General Motors, the largest U.S. industrial firm ever to file for bankruptcy, has always had a massive effect on the American economy and consumers. Here is what its recent bankruptcy (and exit from bankruptcy) means to you.
How Your Community Is Affected
What is the status with GM?
GM is now out of bankruptcy. The company went through a government-supervised bankruptcy procedure in June and July. GM exited bankruptcy on July 10, 2009. The "New GM" exited the bankruptcy procedure as a separate company from the old one (the new company is "General Motors Company," whereas the old company, in business from 1908 to 2009, was "General Motors Corporation.") and a public offering (IPO) is believed to be in the works for next year. The assets of the old GM (now officially known as "Motors Liquidation Company" will be sold out over the next few years; it remains in bankruptcy.
How is GM different?
GM is much smaller as a new entity. Instead of eight brands, GM will plan on building and marketing vehicles for just four (Chevrolet, Cadillac, GMC and Pontiac). In addition to the brands they'll cut (HUMMER, Saab, Saturn and Pontiac), GM is expected to cut 35% of its executive ranks and will operate 34 plants (down from 47 last year). GM's total number of employees will reach 64,000 (from 91,000) by the end of 2009. A new board of directors will be in place as well.
Who owns the New GM?
The new GM is held by the U.S. Department of the Treasury (60.8%), the Canadian and Ontario governments (11.7%), the UAW's Retiree Medical Benefits Trust (17.5%) and debt holders of the old GM (10%).
Does the government run GM?
Despite its majority ownership, GM and spokespeople from the U.S. Treasury insist that the U.S. government will not "run the company." GM's new CEO, Fritz Henderson, and its new Chairman, Ed Whitacre, will run the company and keep in frequent contact with their shareholders.
GM's Legacy of Leadership
|GM's Hydramatic Division, a long-time transmission manufacturer, produced the M16 assault rifle for the U.S. Army during the Vietnam War.|
|GM was the largest contributor of wartime resources to the Allies during World War II.|
|The 1972 Cadillac Coupe DeVille was more than 20 feet long, or about 4 feet longer, than its equivalent today, the DTS.|
|The original Cadillac company was formed from parts of The Henry Ford Co., which auto pioneer Ford helped found and then left in 1902.|
|GM built its 100 millionth car, a Chevrolet Monza subcompact, in 1979.|
|GM built the world's first heart pump in 1952, making open-heart surgery possible.|
|A GM Division, Frigidaire, introduced the world's first room air conditioner in 1929.|
|In 1938, GM presented the industry's first concept car, the Buick Y-Job, which had power-controlled hidden headlights and wraparound bumpers.|
Have any other car companies gone through bankruptcy and come out successfully?
Before this year, no major U.S. car company had ever gone through a bankruptcy. Once they are in mortal danger, automakers typically stop production or merge with a larger firm (as AMC did with Chrysler Corp. in 1987.) Ford Motor Co. was in dire straits after World War II, but it pulled out of its nose-dive with the help of a strong postwar market and a now-legendary, top-flight management team known as "the Whiz Kids." There hasn't been a bankruptcy since the early days of motoring due to fears that consumers won't buy cars from a bankrupt company.
What about other major non-automotive companies?
The record is mixed. United Airlines is one of the best-known U.S. firms to come out of bankruptcy. It filed in 2002 and emerged four years later, but not without drastic cuts. By contrast, Bethlehem Steel, once the second-largest U.S. steel producer, was dissolved in 2003 about two years after filing for bankruptcy. In one of the most famous cases in recent years, energy trader Enron went into bankruptcy in 2001 and then sold or spun off many of its assets, following years of accounting fraud. Now wrapping up its liquidation, it has basically ceased to exist.
What happens to my warranty?
GM and its dealers are required to honor warranties, and the Obama administration is already backing up these programs up with a portion of its $50 billion aid package for the auto industry. So the automaker will be able to reimburse dealers for replacement parts and warranty work on your vehicle. And even if your dealership is one of the more than 2,000 closing by 2010, you can still go to another GM facility to have warranty work done. It would be good to safeguard your maintenance records, however. Your vehicle has to be maintained to company standards to be eligible for warranty repairs, and you might have a hard time proving that it was if your records are not available to you.
What incentives on GM vehicles can consumers expect?
Expect higher cash rebates and/or more generous financing deals. Dealers will have to sweeten their offers to move new vehicles off their lots. During the first month of the Chrysler bankruptcy, the cash rebates on most models were up $500, to as much as $3,000 or $3,500. One example: The incentive on a Dodge Grand Caravan went from $1,500 to $2,000. "A 33 percent increase in rebates is significant," said Tom Libby, an independent auto analyst in Detroit. Some industry analysts even believe that as much as $5,000 to $10,000 could come off the price of some models. They suggest shopping at the dealerships that are closing to get some of the best deals.
Key Dates in GM's History
|1908||1908 William C. Durant founds General Motors as a holding company and incorporates the four-year-old Buick Motor Co. into it.|
|1923||1923 Alfred P. Sloan becomes president and soon introduces annual styling changes as part of a strategy to create planned obsolescence. He also introduces scaled pricing for its brands, with Chevrolet at the low end and Cadillac at the top.|
|1927||GM increases its emphasis on automotive styling under the legendary Harley Earl. He ushers in an era of dramatic artistic design.|
|1931||1931 GM surpasses Ford Motor Co. in sales for the first time, becoming the world's largest automaker.|
|1948||GM introduces early V-8 engines on Cadillacs and Oldsmobiles.|
|1955||1955 GM new-car sales take more than 50 percent of the U.S. market|
|1961||1961 Ralph Nader brands GM's Corvair as a death trap in his book, "Unsafe at Any Speed." It led to the establishment of the first U.S highway safety agency.|
|1964||The Pontiac GTO becomes the quintessential muscle car with its 389 cubic inch engine.|
|1984||1984 GM is reorganized to cut duplication resulting from its largely independent brands.|
|1999||GM merges a number of its parts divisions into the now-bankrupt Delphi Automotive Systems and spins it off.|
|2000||GM reaches its highest-ever market capitalization (or total share value): $52.4 billion|
|2008||Toyota unseats GM as world's largest automaker|
|2009||GM share prices fall to just over $1 a share.|
|2009||GM declared bankruptcy|