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.

Chevrolet Cruz - Is This The Car That Can Save GM?

General Motors is a large corporate conglomerate which operates around the world. As such cars that they design should be marketable around the world. Here is a car that fits that requirement. The Chevrolet Cruze is essentially a world compact car that will replace the Chevrolet Cobalt and Pontiac G5. The current Cobalt will continue to be offered, probably thru June 2010, with the 2011 Cruze built alongside it until the Cobalt is phased out.

Since the Cruze is a world car, it was engineered at GM’s Russelsheim, Germany, development center, and was designed in Korea by GM Daewoo. The Cruze will be assembled in plants in the U.S., Mexico, various parts of Europe, South Korea, and Brazil.

The interior was done by GM Daewoo in Korea and appears to be the best interior in the compact class.....and arguably makes the car. The attention to detail is what sets the Cruze apart from the competition....it has a nice mixture of textures, including inset panels in the doors and on the dash of metal mesh, as well as satin finish on the center console. The seats have the mesh look along with accented stitching. An interesting feature is a sunglass holder that is built into the headliner above the drivers door.

Production has already started with Europe, with the Cruze going on sale as a 2010 model. In the Australian market, it will be sold as as the Holden Cruze starting in June 2009.

Production in the U.S. will be delayed until the remodeling and retooling of the Lordstown, Ohio plant is completed. GM is investing $500 million to build the car at the Lordstown plant. Plant capacity at Lordstown will remain unchanged at about 330,000 units annually.

The Cruze will be powered by GM’s new family of direct injection four cylinder engines, with a displacement of 2.0 liters, and with some turbocharged. Mileage will be in the 40 plus mpg range.

The European lineup of powertrains includes 112-hp, 1.6-liter and 140-hp, 1.8-liter gasoline engines as well as a new 150-hp, 2.0-liter turbo-diesel. Five-speed manual and six-speed automatic transmissions will be offered.

And with North America such a major piece of GM's global business, "we have to get our U.S. business turned around for GM to succeed," CEO Fritz Henderson said in an interview.

Summary:

General Motors is starting to build some good cars! The inevitable GM bankruptcy will impact GM in the short run, but Chevrolet will remain a viable brand. Producing products like this they will eventually recover. The Chevrolet Cobalt was a good step in that direction, but did not beat the best of the competition. The Chevrolet Cruze is the next generation....and I anticipate that it will be highly competitive.