GM files for Bankruptcy

Discussion in 'International Politics' started by Daredevil, Jun 1, 2009.

  1. Daredevil

    Daredevil On Vacation! Administrator

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    GM files for Bankruptcy

    LONDON, England (CNN) -- The future of thousands of car industry jobs in Europe remained uncertain Monday as General Motors filed for bankruptcy after reaching a deal to sell off its European operations, including German automaker Opel, UK-based Vauxhall and Saab.

    GM filed a bankruptcy petition early on Monday morning, paving the way for a de facto government takeover, leaving U.S. taxpayers with a 60 percent stake in the Detroit-based car giant.

    Chapter 11 bankruptcy will aim to help GM emerge with only its more profitable plants, brands, dealerships and contracts. Unprofitable plants, contracts and other liabilities that the company can no longer afford will be left behind.

    U.S. President Barack Obama will address the American public shortly before noon Monday to explain the government bailout, and his hopes that this is the best route for a turnaround, two officials close to the situation told CNN.

    The day "will rank as another historic day for the company -- the end of an old General Motors and the beginning of a new one," the administration stated in documents released Sunday.

    The rescue of GM in the United States is being led by an unlikely coalition of the U.S. and Canadian governments and the company's employees and creditors.

    The Obama administration will commit another $30 billion on top of the $19.4 billion it has already given GM to cover its losses and fund its operations.

    On Saturday it was announced that a Canadian parts supplier and a Russian bank had finally reached an agreement to take control of GM's European assets, which include Opel and Vauxhall. Watch more about the bankruptcy move ยป

    Under the terms of the deal, Magna International will take a 20 percent stake in GM Europe, Russia's biggest bank, Sberbank, will own a 35 percent share, Opel employees will have 10 percent, while General Motors will retain a 35-percent stake.

    The German government, which has led the negotiations, will provide a bridge loan to keep GM Europe operating in the short term. German Foreign Minister Frank-Walter Steinmeier described the deal as a "responsible solution" that would preserve the highest number of jobs.

    Magna warned during negotiations that it would have to cut about 10,000 jobs, from GM Europe's 55,000-strong workforce. About 2,000 of the job cuts would be in Germany, Magna has said. But a top company official tried to reassure the Germans that it would try to protect the company as much as possible.

    "We will, and I want to stress that again, preserve all the German Opel locations," said Magna co-Chief Executive Siegfried Wolf.

    Meanwhile, Britain's Business Secretary Peter Mandelson said Sunday that Magna's bosses had given a commitment to continue Vauxhall production in the UK, but had given no details as to how long or whether job losses would follow.

    He told the BBC: "I have, in the last 24 hours, spoken again to the senior executives of General Motors in Europe and again I have got their commitment reaffirmed to me as I did previously in the previous week with Magna that their commitment to Vauxhall production continuing in the United Kingdom is firm. But we have got now to pin down specific plans and specific implications for jobs."

    Vauxhall employs 5,500 people in England at its plants in Luton and Ellesmere Port.

    Meanwhile on Monday a bankruptcy judge approved the sale of most of Chrysler's assets to a group led by Italian automaker Fiat, clearing the way for the automaker to emerge from Chapter 11 protection soon.

    Fiat's stake will increase to 35 percent if it reaches certain goals. The Italian carmaker also has the right to eventually acquire an additional 16 percent by buying shares, but only if outstanding debts to the U.S. Treasury and Export Development Canada are paid.

    The judge's ruling allows Chrysler to leave behind the assets that it does not want, including eight factories and franchise agreements with 789 dealerships, placing thousands of jobs in jeopardy.

    For GM, which is has been closely watching Chrysler's emergence from Chapter 11, Monday's bankruptcy filing is just the beginning of a major overhaul aimed at creating a much smaller company.

    As part of the reorganization, GM is expected to cut 20,000 jobs and close about a dozen plants by the end of 2010. The company has already said it will slash 40 percent of its network of 6,000 retail dealerships by next year and drop four of its brands -- Hummer, Saab, Saturn and Pontiac.

    The impact of GM's bankruptcy, which follows a Chapter 11 filing by Chrysler on April 30, will ripple across the nation to dealers, suppliers and other businesses large and small that work in the sector.

    The company, once the country's largest private-sector employer, has only a fraction of its former staff. Its 80,000 hourly and salaried U.S. employees are half the number it had as recently as 2001.

    Nearly 500,000 U.S. retirees, as well as more than 150,000 of their family members, depend on GM health insurance and pension plans. Retirees will see cuts in their health care coverage, although the company's underfunded pension plans are not expected to be affected by a bankruptcy filing.

    In addition, about 300,000 employees at GM dealerships will be affected, as well as hundreds of thousands of workers at auto parts makers and other GM suppliers whose jobs depend on the company's survival.

    The government takeover -- even one that aims to be temporary -- marks a dramatic turn for century-old GM, which has been brought to a whisper of insolvency by plummeting auto sales and huge losses.

    General Motors has reported losses of more than $90 billion since 2005, while its share of the U.S. market has dropped to 19 percent from more than 40 percent in 1980.

    Europe jobs at risk as GM files for bankruptcy - CNN.com
     
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  3. EnlightenedMonk

    EnlightenedMonk Member of The Month JULY 2009 Senior Member

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    Certainly, its the end of an era...
     
  4. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    and they have come out with brilliant idea of building them in China and shipping them here, if no one bought them when they were made in detroit no one will touch them from China.
     
  5. Daredevil

    Daredevil On Vacation! Administrator

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    This is the right time for the Indian companies to buy into these bankrupted companies to get technical know how of the engines/designs which will also give access to existing dealership network which can be used for the exporting of our Indian made cars which can be improved further from the technology gained.
     
  6. EnlightenedMonk

    EnlightenedMonk Member of The Month JULY 2009 Senior Member

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    I'm sure the Chinese and other European brands are already out there trying to do exactly that...

    M&M and Tata should also get into the act...

    With the rates of Petrol going back to where they are, I think even the Americans would actually like to give the Nano a spin, if only for intra-city usage...
     
  7. Su-47

    Su-47 Regular Member

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    The plan is derived from the perception that GM cars were too expensive for customers when built in Detroit, and would be cheaper if built in China.

    The whole point of saving GM was to retain jobs in USA, rather than continued availability of crap cars (lets face it, compared to Japanese and German cars, GM cars are crap). If the Detroit plant is closed, and the factory moved to China, will all the current employees retain their jobs? NO!

    The only thing this move achieves is job creation in China. If I were an American citizen, I'd be PISSED that my tax dollars are used to create jobs in some other country, especially one that the USA doesn't meet eye-to-eye with.
     
  8. EnlightenedMonk

    EnlightenedMonk Member of The Month JULY 2009 Senior Member

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    Maybe LF can shed more light on a question I have...

    Do the Americans like the smaller cars which we prefer to use in India and Europe or are they still sticking to the uncouth (excuse the expression) vehicles we have come to expect of GM and their merry band???
     
  9. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    No thank you. TATA already made that mistake. We can instead focus on absorbing human talent that GM will start kicking out. We can focus on building better engines and designs using this talent rather than buying the rights of existing engines and designs. Its plain cheaper than having to manage those huge companies which have a lot of pension seekers.
     
  10. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    no Americans love big cars and trucks for awhile the SUV that gave 7 miles per galloon were the favorites then when gas went over 4$ a galloon many owners tried to sell but there were no buyers, the government (Bush) even gave tax incentives if you bougth SUV's.
     
  11. nitesh

    nitesh Mob Control Manager Stars and Ambassadors

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    DD not that easy, they have filed for chapter 11 that is application against credit protection. If any company agrees to buy it the money will be paid to the creditors and the buying company has to take care of all the liabilities like the pension burden, salaries, health care of employees/ ex employees etc. The main burden on such companies is these liabilities. Who will be able to take such burden.
     
  12. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    Thailand is a better option. Chinese companies will tend to reverse engineer the models and sell it under a new twisted GM brand. Even the Japanese have large car plants in Thailand.
     
  13. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    jaguar is a much better buy than GM would be, jaguar is a high end international brand while GM has become a local blue collar brand in USA.
     
  14. EnlightenedMonk

    EnlightenedMonk Member of The Month JULY 2009 Senior Member

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    Thanks for that info Nitesh... didn't know that...

    Then I guess its out of the question for M&M and Tata to go around buying these behemoths... its too infeasible...
     
  15. Daredevil

    Daredevil On Vacation! Administrator

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    TATA made a mistake by buying it at the wrong time, that is, just before the recession. You wouldn't be talking like this if it were to be successful. Though it is a good idea to just grab the human capital.
     
  16. Daredevil

    Daredevil On Vacation! Administrator

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    Nitesh, firstly, it will be downsized and will be made more lean, so we don't have to take care of all the employees. Many of them will be fired even before any company buys it. Companies will buy GM only when it is a attractive and sweetened deal not as a liability.
     
  17. nitesh

    nitesh Mob Control Manager Stars and Ambassadors

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    It all depends on the understanding between buyer and the respective government. If government normally does not take full liability of liabilities and then if the buyer does not have enough pockets then :(. It will go to government then.
     
  18. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    it may seem like they may have overpaid but in a couple years it will look like a bargain.
     
  19. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    Yes, timing for TATA was bad. But, lets wait for GM to post a lesser loss than the entire net worth of TATA or Mahindra. Else its a waste of time. I don't want Indian money going to pay for pensions and debt repayment in the US.
     

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