Monday, July 6, 2009

New GM To Emerge

Today is a milestone of American history......General Motors (GM) is about to exit bankruptcy. This is one of the largest and the fastest bankruptcy in American history! The bankruptcy judge Robert Gerber has ruled that GM will be allowed to sell the bulk of the good assets to the new GM. This is the final procedure that will allow the automaker to emerge from bankruptcy protection.

The old GM will be renamed Motors Liquidation Co....and those assets not transferred to the new GM will remain and be liquidated. This process may take up to 2-3 years to finalize. The GM stock is still traded in the over the counter market....but is virtually worthless.

The speed of the bankruptcy was initiated due to the Obama administration requirement otherwise the government would refuse to provide GM with additional funds unless it was out of bankruptcy court by July 10th.

"As nobody can seriously dispute, the only alternative to an immediate sale is liquidation — a disastrous result for GM's creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates," a comment out of the Gerber ruling.

There will be a number of appeals....some are by people that are suing GM citing liable in several auto accident cases. Other are GM's bondholders, unions and consumer groups indicating that their needs were disregarded in bankruptcy. A group of the Chrysler bondholders took their objections to the Supreme Court last month, which delayed Chrysler's exit from bankruptcy....but the court failed to hear their case.

The bankruptcy will allow GM to significantly reduce their debt....along with a renegotiated United Auto Workers(UAW) contract. GM will shed its non-profitable divisions Saturn, Pontiac, Hummer, Saab and Opel.

The new GM has an image problem.... baggage from the old GM....they are perceived as a auto company that is out of touch with the needs to the American public. GM grew fat and bloated and thought that whatever they built would be bought by the public.

Unfortunately, the public has some incredible the new GM will have to bring some dynamic vehicles to market. Then it will take a few years to change the public perceptions. Some of the cars that GM was building lately are actually very good cars....unfortunately most people have the old perception that GM cars stink!

The Chevy Cruze is an excellent choice as a compact car but GM will have serious competition from the Honda Civic, Toyota Corolla, and the Ford Fiesta. The challenge that GM will have is regaining the trust of Americans that have purchased foreign brands and are content with their choices.

When the bankruptcy is completed, GM will receive about $50 billion tax dollars. The government will own 61% of GM. The Obama administration has indicated that they will be hands off owner....but they have already selected AT&T Inc. CEO Ed Whitacre to chair the board. Whiteacre rebuilt AT&T after they were substantially down in market share and profits after the government sponsored breakup of AT&T.


GM will be a better company after this reorganization! I had predicted that this would be the solution back in my February 16th post...Time GM To Pay The Piper. GM will not have the substantial debt to service, the UAW has made substantial concessions to reduce the man hour cost. They have eliminated much of the dead weight that had accumulated over the years.

In the past, I had been very critical of the GM board. They should have replaced the CEO and President Rick Wagner since GM continued with substantial losses and declines in market share. As a shareholder, I would have been extremely upset.

Since, Ed Whitacre will be chairman of the board, expect positive things to happen. He knows how to run a large business and make it successful. The new GM will be a much better company....with products and service to match.


  1. Hi Pete .. looks like GM or the govt are making the right decisions for the future ...

    Thanks for updating us ..
    Hilary Melton-Butcher
    Positive Letters

  2. Hi Pete,
    You were right! This was along time coming. G.M. could not think they were going to continue their old ways? How long do you think it will take for this company to get on track? Keep it coming sir.


    Dr. Moulas

  3. Hello Peter,
    It is not good the way the bound holders and others are being treated. Laws have been put aside for this, it will make a bigger mess in the future. It will happen over and over again because they have now made this a way of life for all. Hope it works out for GM. Not the best of things. Thank you for keeping us informed.

    Dan and Deanna "Marketing Unscrambled"

  4. Hi Hilary,

    Yes, it appears that they are making the right choices to improve the company for the future.
    The other option would have been to liquidate GM...which would have been bad for the company and the country.

    Thanks for your comment!

    Pete Baca
    The Car Enthusiast Online

  5. Dr. Bob,

    The bankruptcy has been coming for a long time! It amazes me that they were not making better was obvious to me that there were some serious competitors out there. They just seemed to ignore them!

    Recovery for GM will take a few depends on how quick the economy comes back. GM has indicated that they can be profitable at the current sales levels. So, when sales do increase substantially due to the pent up demand...profits and sales should soar.

    Thanks for your comment!

    Pete Baca
    The Car Enthusiast Online

  6. Hi Dan & Deanna,

    Your correct about the bond holders...they were stiffed! In a bankruptcy, any of the amounts due to creditors can be reduced.

    What we do not know is if the bond holders would have been better in a liquidation! The Obama administration wanted to get this over with....which was probably the best solution.

    I hope that what has happened is the best for the country and the auto makers survive and prosper!

    Thanks for your comment!

    Pete Baca
    The Car Enthusiast Online