GM is months away from bankruptcy. EDIT : Files for Chapter 11

[aaggoswami]

Opel is a part of GM so thought its worth posting here.
News Source : German government warms to idea of bailout for Opel - worldcarfans

Article :

The German government is considering a bailout for GM Europe's Adam Opel division. The German-based Opel brand has asked both federal and state governments in Germany for loan guarantees.

As GM's global financial situation deteriorates rapidly, suffering heavy losses, collapsing sales and bleeding cash, it's lack of liquidity is threatening the viability of one of Germany's oldest automakers.

Last week the German government turned down a request by Opel for 40 billion euros in guarantees to the German auto industry. But over the last few days, the government has come around to the idea that something needs to be done in order to shore up Germany's prime industrial sector.

Opel Managing Director Hans Demant told Reuters that government aid would be invested in products and manufacturing plants in Germany and would not be allocated outside of Europe.

The German business news daily Handelsblatt has also reported that government sources are saying the German state of Hesse, where Opel's Russelsheim headquarters are based, may provide some 500 million euros in loan guarantees to the trouble automaker.

A decision from Berlin is expected soon.

EDIT : And GM is planning to sell its remaining stake in Suzuki. I hope Toyota buys that.
Srouce : GM to sell remaining Suzuki stake - worldcarfans

Article :

GM is in dire need of cash.

As it awaits word on possible bailouts by the US and German governments it has sold off its 3 percent stake in Suzuki Motor for 230 million US dollars.

But the sale is not likely to have much of an impact on GM's bottom line. GM burned through 6.9 billion US in cash in the 3rd quarter of this year and is losing about 2.3 billion a month at its current rate.

Suzuki Motor of Japan said it would buy back the GM owned shares for 22.4 billion Yen, or 1,363 Yen per share.

GM at one point owned about 20 percent of Suzuki shares which it started buying back in 1981. By 2006, it had sold most of its holdings in the Japanese automaker which makes mostly compact cars and small 4-wheel drive vehicles.

Suzuki Motor is a long-standing brand in Japan, a successful maker of motorbikes, and is the biggest selling automaker in the Indian market. The company says it will continue its joint projects with GM, which includes development of hybrid vehicles.

[Joz]

More desparate efforts from GM. They are now selling of their stake in Suzuki. But analyst say the cash raised is only equivalent to that required to run the company for a week. I am almost certain the govt. will bail them out for sure or atleast give them short term support.

[aaggoswami]

GM has put up video on website putting out facts about the consequence is the American Auto Industry comes down.
NOTE : I am not able to post the entire video here, the video can be seen on the source ( link ) in this post.

Source : VIDEO: GM higlights the consequences of automakers collapse - worldcarfans

Article :

When a corporation sets up a website and puts out a video to beg for a government bailout, you know they are desperate.

We've considered earlier whether the doomsday scenario that GM has posited in their appeals for aid to the US Congress and the Bush administration would actually occur should GM become insolvent. They claim that if they go down, they will take the rest of the industry and its suppliers with them, with hundred of thousands of job losses and a contraction of the GDP since the auto industry makes up about 2.3 percent of that. One thing you can be sure of is that they believe it themselves. Otherwise, they would wait for an Obama administration since the President-elect (along with the Democratic-controlled Congress) is in favor of the loan guarantees.

Some analysts believe that the US auto industry would be able to survive and be made up mostly of local suppliers funneling parts to foreign automakers manufacturing vehicles inside the United States. That may be true. But those foreign automakers have their own interests at heart and they won't care much for GM, Ford and Chrysler's employees, nor the unions that represent them since foreign automakers like to set up plants in the South with non-unionized work forces. And what about the thousands of businesses and jobs at risk at Big 3 dealerships?

About 100,000 automaker and supplier jobs have been lost in the US this year alone, accounting for 10 percent of total job losses for 2008.

And GM does make one argument in this video that is interesting.

The continued erosion of the US manufacturing base is an old story, since we all know how nearly everything available for purchase in the United States is made either in China/Pacific Rim (low-cost goods) or Europe (luxury goods). But the automotive industry still represents the core of US industrial might.

GM claims than in a nation security emergency the US would be dependent on foreign manufacturers to build heavy vehicles for the military.

That may be an exaggeration but it is obvious that if the big 3 are no longer around that the bulk of research and development for new products and technologies will be done outside of the US. And that is a big hit in itself to American industrial power.

[aaggoswami]

@mods: I tired editing, but even when the edit button was active, I was given the message " 20 mins... " thats why a new post.

This is in reference to the above post of mine.
The facts from the video are put up here. The video also claims that the collapse of US auto industry will be bad for security of US as in case of war there wont be any manufacturer for mass production.
The facts are in the following quote.

GM, Ford and Chrylser employ 2,39,000 Americans and 7,75,000 retirees and surviivng spouses rely on the domestic automakers for pensions and benefits
2 million people look to auto industry for health care benefits.
In 2007, the auto industry purchased $ 156 billion in parts, materials and services supporting jobs in all 50 state.
It is largest purchaser of computer chips, plastic, electronics, steel iron, aluminum, copper in the US.
610,000 workers are employed by suppliers to the US auto industry earnign an annual payroll of $54 billion in 2007.
Auto dealers are another vital cog. The US has 14,000 GM, Ford adn Chrysler new vehicle dealerships spread across every state.
They employ an additional 740,000 people nationwide with a total payroll of $35 billion.
Generating $ 693.3 billion in total new sales and contributing more than $ 10 billion in annual tax revenues.
What happens if the domestic auto industry collapses ?
" IN economic terms,the rapid termination of Detroit Three U.S operations in 2009 would reduce U.S. personal income by over $ 150.7 billion in the first year and generate a total loss of $398.2 billion over the course of three years.
This would result in a loss to the government of
$ 60.1 billion in 2009, $ 53.3 billion in 2010 and $42 billion in 2011. a total government tax loss of over $156.4 billion over three years,
The current economic downturn was spurred by a 0.3 % drop in the GDP.
Think about what a nearly 4% drop in GDP will do to economy - that's the auto industry's contribution to the GDP each year.
One out of every 10 jobs in the US relies on the US auto industry.. thats 13 million people.
13 million is the combined populations of Virginia and Minnesota.


Facts About the Auto Crisis - GM Facts and Fiction

[Raja]

What are the possibilities of 'Nationalising' GM or any of the other 2 manufacturers? Similar to what US Government has done with the sub-prime mortgages? US Governement becomes the owner of the company?

[hondadude]

A lot of that is bunch of crap. As long as American people keep buying cars, there will be factories in US, there will be suppliers in US and auto dealers as well. The only difference is that instead of manufacturing and selling big-three, they will be making and selling Hondas and Toyotas.

[amitpunjani]

Originally Posted by RX135

I have not caught even an iota of this whole BIG 3 Automaker bankruptcy business.

However, I've a gut feeling, and strong one it is, that bankruptcy of GM would never happen, or US Govt. will not let that happen. Proposals will be made and will be rejected, there will be talks of bankruptcy and chapter 11, but after lot of give n' take, finally a solution will emerge to bail GM out.

Well, just a gut feeling! Don't ask for justification.

HI Rx 135

I share same thoughts on GM bankruptcy. IMHO, GM is the pride of US and they won't let it go like that.

Long Live GM

Amit

[BenjiRoss]

Rediff had this article:
rediff.com: Will America's 3 biggest automakers die?

[tsk1979]

Bailout seems like a nice idea, but GM is asking the wrong question. Considering the amount of gas guzzlers big 3 make, the right people to ask for money are the oil companies.
They have enough cash to bailout GM and the likes.
It need not be cash. For example an offer of vehicle price gallons of gas free with every vehicle should warm up the customers to "Gas Guzzlers"

[AMATMO]

if daewoo hadnt collapsed ,GM would have got bankrupt by now
today daewoo is one of the important source of sales for GM and daewoo range is perfect to compete with the japanese

also daewoo is perfect for delevoping markets like asia aswell as developed markets in the west cause they can offer more vfm than the japanese

[vinit.merchant]

Read today in todays papers. GM is adding 500 more employees for its Talegaon Plant in Pune. It also mentions that even though there are Lay-Offs in the US, GM will keep hiring here. Source: TOI

[sridharps]

Originally Posted by BenjiRoss

Rediff had this article:
rediff.com: Will America's 3 biggest automakers die?

Good one, did you see this part in that article?

Instead, though unlikely, GM might have to face the dreaded Chapter 7 bankruptcy, which would see GM factories cease production, orders for auto parts stop and the entire scheme grind to an unsatisfying halt, the net result of which could mean up to 2.5 million more Americans left unemployed, driving the overall US unemployment close to double digits, the highest in 30 years, according to a study by the Centre for Automotive Research (CAR).

I like the word unlikely here. I hope it stays that way.

[aaggoswami]

Congress is ready to help the troubled manufacturers with some strict restrictions.

Source :
Congress puts forth bailout plan with strict demands - worldcarfans

Article :

GM, Ford, Chrysler and their suppliers are unassuringly counting on a lame-duck Congress and a lame-duck president for help. Republicans in Congress, as well as the Bush administration, remain skeptical of a bailout. And Congressional leaders are aiming to impose serious conditions on any loan guarantees provided to the automakers.

There are currently two competing aid packages being put together, one from each chamber of the US Congress. A Senate proposal by Michigan Democratic Senator Carl Levin calls for the automakers to submit detailed restructuring plans and make commitments to building more fuel-efficient vehicles.

But the House version (House of Representatives) stipulates far stricter conditions. The plan, backed by Democratic Speaker of the House Nancy Pelosi of California, calls for the government to hold veto power over any major business decisions by automaker who receive aid. It also requires the Big 3 to submit a "plan for long-term viability and international competitiveness" by the end of March next year.

And there is more. The government would be first in line amongst the companies' creditors and the US Treasury will take stock in each company worth a minimum of 20 percent of the loans provided.

But still, the Bush administration expressed skepticism at providing any additional aid beyond the 25 billion in loans approved in September for automakers to use for plant re-tooling and investment in future products.

Automakers are seeking an additional 25 billion on top of that to secure their liquidity through 2009. GM, Ford and Chrysler are burning cash at unsustainable rates. GM says it will run out of money by mid-2009 if it does not secure a government bailout.

Democrats would need a two-thirds majority in both houses of Congress to override a presidential veto of any bill they pass, which is very unlikely.

And Germany is ready to give Opel ( bringing it here as it is part of GM )some help.
Source : Berlin ready to give Opel 1bn Euro guarantee - worldcarfans

Article :

It was quite a site to see - GM Europe's CEO Carl-Peter Forster standing next to the German Chancellor at a press conference yesterday after his plea for aid. But GM has succeeded in its search for cash, at least in Germany. The German government has announced it is ready to provide a loan guarantee to Opel, GM Europe's main brand and one of Germany's largest automakers.

The Berlin government has said it will provide Opel with 1 billion euros in a loan but Chancellor Angela Merkel has stipulated that the money is to remain in Germany and used only to shore up Opel operations in country.

Opel has been hit hardest by the shrinking market in Europe. Opel (and its sibling brand Vauxhall) have seen sales fall 14 percent so far in 2008 compared to an overall drop of only 6 points in Western European car markets, according to ACEA, the association that represents European car manufacturers.

Quietly behind the scenes in Germany is VW, the automaker that has suffered the least in terms of sales. Its sales are actually up for 2008, in a market that has fallen off sharply. VW sales were down only 5.1 percent for October compared to the same month last year. The overall car market in Europe dropped sharply by 14.5 percent for the month compared to October 2007.

[benbsb29]

Now that GM has sold off its stake in Suzuki, one can assume that the Aveo would never come with the MJD series of engines?

[mjothi]

Originally Posted by benbsb29

Now that GM has sold off its stake in Suzuki, one can assume that the Aveo would never come with the MJD series of engines?

What does MJD to do with GM selling its stake in Suzuki? i dont get you buddy.

MJD is from Fiat. And whether they have stake or not, its business. If they want to buy from Fiat they would get to an agreement and buy, right?