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To stave off bankruptcy, General Motors must rework its union contracts, drastically cut its capacity, workforce and dealer networks – and convince creditors to take 10 cents on the dollar on $27 billion in unsecured debt. In two months. That's a herculean task for any company, much less for a monolith the size of The General.

While GM is publicly working to avoid bankruptcy, some experts feel the largest of the Detroit automakers is simply lining up its creditors to expedite its Chapter 11 bankruptcy plans. In a new report by The Associated Press, the chorus of doubters is getting louder: "'I just don't see how it's possible, given all of the pieces,'" the AP quotes bankruptcy specialist Stephen J. Lubben, a professor at Seton Hall University School of Law.

For its part, the Auto Task Force and the Obama administration seem to think that a "surgical" bankruptcy could last only one to two months, a feat that many bankruptcy lawyers think is optimistic at best. One sticking point of negotiations with creditors is the apparenly disproportionate allocation of GM shares. The current plan is for the US government to receive 50%, while the UAW receives 39% to pay for retiree health care. That leaves just 1% for shareholders, and 10% for creditors. $27 billion doesn't seem to buy much these days. If creditors ultimately don't agree to the governments demands, though, bankruptcy is virtually guaranteed.

Bankruptcy could also make the most sense in dealing with GM's dealership problem. The General needs to cut thousands of retail stores; a move that will undoubtedly cost a fortune, especially outside of bankruptcy.

Others see the threat of bankruptcy as a ploy to make labor concessions and heavy bondholder concessions sound like a gift from above. GM can point to the situation with Chrysler as proof of how fast chapter 11 can happen, giving creditors plenty of reason to see things the General's way. With GM's deadline to meet the terms of the government's terms for financial assistance less than three weeks away, we'll know all too soon whether or not GM is bluffing.

Will General Motors declare bankruptcy?
Yes 6631 (84.6%)
No 614 (7.8%)
Unsure 597 (7.6%)

[Source: The Associated Press via Mlive | Image: Bill Pugliano/Getty]


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  • 38 Comments
      • 5 Years Ago
      They'd be done with it by now if they had started 6 months ago.
      I don't necessarily disagree with what happened, there was always a method to the madness, but it doesn't change that they should have done it half a year ago.
      • 5 Years Ago
      pending this happens... the way it is intended to... i almost feel that Ford will be getting the shaft down the road. Ford is the only company doing it 'the right way' and pushing forward with new product, and investing in plants, and growing globally and becoming more 'green' and yet they will be the ones stuck with current debt obligations and union contracts. GM will be able to write off large portions of debt, restructure contracts and by screwing things up so badly will be allowed to position itself to succeed when the dust settles.
      it's a lot like the housing market... we reward those who made poor decisions and the one's trying to do things the right way get the shaft and have to work twice as hard to keep on level ground.
      I hope to God that Ford gobbles up every bit of this market share....
        • 5 Years Ago
        break the UAW? What are you smoking? Obama has given them a stake in Chrysler!!!
        • 5 Years Ago
        Edit: and also C.W., of course.
        • 5 Years Ago
        @SeaUrchin:

        Yeah, it's true that Ford's having to keep all its dealers may be a detriment, but it could also be an asset.

        It really depends on what dealers GM and Chrysler decide to cut. Consider small-town Carlsbad, NM. There's a Toyota dealership here, a Ford dealership, a Chrysler dealership, and a GM dealership. If Chrysler and GM cut their dealers here, for poor performance or whatever, it becomes a two-horse race, and Ford's entry in the stakes becomes an asset.

        On the other hand, in big-town Albuquerque, NM, we have multiple dealers, Don Chalmers, Rich Ford, and Bob Turner's, all being forced to have a price war for limited sales. If Chrysler and GM cut their unnecessary dealers, Ford's three become detriments.

        However, let us ask what happens if Ford's dealers voluntarily decide to shrink and sell off some of their unnecessary land and buy fewer models from the Ford corporate mothership. Well, then Ford's three dealers aren't necessarily detriments anymore. They end up being three dealers where the guy on the northwest side of town buys from the northwest dealership (Chalmers), the guy on the east side of town buys from the Eastern side dealers, and whatever else have you. Then it's not nearly as bad as a detriment.

        The only question: Will multiple dealers in metro areas be willing to shrink to adapt to the smaller buyer market?
        • 5 Years Ago
        Hey, why don't you take your free market, capitalistic ideas elsewhere buddy. We are socialists in here and we proud of it. Me and Mr. Oak will takeover anyday now.


        But seriously, once GM and Chrysler will break UAW i do not see them not giving the same deal to Ford, however that dealership issue will be a big one. In BK GM will kill some of the dealers, Ford will not have the opportunity to do so.
      • 5 Years Ago
      ???
      Malibu - North American Car of the Year, 2008; C&D 10 best, 2008
      Aura - North American Car of the Year, 2007
      Cadillac CTS - Motor Trend Car of the Year, 2008; C&D 10 best, 2008 & 2009

      Not to mention the GMT900 platform trucks and SUVs.

      There are not many, but there is more out there than you (don't) give credit for.

        • 5 Years Ago
        I think the issue we're starting to confront is what those either a) north American automotive press awards or b) Detroit auto show awards actually mean to sales. I'm sure someone has more current figures, but last i checked (when GM was making noise about Malibu sales) the Malibu was selling a fraction of the Camry, 1/3. And that’s the rub, no matter how much progress GM is finally making to actually compete with one or two or three models as you’ve mentioned, that progress isn’t translating into any huge increase in market share, which his needed to bring in revenue for cars priced with lower profit margins than their competitors. Which is one of the reasons I’ve changed sides to the pro ch11 camp, GM simply cannot fix this situation without the sort of restructuring ch11 provides, and even after I’m not convinced they can do it. So many years to build a half dozen universally recognized car models, with all that money, and now their R&D budget is nothing, and will be slim post ch11, how can they possibly pull out of this?
        • 5 Years Ago
        universally recognized *competitive.
        • 5 Years Ago
        The answer to your riddle is this:

        Too little, too late!

        Also, you can't lose BILLIONS of dollars EVERY QUARTER for the past 6 years and not suffer dire consequences for it.

        I love how GM tried to play the "we're victims of the economic downtown" card too. No one who's been paying attention was going to accept that sorry excuse.
        • 5 Years Ago
        The trouble is, that's four products (seven, if you count all the GMT900 brand derivatives) out of about 50 total. I'd add the Corvette, Camaro, G8, and Lambda twins to (and subtract the Aura from) that "knockout" list, and we're still talking 1/5 of their portfolio.

        Which only goes to justify Ch. 11. There's nothing wrong with GM that trimming 4/5 of dead weight won't fix.
      • 5 Years Ago
      A GM Ch11 filing is necessary to almost start over. Their legendary contracts for labor, dealer franchises, and suppliers just don't support a "healthy" automaker. The old days of "naming your price" and GM "will just pay it" is over.

      A major change is necessary for GM to survive. A lot jobs will be lost and associated businesses will be hurt. Too many business owners have depended on GM for too much business, and their only business on some cases.

      A healthy GM will survive the bankruptcy, will a "damaged" company consisting of a pile of brands & debt will be created. It's hard to really "break-up" GM as most of its brands share heavily on platforms, components, and content. I can see any investor buying Pontiac, GMC, or Saturn. They'd just be running a GM-supplied brand. Who'd be proud to pay billions for any of them? Not me. Probably not you.

      This bankruptcy should do a few things, most notably, re-structure the way GM handles its brands. See VW or Toyota for examples.
      • 5 Years Ago
      Bankruptcy does seem inevitable.
      • 5 Years Ago
      Remember when readers of this site insisted that we had to give GM billions of dollars to prevent the company from going bankrupt and that allowing GM to go bankrupt would be a disaster?

      Good going, geniuses.
      • 5 Years Ago
      *Sigh*, I'm at work, so I wish it were that easy...
        • 5 Years Ago
        Also, I wish I could edit/delete comments, since this was supposed to be a reply...
      • 5 Years Ago
      Yup, they will, and they need to, to get as close to a fresh start as they can. The last few weeks have caused me to jump on the republican bandwagon, bankruptcy it is. The job loss while they trim down the company will be nothing compared to what we've seen the last eight years.
      • 5 Years Ago
      Flush already! Close the lid when you are through.
      • 5 Years Ago
      So basically, all the bailout money went to total waste and we should have let them go into bankruptcy from day one. Awesome! Our tax dollors circling the drain...AGAIN!
      • 5 Years Ago
      Am I the only one that finds the polls on this site oddly/irritatingly formatted? The bar for "Yes" at 86% is only a tiny bit longer than the bar for "No" at 7.5%. wtf?
        • 5 Years Ago
        must be your browser, it looks right on my screen.
      • 5 Years Ago
      @ Mike tl;dr

      Seriously, what does that have to do with what I said? The "market" isn't perfect, and doesn't always ONLY JUST put the weak out of business. Sometimes the bigger better dealers also have more overhead and get stymied by the mom and pop shops that only sell three or four new cars a month OR LESS but siphon off service as well as a handful of sales from the bigger stores. GM needs to make the good dealers profitable RIGHT NOW.
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