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 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 choices....so 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!
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.