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Top 10 Talking Points To Sound Smart About GM Bankruptcy

Top 10 Talking Points To Sound Smart About GM Bankruptcy

Posted Jun 2nd 2009 12:29PM

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Look, you're a car person, I'm a car person... we're car people. As such, friends, family and the watercooler crowd are depending on us to explain what the hell is going on with General Motors filing for Chapter 11 bankruptcy. So that we don't all end up regurgitating the five-second sound bites from TV newscasts, we've assembled the Top 10 talking points you need to know. Remember these tips and the ignorant masses will see you as wise as a cable news show pundit. For everything else, you're on your own.

Category: GM

Tags: general motors, GeneralMotors, gm, gm bankruptcy, GmBankruptcy

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typhoon5000

I was just wondering, How is Holden playing into all of this? Is it still apart of New GM? Or is it being sold or what? Now that Vauxhall is owned by Magna, I would suspect that the UK market will no longer get versions of Holdens either, right?

June 03 2009 at 6:43 AM Report abuse Permalink rate up rate down Reply

Avinash machado

So I guess will lose the status of number two automaker I guess. But will still perhaps rank in the top five with Toyota,Ford,VW etc.

June 02 2009 at 11:55 PM Report abuse Permalink rate up rate down Reply

jamie

[B] UPDATE 2-Magna says can't sell Opel cars in U.S., China[/B]
Tue Jun 2, 2009 2:48pm EDT

* GM protects U.S. market, protects China for now

* Magna says little appetite for buying Saturn, Saab

* Sees Opel breaking even in three years, profit in four

* Seeks government help for electric vehicle production

By Randall Palmer

OTTAWA, June 2 (Reuters) - Magna International Inc (MGa.TO) is prevented by an agreement with General Motors Corp (GMGMQ.PK) from selling Opel cars in the United States and, for now, in China, the chairman of the Canadian auto parts company said on Tuesday.

More details at
http://www.reuters.com/article/marketsNews/idCAN0229301520090602?rpc=44

June 02 2009 at 4:53 PM Report abuse Permalink rate up rate down Reply

1 reply to jamie's comment

BigWill

You know they'll be available in Canada, particularly since it's guaranteed that Magna is going to hit up Ottawa for money.

June 02 2009 at 9:54 PM Report abuse Permalink rate up rate down Reply

simianspeedster

There's some seriously bad misinformation in this propaganda piece. Consider this gem:

"More Made In the USA: Part of GM's viability plan is to begin producing more cars in the U.S. than it has in the past...according to President Obama, this will help GM increase its share of U.S. production for the first time in three decades"

So, let me get this straight. The new GM, minus four brands and likely two dozen shuttered factories, is going to "begin producing more cars in the U.S. than it has in the past?"

BULLCRAP

Yes, GM's percentage of overall cars produced in the U.S. may go up, but let's be real: the number of overall GM cars produced in the U.S. and the number of corresponding U.S. jobs is goign to be way, way down and it will likely never recover.

This goes beyond lazy writing -- it's misleading. Has Autoblog become so hopeful in a resurgent GM that the writers can't perform any basic analysis or fact checking?

June 02 2009 at 3:58 PM Report abuse Permalink rate up rate down Reply

1 reply to simianspeedster's comment

simianspeedster

@bvz,

I understand your perspective, but I think this slide (among others) was written in a way to make us feel better about what has happened to GM by burying the lead. There is clearly an element of spin at play, and I think it's knowingly misleading.

Consider the title of the slide and the following statement as written:

"More Made In the USA: Part of GM's viability plan is to begin producing more cars in the U.S. than it has in the past."

That statment is patently false until you add a big asterisk and parse it like only politicians can. "More cars" to most people means "5 cars is more cars than 4 cars" -- the clearest interpretation is that more cars means more cars in absolute terms. If you have to explain that more cars really means less cars, you're clouding the truth.

This "talking point" is intended to make us feel better about the number of cars GM will be producing in the U.S. -- hey, look, they're even ADDING 160,000 cars! -- but the truth is, the number of cars GM will produce in America is down substantially and it may never recover to levels seen earlier this decade. That's the real story, the real talking point.

June 02 2009 at 6:21 PM Report abuse Permalink rate up rate down Reply

Judy Zik

Another interesting point is that GM Canada is not in Bankruptcy. No mean feat considering. They also have quite a few plants still running during this process.

The interesting one is going to be Spring Hill TN. They have spent a fortune on that plant over the years but they have it idled with tooling to build just the Traverse. Seems like a huge waste considering the Traverse could easily be built alongside the Acadia and the rest of the Lambda twins. Will Spring Hill get a new product or (a real longshot) will it be sold off along with Saturn? This is too good a plant to be left sitting idle.

June 02 2009 at 2:22 PM Report abuse Permalink rate up rate down Reply

1 reply to Judy Zik's comment

jamie

General Motors will transfer production of its Chevrolet Traverse crossover from Spring Hill, Tenn., to its Lansing-Delta plant.

Lordstown gets the Cruze.

With both Orion and Spring Hill idled, you can bet GM is trying to get one of those players to ante up some more concessions to latch onto the new subcompact they announced that would be built in the US. y bet is that Spring Hill will steal this one quite handily. Orion will probably end up producing the Malibu and a Buick Regal/Insignia.

That is... if GM will be able to scrape up enough dollars to make it happen which seems highly unlikely at this point without tweaking their business viability plan somewhat.

June 02 2009 at 5:05 PM Report abuse Permalink rate up rate down Reply

Chris

So if by some weird chance GM gets forced into liquidation, how is the warranty going to be handled if the parts come in short supply? I can imagine replacement panels for discontinued brands will be fine early on but going forward I am curious what it will be like

June 02 2009 at 1:43 PM Report abuse Permalink rate up rate down Reply

1 reply to Chris's comment

Cougs

Knowing the government...not well at all. Probably have to outsource parts production to Mexico to keep the cost for the taxpayer down (I know, laughable right?).

June 02 2009 at 1:46 PM Report abuse Permalink rate up rate down Reply

Nice list of 10 Autoblog! It makes it a little easier for people to follow, including me.

June 02 2009 at 1:32 PM Report abuse Permalink rate up rate down Reply

compy386

Actually the government is going to get more back than what I originally thought. In total the government is going to get 6.7 billion in debt + 60% of the new GM. That means in order for the government to be repaid 100%. The new GM would have to be worth (50 - 6.7)/.6 = 72.2 billion in equity alone. That may sound high but right now Ford is worth about 165 billion with 20 billion in equity and 140 billion in debt (almost of all of that if Ford Credit). If the new GM emerges with no debt (other than the government 6.7 billion) then GM would have to be worth half of Ford (80 billion in total) in order for the government to get all its money back. Since GM is getting 30 billion from the government, that means it will have operating cash without having to raise too much more privately. Lots of numbers and assumptions but it makes me feel better about my investment by default.

June 02 2009 at 1:04 PM Report abuse Permalink rate up rate down Reply

BoxerFanatic

That's a tasty propaganda meatball.

But I don't trust it a bit.

talk is talk. The loans were supposed to be loans, and when I and others said that they weren't, we were criticized.

Now, all said and done, between money given, promised, and forgiven, it is going to take $100B, not $50B out of the rest of the economy, with no concrete certainty that the company will have learned anything, or be any more viable after the fact.

GM couldn't pay back, or regain that much value on it's previous best day extrapolated out to years and years, beating all of it's competitors. A shrunken and emaciated company, under government control and regulation is never going to be ABLE to pay back.

The US Dollar is on borrowed time due to this sort of behavior by the government, spending, printing, and conjuring up money after inconceivable debt levels.

How is anyone going to be able to afford a car if the dollar tanks because the government has flooded the market with dollars thinner than the paper stock they are printed on?

June 02 2009 at 1:00 PM Report abuse Permalink rate up rate down Reply

2 replies to BoxerFanatic's comment

BigWill

@Boxer

You obviously didn't drink the Kool-Aid that ACORN dropped off in your mailbox.

http://campaignspot.nationalreview.com/post/?q=YjEwY2IyMzNjYTg1MjFjOTI0ZmY2ODQ5N2I5ZWQyZmQ=

June 02 2009 at 2:45 PM Report abuse Permalink rate up rate down Reply

Shamdiddly

You will be assigned a new "people's car" by Government Motors, Comrade.

Do not worry...

June 02 2009 at 2:46 PM Report abuse Permalink rate up rate down Reply

Cameron

The armchair economist in me believes we're doing capitalism no favors by keeping a company on life support. Let failing companies fail.

Do I have faith that GM can turn it around? Yes. Corvette. Cadillac. Cobalt SS turbo. New Buick. Volt. Cruze. GMT900 trucks. Engineers are being listened to these days and people that are actually passionate about cars are starting to win against the bean counters.

But is this level of government intervention appropriate? No.

Had GM gone to chapter 7 liquidation this situation would be a lot worse for a lot of people, but GM didn't need government takeover to ensure chapter 11.

Now, some informed observers state that had GM gone chapter 7 it would have caused a ripple effect through suppliers that would eventually bring Ford down along with them. I can't verify that, but I would HATE to see Ford (who's really turning it around, and fast) be pulled down by GM's failure.

June 02 2009 at 12:58 PM Report abuse Permalink rate up rate down Reply

2 replies to Cameron's comment

jamie

Tier 1 and Tier 2 suppliers are going to be hit hard. A large number of them are already teetering on bankruptcy, and I rather suspect more filings to be apparent in the next couple of weeks. That means more job losses spreading throughout the industry.

All it takes is for one key supplier to go down and everything will grind to a halt. GM and Ford have protected themselves by propping up their Visteon and Delphi counterparts.

Once the ball starts rolling, its going to take more than an act of Congress to stop it.

Supplier says GM bankruptcy will kill businesses, decimate Michigan
http://www.wzzm13.com/news/news_story.aspx?storyid=109980&catid=14

June 02 2009 at 1:22 PM Report abuse Permalink rate up rate down Reply

jamie

The new watch list:

"The collapse of new car and truck demand has forced Visteon Corp., Metaldyne Corp. and other auto parts makers to seek bankruptcy protection this year.

In addition to American Axle, analysts say Lear Corp. and TRW Automotive Holdings Inc. are more vulnerable in the wake of GM's bankruptcy. "

Delphi sold in $3.6B deal
Transaction with private-equity firm may lift parts-maker out of bankruptcy
http://www.detnews.com/article/20090602/AUTO01/906020359/1148/auto01/Delphi+sold+in+$3.6B+deal

June 02 2009 at 1:42 PM Report abuse Permalink rate up rate down Reply