GM considering chapter 11 - Reuters Article Link

I saw this article posted:
http://www.reuters.com/article/newsOne/idUSTRE51D1Q120090214

I don't believe everything I read on reuters, but I thought I should pass it on.

Reuters is about as good a news source as it gets.

Yes, Bankruptcy is certainly one of the options in GM's plan. It would be completely and utterly irresponsible of them if it wasn't.

If GM can't prove to the government it can become viable (in this instance simply meaning the ability to pay it's bills, not dig itself deeper into debt, and actually having a shot at becoming profitable and paying off it's existing debt in our lifetime), it has to instantly repay the money the US government loaned it.

If that happens, GM goes directly into bankruptcy wich will protect it from what can conservatively be called a "free-for-all" in lawsuits from everyone GM owes money to and has contracts with while they attempt to salvage something resembling a company. GM is positioning itself so that it's ready to go if it fails.

GM sould pretty much be done setting up the bankruptcy "nuclear option" because they started on this late last year when good old Senator Shelby and company were attempting to kill off any government aid to US car industries last fall. Although GM eventially got money a mere days before the walls came in, I suspect that they already had a plan set up involving bankruptcy protection.

Just a side note,

I don't profess to know GM's strategy, however if GM does go into bankruptcy, General Motors corperation is gone. Their debt exceeds the value of the comnpany, their balence sheet has been bleak for quite a few years, and the word "bankruptcy" still "means out-of-business" to the general population, and you could fit the number of potential buyers willing to spring $30K+ on a car company in such straights in the handicap stall at the local Burger King.

Reuters is a reliable media source.

GM has been looking at Chap. 11 bankruptcy the last several months and would be there without the help of Gov. loans. So this is news but nothing new.

I don't see how GM and Chrysler don't get the remainder of their loans. This Congress and administration should have a more favorable view of the embattled car companies. One would also have to ask how much reorganization and solvency can a corp. like GM show in only 2 months since the first loan that everyone agreed wasn't enough. So it's not like GM must show that Pontiac is going to close or Hummer has a buyer and the UAW has signed the new amended contract. They just have to show that those are in the plans and with the loan money could be completed.

The elephant in the room will have to be how much money is really needed in this economy and to accomplish what it takes to regain control of the company and assets.

Another possibility (based on a new thread I just finished).

What if GM spins off it's unprofitable assets into a single company, and that company declares bankruptcy? Not sure if it's legal or even possible.

Although I wrote parts of my post yesterday before posting it this afternoon, I found this article from the Wall Street Journal just a few minutes ago which expands on the Reuters article(and seems to fall in with one of my predictions):

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

I wonder what the new company would be called?

What if GM spins off it's unprofitable assets into a single company, and that company declares bankruptcy? Not sure if it's legal or even possible.



Why wouldn't it be its what they did with Lehman Bros.

I wonder what the new company would be called?

Take a play from LG (Life's Good) and call it Good Motors?

I'm feeling another 35026906790637623 gazzilion dollar (Bank type) bailout. With my tax money.

I'm feeling another 35026906790637623 gazzilion dollar (Bank type) bailout. With my tax money.

I really doubt that, to many people in and outside the government want to see it go to hell in a handbasket.

Besides the Feds have already shown they are all to eager to show their business accumen when it comes to the domestic auto industry :mad:

I really doubt that, to many people in and outside the government want to see it go to hell in a handbasket.

Besides the Feds have already shown they are all to eager to show their business accumen when it comes to the domestic auto industry :mad:

Cause all the people in the government have never drived a American car. Thats there problem, there in love with rice burners. We need to get these politicians behind the wheel of a real car, to get the heart racing.

Didnt Kmart do something similar right before being bought by Sears. I mean basically...someone needs to hit Ctrl+Alt+Del on GM and reboot everything so they can be competitive.

Another possibility (based on a new thread I just finished).

What if GM spins off it's unprofitable assets into a single company, and that company declares bankruptcy? Not sure if it's legal or even possible.

Although I wrote parts of my post yesterday before posting it this afternoon, I found this article from the Wall Street Journal just a few minutes ago which expands on the Reuters article(and seems to fall in with one of my predictions):

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Didnt Kmart do something similar right before being bought by Sears. I mean basically...someone needs to hit Ctrl+Alt+Del on GM and reboot everything so they can be competitive.

Kmart bought Sears.
Kmart went Chap 11, sold off a lot of thier stores namely to Sears, along with the land. Sears was riding high for a little while, then with places like Walmart rising fast in America, Sears found themselves in an odd place, not as good as other department stores, but not having the pricing power of Walmart. Sears hit some tough times, some things didnt work out.
Kmart on the other hand, restructured under a new CEO, rebuilt and tried to fight agressivly with Walmart. They came out of Chap 11 with tons of money, purchased Sears to form Sears Holding Corp.

I wonder what the new company would be called?

Titanic Motors Corporation comes to mind.

Or if you like TMC could = Too Many Companies or Too Many Cars :shrug:

:D

I really doubt that, to many people in and outside the government want to see it go to hell in a handbasket.

Besides the Feds have already shown they are all to eager to show their business accumen when it comes to the domestic auto industry :mad:

Not sure I'm following you bossco.

You seem to be implying that:

1. The Federal Government went to the car industry, begging to take it over.

2. The car industry (which I gather to mean GM and Chrysler since Ford managed to avoid the choice between going to the Feds and going out of business) knows so well how to run their industry, that they were doing just fine on their own.. and would continue to do fine if the government just gave them whatever money they asked for, and let them continue doing what they have always been doing.

3. The Feds have nothing better to do with their time, energy, and money than to pour all it's time talent and resources running a car company... or an entire car industry.

4. That there is some person or persons who are somehow currently underemployed in the Federal Government who are chomping at the bit to prove they can run a car company.

If I misunderstand this, please correct me. :confused:

Take a play from LG (Life's Good) and call it Good Motors?

LG was Lucky Goldstar :)

How does chapter 11 work exactly? how do they get money out of it and keep making cars?

sorry im just an engineering major :D

I found the following article very insightful - http://www.christonium.com/automotive/ItemID=12347179104179

I suppose the advantage GM has in filing for bankruptcy would be to avoid dealing with the Unions in its restructure... that would save them a lot of money when finding for ways to pay back some of its creditors.

I suppose the advantage GM has in filing for bankruptcy would be to avoid dealing with the Unions in its restructure... that would save them a lot of money when finding for ways to pay back some of its creditors.


I believe that GM would still have to negotiate with the unions during restructuring. Bankruptcy laws here in Canada state that the courts can not amend a colleective agreement without the unions consent. Are US bankruptcy laws similar?

Someone please correct me if I'm wrong. I remember Delphi giving out VERY lucrative buyouts while they were under chapter 11 and I doubt you would have seen that if Delphi could just avoid dealing with the union.

In a perfect world GM should be able to do everything they need to do WITHOUT having to file chapter 11 but the UAW won't make it easy. GM is sadly running out of options.

I found the following article very insightful - http://www.christonium.com/automotive/ItemID=12347179104179

Very insightful indeed.

I still do not believe bankruptcy is in GM's (or any automaker who wishes to continue making cars) best intrest. I believe the impact on short term sales and therfore, long term viability would likely spell the end. Especially when we're talking about a company whose debt outstrip it's assets.

Although the UAW needs to compromise a bit more on retiree healthcare, it's shaping up to be the bondholders that are going to sink GM. Why?

The UAW is certainly going to reach a point where they will have to compromise or lose everything. They have been decimated over the years to a fraction of what they were at the start of this decade, let alone the 1970s. They aren't going to willingly obliterate themselves by ending the company that has by far the largest number of members... and risk both Chrysler and maybe even Ford also declaring bankruptcy or at least going to court to win parity with GM on labor.

The bondholders on the other hand have nothing left to lose! Of every dollar they invested, the cash in value now is only 15 cents. Most of that can likely be written off for tax breaks. They don't really lose pushing GM for 50 cents on the dollar despite the Fed's demand of 30.

With this type of backdrop, I can see the advantages of the "Nuclear Option". It would be a stick in the eye of 2 parties that are (in my opinion wrongly) gambling that the new administration will cave in and dish out more money at the 11th hour and 59th minute.

I wouldn't take that bet.