REPORT: US directs GM to prep for bankruptcy filing by 6/1

[BigPontiac]

Link to Article

US directs GM to prep for bankruptcy filing-NY Times

Sun Apr 12, 2009 11:08pm EDT

WASHINGTON, April 12 (Reuters ) - The U.S. Treasury Department is directing General Motors (GM.N) to lay the groundwork for a bankruptcy filing by June 1, even though the automaker has publicly stated it could reorganize outside of court, The New York Times reported on Sunday.

GM is operating under emergency U.S. government loans. It has been told by the Obama administration's task force overseeing its bailout that it must cut costs and reduce its debts in order to continue to receive aid.

The White House-appointed autos task force has given GM 60 days to come up with a restructuring plan and it is trying to determine whether the automaker can be a viable company.

Quoting sources who had been briefed on the GM plans, the Times said the goal was to prepare for a fast "surgical" bankruptcy.

The newspaper said preparations are aimed at assuring a GM bankruptcy filing is ready if the company is unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union.

A plan under consideration would create a new company that would buy the "good" assets of GM after the carmaker files for bankruptcy, the Times said.

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years, according to the paper.

Treasury officials are examining one potential outcome in which the viable GM enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person briefed on the matter told the Times.

The Times sources declined to be identified because they were not authorized to discuss the process. Both GM and Treasury Department officials declined to comment, the newspaper said.

Last week, GM's chief executive said the automaker wanted to restructure out of court, but also preparing for a bankruptcy filing.

[black02]

Link to Article

US directs GM to prep for bankruptcy filing-NY Times

Sun Apr 12, 2009 11:08pm EDT

It's looking more and more like the bankruptcy is inevitable, especially given the rumors that the bondholders would prefer a default, for which they could put in a claim. This 363 is also a way to get it over with very quickly, with respect to the continuing part of the business.

[ShadowDog]

It's looking more and more like the bankruptcy is inevitable, especially given the rumors that the bondholders would prefer a default, for which they could put in a claim. This 363 is also a way to get it over with very quickly, with respect to the continuing part of the business.

I certainly didn't expect it to go any other way. It was never a matter of 'if', but 'when'. The only thing left to do is continue to fill topics with discussion and argument on which brands are deemed "unwanted" as the report suggests. Apparently, they're ALL 'wanted'.

[black02]

I certainly didn't expect it to go any other way. It was never a matter of 'if', but 'when'. The only thing left to do is continue to fill topics with discussion and argument on which brands are deemed "unwanted" as the report suggests. Apparently, they're ALL 'wanted'.

I'm glad that the government spent the time to do this right. A 363 without government help likely would have been impossible, and a standard chapter 11 would have been a mess and probably would not have been successful.

The only bad thing is that GM has to choose now which brands it wants to keep. After the bankruptcy, it'd be very expensive to drop any. So given what's been posted here, things don't look good for Pontiac. It's kill it now or kill it never. And I've not seen anything from GM or the government that makes me think 'never' is likely.

Besides, the annual will they/won't they would be incredibly distracting. Get it over with and focus on the future. No more painful dragged out brand deaths, with years of rumor followed by 3-4 years of slow death.

[pow]

Agreed... restructuring to competitiveness, whether through bankruptcy court or not, inevitably means downsizing - closing plants, laying off workers, killing brands - so that the size of the company is in line with the actual car market size. The dilemma is how best to minimize the effects of this downsizing, and to make sure all stakeholders share in the pain. In this respect, a government aided bankruptcy seems preferable.

[Chevy Nick]

This should make for an interesting spring and summer.

[FUTURE_OF_GM]

I still think the 5 core brands should be kept....

But I think we'll end up seeing either Chevy, Cadillac & Buick or Chevy, Cadillac, Buick and GMC.

Why not go the extra mile and preserve Pontiac as a niche brand?

[Camino LS6]

Saving Buick and/or Pontiac as niche brands makes good sense simply for sake of leaving GM's options open after the restructuring. They will need all of the exisiting customers they can keep.

In fact, It would make sense to me to plan for both brands to be niche for a while at least. Do a few cars, do them extremely well, and do them true to the two brands.

A few years of that, and both brands will have huge value as well as potential.

[Dsuupr]

Besides, the annual will they/won't they would be incredibly distracting. Get it over with and focus on the future. No more painful dragged out brand deaths, with years of rumor followed by 3-4 years of slow death.

The big question will be, how fast do they close the dealers and stop providing product. A BK means they can and will need to drop the division and everything it represents within a month to make it a fast one.

[hyperv6]

I am sure if anyone is willing to write the check to pay for them they would love to keep the other divisions open.

If models can be reserected limited brands like Pontiac could be down the road if anyone shows that much interest.

Note not saying it is likely.

Edited April 13, 2009 by hyperv6

[Camino LS6]

I am sure if anyone is willing to write the check to pay for them they would love to keep the other division.

Time to go back to basics.

If models can be reserected limited brands like Pontiac could be down the road if anyone shows that much interest.

Note not saying it is likely.

Seems more sensible to keep them around in a niche role than dreaming of a later resurrection.

Take out the costs in the restructuring, and focus on building one or two "perfect" Buicks and Pontiacs.

Best of both worlds that way

[evok]

From AN interview with Fritz published today:

How much revenue do you lose to get rid of a Saturn; to get rid of a Hummer?

Well, we actually showed a chart - it was measured in volume, not necessarily revenue. The revenue effect is actually less than the volume effect because the vehicles tend to sell for lower average transaction prices than our regular vehicles. But in the end, if I remember chart correctly, from '08, Saturn was about 100,000 retail cars, after you pulled out fleet and after you pull out employee sales. And, Pontiac was similar actually. Hummer, Saab - a fraction of that, a very small fraction of that.

About 250,000 units?

Oh, yeah. And even then, we're not conceding that because many of those sales were still ones where we provided some kind of GM support for them whether it was APR or in the case of Saturn, they were heavily driven by leasing which we've exited. So the question is: Can we bring the customer back into a Chevrolet or a Buick?

[Camino LS6]

The answer is not likely, and not often.

[hyperv6]

Seems for sensible to keep them around in a niche role than dreaming of a later resurrection.

Take out the costs in the restructuring, and focus on building one or two "perfect" Buicks and Pontiacs.

Best of both worlds that way

And then when when they don't sell and GM could have used that money to make a perfect Chevy something that could make a profit and sell in greater volumes?

GM is not going to get a second chance so they need to get back to the basics.

Goodyear did the same and shead all the other lines like belts, hoses, convair belts, chemical, aerospace and more. It was painfull but today they are a company that is holding it's own when most of their competitors are struggling. They got back to the core of selling tires and not much else.

I could justify Buick as if it fails here it will still do well in China and beable to recoupe any loss. If Pontiac fails here it will just be a loss out side the G8.

[Camino LS6]

And then when when they don't sell and GM could have used that money to make a perfect Chevy something that could make a profit and sell in greater volumes?

GM is not going to get a second chance so they need to get back to the basics.

Goodyear did the same and shead all the other lines like belts, hoses, convair belts, chemical, aerospace and more. It was painfull but today they are a company that is holding it's own when most of their competitors are struggling. They got back to the core of selling tires and not much else.

I could justify Buick as if it fails here it will still do well in China and beable to recoupe any loss. If Pontiac fails here it will just be a loss out side the G8.

So think of it like this (just a hypothetical), Buick stays and keeps Enclave and the new Lacrosse and Pontiac stays and keeps G8 and Solstice. Both are simply marketed well and incrementally improved over the next few years while GM sorts out the rest of its business. The biggest investment might be adding a model variant to an existing line.

At that point, a less rash approach to the future could be taken using improved brand equity. It could solidly place both brands well above Chevrolet. If it doesn't work, so be it - the costs would be tiny. Not something that would have impeded Chevy and Cadillac in any way.

[Camino LS6]

I just see it as a way for GM to keep something in its back pocket for later. It won't look so gutted that way.

[G. David Felt]

Over all I think this is good as those that hold the debt will end up getting a tax break against other profitable earnings. So this is the win they wanted and GM can finally clean house and get a fresh start. UAW, sucks to be you as you have hurt yourself with your greed.

End result, if they properly position the business plan as a 3 tier company of entry level, mid lux level and Luxury, They really could end up with a Chevy, BPG & Cadillac formula that will work. This would save many customers and allow them to flush out Saturn, Hummer and SAAB. I suspect SAAB will truly die as will Hummer. The technology of Hummer will live on in other GM products. Saturn I could see as an independant company or bought by a India or Chinese company that gives them access to the US market.

In regards to customers lost, very little as SAAB was not enought to really be noticed, Hummer is the same way, but most of Hummer people will shop other GM products again unlike SAAB customers. Saturn is the only place you could loose a noticable amount if it is not bought by another company.

[hyperv6]

What is going to be interesting is how the Obama admin deals with his Surgical Bankruptcy as they call it with thew UAW.

The UAW has been pushing them to avoid Bankruptcy so I wonder if they found a way not to mash any toes or is the UAW going to be mad.

The details will be interesting.

[Camino LS6]

What is going to be interesting is how the Obama admin deals with his Surgical Bankruptcy as they call it with thew UAW.

The UAW has been pushing them to avoid Bankruptcy so I wonder if they found a way not to mash any toes or is the UAW going to be mad.

The details will be interesting.

"Interesting" would be an understatement, I suspect.

With all of the obstacles to step around, I fear a plan born of commitee. All of the constituencies addressed, but none of the real problems...

[hyperv6]

"Interesting" would be an understatement, I suspect.

With all of the obstacles to step around, I fear a plan born of commitee. All of the constituencies addressed, but none of the real problems...

I just hope they do what is right and best not based on who donated how much.

This is no time for political games for GM's sake.

Edited April 13, 2009 by hyperv6

[Teh Ricer Civic!]

I just hope they do what is right and best not based on who donated how much.

This is no time for political games for GM's sake.

Alienate Union workers all across America & lose a large segment of votes, or do whats right for GM...

Hmmmm....

If Obama actually does whats right for GM while compromising himself among union workers, i will be very impressed by his character.

[black02]

The answer is not likely, and not often.

And how do you know that?

[hyperv6]

Alienate Union workers all across America & lose a large segment of votes, or do whats right for GM...

Hmmmm....

If Obama actually does whats right for GM while compromising himself among union workers, i will be very impressed by his character.

Piss of UAW member or bail out GM that will help spur growth of the Economy that your struggling to help recover.

Lets face it Obama is faced with fixing GM or paying to clean up the mess after GM. At least with GM around they will be brining money back into to the economy and jobs vs if GM and many suppliers just tank.

I think this time this is one the UAW will lose but I could see the goverment making GM do the dirty work first hand so they can place the blaime on GM and not any elected official.

I can see it now. Guys we did all we could do but GM forced our hand when they filed.

Biden could just say "I was in Fritz's office and I told him not to do it!"

Either way it is a tight rope they will figure out how to place the blaime fully on GM in the end if the UAW loses out. And at this point I don't see GM fighting it.

Edited April 13, 2009 by hyperv6

[gm4life]

Alienate Union workers all across America & lose a large segment of votes, or do whats right for GM...

Hmmmm....

If Obama actually does whats right for GM while compromising himself among union workers, i will be very impressed by his character.

He'll do whats right for the Unions, then GM comes back to the table a few years later. Hopefully with someone in office who isn't out to "save" the Unions. I hope the UAW gets real, and so do the execs who have made darn bad choices. Obama might be smart enough to realize he can't give into the UAW and have a sucessful GM... I hope so, and I would like to see that, the less goverment in this chapter 11 filing the better.

[daves87rs]

What is going to be interesting is how the Obama admin deals with his Surgical Bankruptcy as they call it with thew UAW.

The UAW has been pushing them to avoid Bankruptcy so I wonder if they found a way not to mash any toes or is the UAW going to be mad.

The details will be interesting.

This is cleary to get around the UAW. It is going to be messy, and possibly the end of the UAW.....

[daves87rs]

Alienate Union workers all across America & lose a large segment of votes, or do whats right for GM...

Hmmmm....

If Obama actually does whats right for GM while compromising himself among union workers, i will be very impressed by his character.

In case you haven't noticed, unions are disappearing pretty quickly here...

These so called "pissed off union workers" will be too busy looking for new jobs to care...

[daves87rs]

He'll do whats right for the Unions, then GM comes back to the table a few years later. Hopefully with someone in office who isn't out to "save" the Unions. I hope the UAW gets real, and so do the execs who have made darn bad choices. Obama might be smart enough to realize he can't give into the UAW and have a sucessful GM... I hope so, and I would like to see that, the less goverment in this chapter 11 filing the better.

I want to know why Obama going to care about the unions? He doesn't, and I don't think he plans to take major heat from the right to work states....

He needs to save GM to keep the economy from falling apart....

[Teh Ricer Civic!]

He needs to save GM to keep the economy from falling apart....

There is a big difference between a band-aided together economy & a good economy. The path Bush lead us down, with Obama gleefully following, is the former.

What seems great TODAY may suck TOMORROW. But Politicians do not care, they only care about votes and being re-elected; which i why i have little faith in either party for actually paving the way for a strong, sustainable, economy.

[GXT]

"Treasury officials are examining one potential outcome in which the viable GM enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person briefed on the matter told the Times."

What happened to the "100 Billion" cost to the government for C11? Not that I believed that... or the "two weeks" claim from this article, for that matter

At least there will be no more posts calling the bailouts "loans".

[GXT]

This is cleary to get around the UAW. It is going to be messy, and possibly the end of the UAW.....

This could be the end of the UAW. But if so I'm sure there will be a new union formed very quickly. Fun times ahead.