have decided on a "surgical" bankruptcy, in addition, to try to revive GM.
The key to whether GM will be forced to submit to bankruptcy will be whether the company and the United Autoworkers Union can reach a settlement with bondholders to exchange roughly $28 billion in debt into equity.
According to the recent Times report, one plan currently being considered is to take the "good" brands and assets of GM and sell them to a new company, while leaving the rest -- unwanted brands, factories and health care obligations -- to bankruptcy and liquidation over the next several years.
One plan being examined could see GM entering and leaving bankruptcy in as little as 2 weeks, with approximately $5B to $7B USD in federal funding. GM and Treasury Department officials declined comment, and the source of the report declined to be identified as they were not authorized to discuss the proceedings.
In other GM-related news, the company's woes may have a serious impact on the upcoming Chevy Volt. The company is having trouble getting federal funding for the promising upcoming electric vehicle. The Obama administration has refused to give the company the over $10.3B USD in U.S. Energy Department loans for development of fuel-efficient vehicles it has applied for until it deems the company viable.
A lot of the requested money was set to go towards enhancing and refining the Volt's powertrain platform. GM is seeking $2.6B USD for the development of two Volt derivatives, a third hybrid model, and components for the platform.
Bruce Harrison, an IHS Global Insight analyst warns that delays in funding could be catastrophic for the fledgling project. He states, "Any lack of funding they were counting on is likely to be very serious for the projects it’s connected to. The company is fighting for its life and needs every dollar it can get."
GM continues to say that with or without federal funding, the company will release the Volt next year. States GM spokesman David Darovitz, "The Volt continues to be one of our highest priorities among all GM’s future product programs and remains on track for a November 2010 launch -- with or without a Sec. 136 award."
However, in order to accomplish this, GM may transfer funds from its more viable brands, which analysts warn could put the company in worse shape. States Rob Kleinbaum, managing director of RAK & Co., a consulting firm in Ann Arbor, Mich., "That would be a mistake. The Volt won’t be commercially successful for quite some time. By robbing Peter to pay Paul, they’d be undermining their bottom line."
quote: According to the recent Times report, one plan currently being considered is to take the "good" brands and assets of GM and sell them to a new company, while leaving the rest -- unwanted brands, factories and health care obligations -- to bankruptcy and liquidation over the next several years.
quote: Yes, clearly they are incapable of building cars/trucks that anyone wants for a profit.
quote: Just f'ing die already...the only good car you make is the Corvette anyway...
quote: heck even the GTO was based on the Monaro at one stage
quote: It's a shame that Saturn has to go under -- they sell the few GM cars that are even mildly attractive. Hopefully whatever emerges from GM's ashes brings over some more Opel derivatives, they actually make some cars that are worth taking a look at.
quote: The end of the General Motors saga may be nearing. After months of bailouts and pleas for more money, the U.S. government ruled that GM's recovery plan was unacceptable. They ordered GM to reorganize, removing CEO Rick Wagoner, a veteran of 30 years at GM and 8 years as CEO, as the first step.
quote: As a voter and taxpayer, I would really like to know which aspects of Gm's plan the government thought was unnacceptable. Since the whole POINT of the bailouts were supposed to be to prevent bankruptcy in the first place.
quote: See what I'm getting at ? Would GM's plan have prevented bankruptcy and made them profitable ?
quote: Or was that not really the point here anymore ? Or was the point to extend the argument " you took money, so you will do things the way WE say so, not the way you NEED to do things to survive. " ?
quote: I don't see how every problem is the result of a liberal conspiracy is rational.
quote: GM stopped producing cars people wanted to buy.
quote: They focused on SUVs and when that market took a nose dive
quote: Another lie. I know you guys just can't stand this fact, but truck and SUV sales were through the roof. The American people had spoken, and they wanted trucks and SUV's. Period.
quote: Again, you are making no sense. SUV's were outselling all their other "balanced product lines" 5 to 1. There were EXACTLY focusing on what their customers WANTED. There is no other way to interpret the facts. What would you rather them have focused on ?
quote: I own a 1991 Honda Accord that's got over 300,000 miles on it. It's never had any serious work done on it. My daughter drives it every day. You don't see that kind of quality from GM, Ford or Chysler.
quote: Why is the ratio so important though ?
quote: Original clutch
quote: So basically the government, which has never met a deadline, kept an agenda, or balanced a budget or handled money responsibly, has told GM it's plan is unnacceptable. And none of you are pointing out how ironic this is ?
quote: So basically the government, which has never met a deadline, kept an agenda, or balanced a budget or handled money responsibly, has told GM it's plan is unnacceptable.And none of you are pointing out how ironic this is ?
quote: or balanced a budget
quote: ...and if I remember correctly, the U.S. Government was running a surplus between Bush I and Bush II.
quote: or balanced a budget
quote: The healthier brands like Chevy and GMC will continue to produce though their capacity may be significantly diminished.
quote: GMC: Stripped down fleet sales only, no commercial dealerships.
quote: Did some just think that magically when the clock struck 2009 that GM would be able to magically sell more cars & make money when they had been bleeding for years?
quote: This nation, the majority of politicians running Washington right now and the constituents that put them there have this sudden got-to-fix-it-now mentality and worry about long term repercussions later. That so-called "stimulus" bill that was rushed through Congress so fast that most of it wasn't even read is a perfect example. It sure sounded like an instant fix, didn't it?
quote: t pains me greatly that some of that is going towards this Cluster-F, especially since I'm a Ford guy...
quote: I'm wondering why Japan or China don't just swoop in and buy GM... they already own nearly 50% of our public debt-- what's just a little more going to hurt?
quote: By robbing Peter to pay Paul, they’d be undermining their bottom line."
quote: Stop spreading that bullshit. Banks got greedy and made very stupid decisions, which lead to their failure. Nothing more.
quote: "We must begin to close this homeownership gap by dismantling the barriers that prevent minorities from owning a piece of the American dream" -George W. Bush
quote: "The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories""The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership,"-David Glenn, Former CEO of Freddie Mac
quote: "These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis."- US Representative Barney Frank (D) MA and chairman of the House Financial Services Committee (2003)
quote: US Representative Barney Frank (D) MA and chairman of the House Financial Services Committee (2003)
quote: agree 100%the bad loans were almost a direct result of the "equal lending" practices forced onto them from the feds
quote: It's kinda different when your company is sucking from the government's teat to stay alive...