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 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!

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.

SUMMARY:

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.

GM Sells Saab Brand

GM has been negotiating to sell the Saab brand to a Swedish company Koenigsegg Automotive AB. Koenigsegg is a Swedish manufacturer of high-performance sports cars based in Angelholm, Sweden. Koenigsegg along with some Norwegian investors have signed a letter of intent to purchase the Saab brand...with the sale to be consummated within several weeks.

Most people are not aware of the name....the company was founded in 1994 by Christian von Koenigseff, with the sole purpose of creating a world class supercar. The first street-legal production car was delivered in 2002.

Apart from developing manufacturing and selling the Koenigsegg line of supercar, Koenigsegg is also involved in "green technology" development programs. This enabled Koenigsegg to produce the CCXR - "Flower Power" flexfuel supercar as an example.


Koenigsegg is also active in development programs when it comes to plug-in electrical cars systems and next generation combustion engine technologies. Koenigsegg would be able to help Saab with the developement green technologies in their autos.

Koenigsegg holds a number of patents in the engine development area. In March, the Koenigsegg CCXR shown was chosen by Forbes to be one of the ten most beautiful cars in history.

GM to Sell Opel and Vauxhall to Magna

General Motors (GM) is working feverishly on a number of projects related to the bankruptcy. GM has scheduled an announcement for Monday morning....it is anticipated that they will declare a chapter eleven bankruptcy. The government had given them until June 1st to resolve their financial issues or file for bankruptcy. Presently, bond holders have withheld their approval of the deal to give them shares in GM in exchange for the bond debt. The United Automobile Workers have already reached an agreement with GM.

GM is also working on the sale of GM Europe to Magna International (MI). Magna International is a Canadian company based in Aurora, Ontario. It is Canada's largest automobile parts manufacturer and one of the country's largest companies. MI is a business to business company...with a name that is not well know to the public. They manufacturer parts for the Big 3 U.S. auto manufacturers in addition to Volkswagen, BMW, and Toyota.

The German government has requested that the GM subsidiary Opel be shielded from the parent GM's U.S. bankruptcy. The German government apparently be willing to put up 1.5 billion Euros($2.1 billion) for a bridge loan that would be repaid when the deal is closed.

It appears that Fiat has withdrawn from bidding on GM Europe, due to the German governments demand for emergency funds during the transition. Apparently, Fiat does not have the ability to fund the transaction.

Today, a memorandum of understanding was signed outlining a plan for the future ownership of the Opel and Vauxhall assets. The assets are to be transferred to a new company, which Magna International will take a 20 per cent stake and Sberbank, a Russian bank, will take a 35 per cent stake, giving their consortium a majority. GM will retain a 35 per cent holding, while the remaining 10 per cent will go to Opel employees.

The fate of Saab has not been resolved, but as soon as I have information I will advise!

Ford Overtakes GM In North American Production

General Motors (GM) has been the largest manufacturer in the united states since 1923. Due to the anticipated Chapter 11 bankruptcy filing GM will shrink substantially. Currently, GM has the following brands on the auction block....Hummer, Saab, GM Europe, and Saturn. In addition, they will discontinue the Pontiac brand.

Ford will displace GM as the largest North American auto producer this year. Ford’s North American output is actually expected to fall by 17.7 percent to 1.9 million units this year. But that number should keep the Blue Oval ahead of GM. GM is planning to sell or close the brands mentioned above.....also GM will cut production at 13 of its North American plants for up to 9 weeks this summer. GM North America should produce approximately 1.7 million vehicles this year.

Since the recession hit, GM financial problems have magnified. In 2008, Toyota overtook GM as the world's largest auto manufacturer. So it appears that GM will loose the second largest manufacturer in the world to Volkswagon.

Chrysler’s bankruptcy will also clear the way for Honda to move up to the number three spot. In fact, Chrysler will produce just over 900,000 vehicles this year – a decrease of more than 50 percent from last year – sliding the automaker all the way down to number five. Toyota should finish just ahead of Chrysler with approxximately 904,000 units produced.

Chrysler Closes 789 Dealers

Chrysler LLC announced today that they are planning on eliminating 789 of their 3,200 U.S. dealerships by early next month. They will formally petition the bankruptcy court...they indicated that the dealership network is antiquated and has too many stores competing with each other.

The issue with Chrysler is that these are the smaller dealers...they probably have done cost accounting and determined that it costs them more to support the dealers than they make from the sales of those dealers. Chrysler indicated that 50 % of the dealers accounted for 90 % of the the companies U. S. Sales.

Dealers were informed this morning via United Parcel Service letters...the letter notified all dealers if they if they would remain or be eliminated. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York, at that time the judge will approve or deny the motion. In most business bankrupcy cases, judges rely on the bankrupt corporations input to determine if contract cancellations are necessary.

Chrysler Vice Chairman Jim Press called the cuts difficult but necessary. He said the list of dealers is final and there will be no appeal process. Eliminating dealer will cut down on the cross town competition in many cases, which will increase dealer profits.

Chrysler is trying to cut the number of single brand dealers, so that Chrysler, Dodge and Jeep can be one dealership. Chrysler averages of 300 vehicles per dealer in 2008, meanwhile Honda sells 1,200 and Toyota sells 1,300 respectively.

The dealership cuts will cut also cut deep into the city budgets, as thousands of employees will be laid off and the city will loose sales tax revenue from vehicle sales.

My take is that this is one of the necessary steps to get Chrysler back in the game! It will be very painful to the employees, the dealers and the cities impacted. Chysler has done this so it can change the dealer contracts at will....outside of bankrupcy they would have been hit with a barrage of lawsuits.

I do feel that giving these small businesses less than a months notice is highly unfair! Many of these dealers have been with Chrysler for many years, then to tell them they don't have a contract under a month is very cold. The dealers should be notified and given time to take appropriate steps to wind down the business. Actually, this action will probably throw many of the dealers and employees impacted into bankrupcy themselves.

It is estimated that approximately 190,000 jobs would be lost from the GM and Chrysler bankrupcies.