Its 3 months from now...politicians decide that GM/Chrysler have not done enough to become viable...what happens now?


I just cant imagine that Chevy, Caddy, and Pontiac or Dodge, Jeep, Chrysler will cease to exist entirely. If this thing does go south, will will be looking at a (Insert Company Name Here) badge on all former GM cars? Will a new company still be at the mercy of the UAW? Or will they be able to acquire a more Toyota-like dealing with their employees?

Sorry for all the questions...I'm a military guy and have absolutely no business sense whatsoever.

 

If these loans are called in in 3 months:

- Chrysler goes into Chapter 7 liquidation. It's parts are sold off to the highest bidder.

- GM goes into Chapter 11 bankruptcy. It becomes a smaller company with fewer brands, fewer dealers, it's agreements are discarded.

- Many automotive suppliers close their doors.

- The UAW ceases to exist.

 

The more I dig, the more it becomes apparent to me that Chrysler is (at the absoluter very least) in a marginally better position than GM.

The first hint is their expiration date without Federally backed loans.

Chrysler was looking at death's door by late spring to sometime this summer.

GM was looking at death's door next Thursday.

Then, a look at Chrysler's balence sheet and a look at GM's shows Chrysler is a much better position financially than GM is proportionally. If you look at total dollar amounts being thrown around, GM is the 800 pound gorilla next to Chrysler's mini mouse amounts. But take a look at debt versus cash reserves, and Chrysler by comparison looks amazingly good next to GM. Also, if Chrysler gets a $4 billion loan, it's going to have a far greater impact on Chrysler's survival than the 14 billion going to GM.

Then look at Chrysler's factory usage. Chrysler's tactic has been to make as many models in a single factory as possible in order to keep it in operation. That's a big reason why Chrysler hasn't had to lay off many people this year till it closed factories to thin down stockpile. The Magnum's drop in sales was replaced by the Challenger. The plant that makes Nitros also makes 2 Jeeps. The plant that makes minivans also makes minivans for VW. The Ram plant in Mexico will soo replace it's lost volume by making big trucks for Nissan.

Then you look at the cost to reorganize.

GM is going to need to spend billions to close dealers and divisions, lose volume (and income) by selling off pieces of itself. GM is the only US automaker who needs to save themselves by becoming smaller. Chrysler, on the other hand, needs to close dealers and make a midsize car that's a hit. They don't need to cut brands, they don't need to downsize the company any farther, and for the most part, they are already running on a skeleton crew, so they don't need to cut jobs. A sizable portion of their development budget is being done at Nissan, Daimler still owns 20% and still contributes parts to Chrysler, & they still have the option of Renault kicking in another 20% ownership and producing cars for them here with any unused factory space.

Then there's the Chrysler culture which appears to have reemerged with a vengence. Nardelli seems to have gotten serious about saving the company, and there's enough Chrysler hands with Chrysler's traditional scrappiness and Chrysler's traditional way of making big things with very little money.

Now compare each point with GM.

Each day that goes by I question the value of centering the company's future on a vehicle designed to lose money while at the same time depending on taxbreaks to keep the price below 40 grand (the Volt) instead of improving the hybrid system they already have. The company that did the Camaro right (bold styling, streamline development, high quality, no flip-flops) seems to have fallen into the traditional GM start-stop-flip-flop (RWD Impala, the Orlando, the Alpha, the Park Avenue, the Road to Redemption campaign, Pontiac's this.. now Pontiac's that).

Then GM is going to have to shed divisions. GM will certainly lose money in the deal, but it will affect it's fixed costs in a positive way. GM is taking a draconian hit on the number of dealers. That's going to cost.

What GM does have going in their favor is their sheer size. They are truly too big to completely fail. But while no one with the slightest business sense will want to buy or invest in them, GM does make a huge, irresistable target to an emerging auto company that wants to get both modern technology as well as a ready made entry to the United States market. This means China and India... and maybe even Russia.

Unlike the thread heading, I'm not playing out the worse case scenario, but I'm playing out the most realistic scenario.

You can bet the farm that GM & Chrysler are going to present a plan for survival. They know that they have a hostile audience to impress, so they will move mountains to make things happen.

GM's plans are solid, but it's going to take a long time for them to recover. Their problems didn't happen overnight and the problem they have to fix is more cultural than structural. GM's decision making model does it no favors. Culture is far harder to change, and takes longer. Sheding divisions, dealers, reorganizing what's left is all an issue of money.... tons of it.

Chrysler's problems are that it has no real midsize car worth a damn, and that it has no small cars whatsoever. Throw in far too many dealers, and that pretty much wraps up Chrysler's problem list.

Looking at the problems GM and Chrysler have, how much debt each has, what they have to fix, and how much it's going to cost to fix it, and what each has in their favor, I would't count Chrysler out by a long shot.

As long as Holden and Opel survive (with the respective help of the Australian and german governments) and Buick in China thrives, and GM Latin America still is on something of a roll, and Chevrolet still sells volume here in the US, GM is going to survive in some form or another... even if as a China or Indian owned mostly import label. But at the same time, I see Chrysler surprizing (even shocking) alot of people.... especially if lending suddenly lossened up.

 

The UAW will not cease to exist. They may have to take a bigger haircut, but they will be around.
And, I may be wrong, but I'm under the impression that even if the company closes, the local does not cease to exist. The only way to end a local is if the members vote to end it. I'll have to ask a friend who has a greater knowledge of this.

 

The Union can move to Alabama and the other states where they are not at the present.

 

The UAW will have to go along with pretty much anything that's mandated if they want to survive. That is the basis of what senator Shelby was attempting to take advantage of. He was willing to take a high stakes gamble with the United States economy and a potential intense recession or even a depression in a irresponsible last ditch attempt to destroy the UAW.

Pay levels at both union and non-union plants are nearly identical. While semnator Shelby and Corker were spouting off against taxpayer risk investing in US auto industries, their own states were shoveling as much taxpayer money as they could get their hands on (even while their education budgets ended up in jepordy) in order to attract foreign auto businesses.

The UAW will be taking a substantial hit just like GM, Chrysler, and suppliers will. They may even see their ranks depleted by substanial numbers (yet again). But I doubt seriously they will dissappear regardless as to who goes under.