A new report suggests that American automaker GM is considering a Chapter 11 bankruptcy filing as its deadline to submit a restructuring and viability plan draws near. GM has already received nearly 10 billion dollars in bailout money.
GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 per cent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.GM's CEO Rick Wagoner, perhaps sensing that times are tough, recently took a voluntary pay reduction to $1. This brave move has forced him to survive on the remnants of his 2007 compensation of 15.7 million dollars, a 64% increase which he earned for steering his company into a record 39 billion dollar net loss that same year. One wonders how such a profoundly ill industry has managed to survive even this long.
Bonus: Here's The Onion's take.
6 comments:
I suspect Chapter 11 is an inevitability for GM so it can write down debt and scrap its union obligations. It's worked, sort of, for several airlines and I think I would be a lot more concerned about flying with an insolvent airline than I would about buying a car from an automotive company that had pulled the pin. Neither GM nor its creditors will have any choice but to let the company honour its warranty obligations to customers. The alternative is to force the company into liquidation for virtually no recovery.
If GM goes, I'd bet Cerebrus does the same for Chrysler. Ford, who knows?
MoS - You're quite right. At this point, it would seem that their only hope of survival is to break their current contracts with unions and creditors. Frankly, this has been coming for a long time. I'm just peeved that the global economic crisis has allowed them to swallow billions in public money only to end up in Chapter 11, which is where they have been headed for the past 15 years anyways. As usual, the people who will suffer the most are the ones who can least afford to...the low income workers and small business-people who depend on GM for their very existence.
The UK realized they could not support a domestic industry in light of Continental imports - and Asian cars... The US is learning this slowly. Like the UK (post Empire), some marks will survive - Ford, which is globally known is one of them. Maybe Opel/GM, GM Trucks, Cadillac, and maybe one Chevrolet - the Corvette. Chrysler may survive as a scaled down "Jeep" - which has a loyal following. Their trucks MAY survive, if enough diesel and hybrids come out.
American makers do light trucks "semi-ok", so this part may survive. There is some affinity to the "muscle cars", hence Corvette possibly surviving. Cadillac has nicely transformed itself... They cannot compete with the "imports" in other areas. The Brits realized that they can do luxury well (Jag, Rollers, and Bentley - although these marks are also having trouble). I believe Jaguar and Rover are now owned by Tata of India.
I think this shake-up is very good for America. Perhaps NOW they will wake up and "European-ize" their economy: more "green" industries, focus on "small" vehicles, more research and focus on quality and longevity...
WG - The truly maddening part of this is that green technologies have existed in this sector for many years. Small electric vehicles are being produced by companies around the world (including the Canadian Zenn), and high performance electrics are already in production by Tesla Motors in California. Fuel cells have been around for at least 10 years, and research was going on well before that. The problem has never been lack of technology. It's been lack of corporate willpower by the only companies big enough to implement these technologies on a massive scale - the "Big 3".
There's a lot of blame to go around, and government has to take some blame for not creating real incentives for green technologies, and imposing stiff corporate penalties for car companies not meeting certain fuel economy standards with their products. But the big 3 behaved like dinosaurs for too long. It's only fitting that they should meet the same fate.
Frank Stronach is probably extemely grateful that Magna failed to grab Chrysler. I'm sure Chrysler is headed down the tubes as well. Anyways, the US government won't allow any of the big 3 to actually fail no matter what they do. If GM goes into bankruptcy, they will make sure it comes out the other side eventually.
MD - Well, Magna is likely suffering one way or the other, but yes owning Chrysler would have been a disaster for them. Chrysler seems to be in as poor shape as GM right now. Of the big 3, Ford appears to be in the best shape....but that's not saying much.
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