GM File for bankruptcy

[Yoda]

From ABC news.

http://www.abc.net.au/news/stories/2009/05/31/2585531.htm

GM expected to file for Bankruptcy Monday 1st of June.

The Federal Government says General Motors' fortunes overseas are not expected to have any impact on Holden's Australian operations.

Holden is the Australian subsidiary of troubled Detroit-based car maker General Motors (GM), which is expected to file for Chapter 11 bankruptcy on Monday.

The Government believes GM's local operations remain viable following the $6.2 billion car plan announced last year.

It aims to help the company produce a new four-cyclinder model at its South Australian plant, a spokeswoman for Industry Minister Kim Carr said.

The Australian Government's comments come a day after the German government helped to broker a deal to rescue the bulk of GM Europe's operations.

The company's European arm will be placed into an independent trust which will be protected if GM does file for bankruptcy, and Germany is to provide a bridging loan of more than $2 billion to keep operations running.

In the meantime, the German government continues talks with Canadian firm Magna International and its Russian investors to work out the final structure of the new group.

Since last week, GM has been racing to complete a series of last-minute deals intended to help speed its way through a fast-track bankruptcy that would see it emerge under the majority ownership of the US Government, at least for a short time.

US President Barack Obama says he expects the Government to own less than 72 per cent.

"My preference would have been to stay out of it completely," he said in an interview with NBC News.

"But the alternative was to see a liquidation, bankruptcy in which an enormous institution with huge importance to our economy simply gets broken up in to pieces."

Car workers' unions in the US have also agreed to a range of concessions in the hope of saving jobs.

They include freezing wages, ending bonuses, cutting health benefits for retired employees and holding off on strike action.

In exchange the unions will received a 17.5 per cent shareholding in GM once it emerges as a new slimmed-down company

[Mothers Worry]

US auto industry's future hangs in the balance

From AFP via Yahoo!7 News:

US auto industry's future hangs in the balance

May 31, 2009, 8:37 am

WASHINGTON (AFP) - The US auto industry faces a day of reckoning Monday, with the looming bankruptcy of auto giant General Motors and an expected court ruling on the sale of automaker Chrysler to a group led by Italy's Fiat.

The once mighty US auto industry is reeling, prompting massive intervention by President Barack Obama's administration to prevent total collapse and a new body blow to a national economy already in recession.

The government's rescue plan for GM could put as much as 72.5 percent of the country's biggest automaker under state ownership.

The hours are now numbered for GM, whose bondholders' Saturday deadline expired without indication on whether they support the group's new offer.

If they accept the plan, the bondholders would obtain the rights to buy an extra 15 percent of GM's stock at a low price. They would also control 25 percent of the "new GM," after having supported the new company's creation in bankruptcy court.

Recalcitrant bondholders who opt for confrontation rather than cooperation "will get nothing or very little," an Obama administration official told reporters Thursday.

Government-backed restructuring in bankruptcy court for GM, once the world's largest automaker, appeared all but certain ahead of a Monday deadline imposed by the Obama administration on the company to submit a viable restructuring plan or file for bankruptcy. It could take place as early as Sunday.

Meanwhile, a US bankruptcy court judge in New York was widely expected to approve a deal between Chrysler and Fiat Monday. The third biggest US automaker has declared bankruptcy and is seeking a tie-up with Fiat in a plan presented as the only way to save the company from liquidation.

Developments at Chrysler could provide an example for restructuring at GM, which will similarly have to sell some of its brands and close many dealerships.

But the administration official said a 60- to 90-day timeframe was "better" for GM, contrasted with the fast-track process for Chrysler, which filed for bankruptcy protection on April 30.

"This is a much more complicated company than Chrysler, as a global company. It's three times the size," noted the official.

The United Auto Workers (UAW) union said Friday its members ratified a deal to allow GM to radically cut costs and its debt load, clearing the way for a quick exit from the expected bankruptcy filing.

GM also announced plans to retool an idled US plant to build small cars it had originally planned to import, and two more US assembly plants could potentially be saved.

The bankruptcy filing could also be sped up by a deal struck in the early hours Saturday that sees Canadian parts maker Magna and its Russian backers taking over GM's Opel.

The deal for GM's European operations, which was brokered by Berlin, amounted to a major development in the global rearranging of the auto industry. GM employs some 50,000 people throughout Europe and Magna plans to cut about a fifth.

German Chancellor Angela Merkel, whose government agreed to stump billions of euros (dollars) in loan guarantees and emergency loans to keep the ailing Opel afloat, acknowledged that talks over the future of GM Europe had sometimes been difficult.

Despite what she called "huge mismanagement" by GM executives, a telephone call to Obama helped seal the deal, she said.

As for Chrysler, a new company could be born within days of approval for bankruptcy. The Treasury said it had transferred 6.9 billion dollars in public funds to New Carco, a newly created company to acquire Chrysler's "good assets."

If presiding judge Arthur Gonzalez rules against Chrysler, it faces a grim future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation, with massive job losses.

Legal appeals were expected if Gonzalez ruled in favor, meaning possible new delays. Fiat has said it might back out if the transaction is not completed by June 15.

[Richarbl]

Although I am a Ford person...but objectively so.....I am sad to finally see GM become nationalised. It should however come as no shock to anyone who has been watching the car industry for few years, it was clear to most people that GM were on a downward spiral that they would probably not recover from.
The reasons are many and varied, ranging from a US only market focus, reliance on SUV's, poor quality products, lack of small car ability and a million other issues.

Such as the interview in the latest issue of Wheels magazine with Mark Reuss, an American and current boss of Holden. This story is wrapped around the release of the new Holden Cruze, a thinly disguised Daewoo which has produced other recent pieces of road junk such as the Viva, Barina (current model), Captiva and Epica.

When asked by journalist, Sean Poppit about some details, he said...." See those engine mounts? We swung the power cube (he means engine) from a chain to find
its moment of inertia, then mounted the engine along that torque axis to optimise NVH." Walking around and pointing to the body side Reuss adds, " I challenge you to a seam weld on this side; we used copper plating on the weld tips."

I don't have the time to explain to those who are not technically experienced but anyone with automobile engineering and construction knowledge would instantly recognise these baffling statements as pure gobbledigook.

I hope, for Holdens sake, Mr Reuss is a better accountant than he is an engineer.

[Yoda]

It was always going to happen.

The product line up and the refusal by management to accept that we live in a changing world left GM and Chrysler years behind the competition.

I'm dissapointed that the US government has decided to bail out and subsidise this 20th century relic. GM has been a blight on the world wide industry for years.

[Prophet][]

As much as I would have loved to see someone else buy out GM I hope they do come back to be a major player cos I really would feel for great companies like Futuris that rely on GM.

[f1engineer]

Pardon my ignorance, but who are Futuris?

[Oldtony]

They design and build seats, trim and interior fittings for vehicles F1E
I guess you could say they are into posteria engineering.

[Ian G.]

...on the News last Night,got smothered with 9-11 anniversary,after being called off Magna(Canadian Auto-parts mob) is going ahead to purchase Opel & Vauxhall,German Govt. is going to guarantee Opel jobs but UK Unions say that there is no such deal for Vauxhall and it can't survive without Govt. help. More to come on this as it Looks like "New" GM will be North America and Asia Pacific  for the fore-seeable future.

[Oldtony]

Basicaly the deal has been widened by Magna bringing in the Russian car manufacturer OAO Gaz (check the Moscow cabs and police cars) who together with Magma will buy a 55% share of Opel from GM. Opel will not be able to sell in the US, Canada or South Korea, and must stay out of the China market until 2012. They also have to set up "firewalls" against technology transfer from the Magma parts production for GM and Ford to the Opel or Gaz production.
Current indications are that Vauxhall is not included in the deal and will be asset stripped and closed down.
As you said Ian it looks as if GM will be mainly N. America and Asia Pacific and will virtually vanish from Europe. What happens with S.America I don't know. The exclusion of Canada is interesting as it is the home base for Magna.
The deal is upposed to be finalised by the end of this month.
Meanwhile the takeover of SAAB by Konisiseeg, the Swedish supercar builder is beeing financed by money from the Arab Gulf states and will not be using Swedish Government financing.

[Ian G.]

I noticed in a report on SBS that the Canadians have a stakehold in the 'New' GM,not sure if its the Canadian Govt. or the Canadian based Autoworkers Union or some sort of a mixture between the 2.

[Oldtony]

Here is a surprise. GM today said that they were not going ahead with the deal to sell Opel and Vauxhall to the Magna headed consortium.
They said that studies indicated that they could restructure operation and bring them back to "positive cash flow".
The immediate reaction fromthe German government seemed to be "not with our money" and of course the UK and Spanish government said earlier they were not getting involved in any rescue deals.
Unless they have got a new line of credit from Obama I don't see how they could bring this off.