General Motors Filing for Bankruptcy

Once the largest and most powerful carmaker in the world, General Motors anounced that it will file for Bankruptcy today. What does this mean?

The good news is that GM will survive, albeit a changed company. It will emerge with four brand names, Chevrolet, Cadillac, Buick and GMC. Everything else they had is gone. Opel, the European arm has been sold to a Canadian firm, Offers for Saturn are under review, Hummer has a buyer, but that buyer has not been disclosed and Saab has reverted back to the Swedish Government for now.

The Bankruptcy was an necessary step for GM to expedite its required rightsizing. It really had no other options other than going out of business altogether. Now GM can catch some relief while it completly resturctures itself, closes plants, suppliers, and dealerships. Unfortunately a large number of people are going to lose their livelihoods.

Why should we care? As part of the arrangements, "we" the taxpayers, became the majority shareholder in GM. The UAW has another piece and the rest is in the hands of investors. There was an old saying, "What's good for GM, is good for America" We have now in the short run been tied to the success of this once mighty automotive giant.

The key to it's survival rests with the fate of the economy itself. A recovery by year's end could boost sales and put them in the black by 2010-2011-There may be a lot of pent up demand out there and GM does have a number of impressive cars for people to consider.

Why else should we care?? Don't even get me started. They are declaring bankruptcy....which totally screws the smaller companies that they owe money to. My anger at this is not at GM, it's at the big Wall Street firms that had corrupt leadership, living high on the hog, that ran their companies into the ground starting this spiral. But oh we can't let a big bank or investment firm go out of business so let's just THROW MONEY AT THEM. While GM and Chrysler were in trouble before this, they were not going down this road.

Honestly, with the closing of dealerships and mom and pop stores that rely on the business of these dealerships and smaller OEM suppliers, I hope that Senator Shelby of Alabama experiences first hand the devastion that comes from a scion like GM filing for bankruptcy. It's entirely possible that if Shelby and his like-minded idiot compatriots hadn't done what they did months ago, GM and the families this impacts wouldn't be looking at this future they now do.

************This part may be taken out but I have to say it********
With the government becoming a partial owner of a previously public-owned company, we slide ever further down the slippery slope of becoming a socialist country. Very sad.

I think that Bankruptcy was an inevitable thing for both GM and Chrysler, endless cash infusions would have only served to delay it. Ford actually saw this comming a bit ahead and wisely sold off some assets early and stowed away its cash. Despite the short term pain which will be significant, this was the best course for GM to follow.

GM had too many problems with costs and the only way to eliminate those costs quickly was with a restructure. Sometimes it is better to take the bitter and painful medicine now and get the worst over with right away than to drag out the misery of the disease for years on end.

The important lesson is that bigger is NOT always better. Toyota and VW are now both larger than GM and are having some quality problems. With huge size comes a lesser ability to focus on each product. Hence the 2007 and 2008 Camry had transmission issues. VW continues to struggle with reliability on some of their cars.

The best run car companies right now, in my opinion are Porsche (The most profitable per car in the world), and Honda, a company focused first and foremost on engineering a small lineup of cars to near perfection.

I agree that the bankers on Wall Street should take heat for the problems they have had, but GM is not entirely blameless. Over the last 30 years GM has made a lot of very big mistakes in operations, product engineering, design and development that have allowed competitors to take their business away from them. So they are paying for their mis-steps as well.

not to mention GM was the largest corporation in the world at one time.....Mitsubishi had surpassed them few years back

the bottom line any way you slice it is labor costs....GM couldnt compete with the UAW
contracts holding them hostage

im not anti-union but when someone gets laid off and receives 97% of their base salary and benefits something is seriously wrong

The foreigns don't have the legacy costs. At the time these companies were hailed as wonderful companies for taking such good care of their retirees.

Yes, they made mistakes. There's hardly a huge company that hasn't made mistakes. Especially in the manufacturing business.

Taking the bitter and painful medicine and getting it over with is great for a company, and they will come out "leaner and meaner". However, the people affected will not...they will not come out of it.

I'm sittng here watching my beloved state sink further and further, watching people who have worked their whole lives lose everything. How much more unemployment can this state take? How much more devastation can our cities take.

Timgt5, you are very knowledgable--maybe you can answer something about this that I have not heard any answer for in the media. Why are the dealerships being closed? How do they cost the car companies money? The dealerships pay the companies franchise fees, even if they don't sell any cars, how is it causing them money? I appreciate your insight.

As you and I have talked about before, I get very emotional on this subject because it is so close to home for me. I'm sorry if I get over the top.

The number of GM dealers anounced so far is 1100. That is a lot of jobs. I agree that in the short term this is a heavy burden for the state of Michigan (I am assuming that is where you are from) North Carolina went through this same thing 20 years ago when our textile industry was devistated by foreign competition and our tobacco industry was wrecked with those huge lawsuits. Our state evolved into a technological and financial center (some of the nation's largest banks are headquartered in Charlotte) The point is we survived and moved on. If Michigan has good leadership, they should be plan in place to develop other industries to replace the car business and to re-train laid off auto employees.

Unfortunately having high paid unskilled labor was a double edged sword. It allowed a good living for generations of people but at the same time discouraged parents from pushing their kids to go out and get a better education because "the factory would always be there" Now a generation is going to pay a high price for this shortsightness. It is both sad and unfortunate for a lot of people. I feel for all of them.

It is true that other automotive firms have made errors, but the most frustrating thing about the domestics is they kept repeating the same ones over and over again. Of course CAFE did not help either. I am hoping a downsized GM can react faster and be more flexible in its product planning in the future. There is still some dead weight in the company in terms of models that either need to be re-thought or scrapped.

Keep in mind that Toyota has only 3 brand names (Toyota, Lexus and Scion) and Honda (Honda and Acura) and Nissan(Nissan and Infiniti) only have 2 each, yet they all move a lot of product. If GM can focus on establishing clear identies for it's remaining divisions, it too will have a fighting chance in the future.

A bit of an update on my earlier post, the final number of the dealerships will be 2600 closed and it is expected that apx 21,000.00 people will be laid off (I believe this is both retail and production)

But why? I still don't understand how a dealer costs an auto company money?

fewer dealers = less competition

less competition = GM can raise prices and make more money

its all about the dollar now

I have to jump in on the issue of "foreign cars". I dont know where everybody is located but I refer to cars built in North America not as foreign. Both Honda and Toyota build cars in Canada and the US. I use to work for Honda in Canada. I have a friend that worked from GM also. Comparing the two is quite amazing. We made the same amount of money, we were not unionized, did about the same work, got the same hoildays. The only difference was if we got "laid off" which has yet to happen to either Honda or Toyota we would not have the "job bank" where GM employees are paid upto 97% of thier wages and get to keep thier benefits. That is where GM is having the trouble. These cost make their employees cost per hour in the high $60/hr range. Where at Honda our cost per hour was around the $40/hr range. So when looking at math I think it is simple to see why GM has had such a problem and the non-unionized car builders are not in as bad shape. That $20/hr times 40hrs a week or more, times 52 weeks a year adds upto $41,600 more per employee. So with GM's costs being that much more per employee, it becomes very easy to see why they had no choice but to file. Other automakers are in rough shape too but GM is by far in the worst condition. Now with that being said, I only have ever owned GM cars, even while working for Honda. I prefer the cars over any "import". I like cars that have bigger engines than a little 2.2L car or 3.5L truck. Hopefully no matter what happens GM is able to come out of this and become a profitable company again soon. As I have said this is only may opinion based on what I know first hand from both compines. This post is not ment to offend anyone with a preference of any automaker, it is based on personal knowlegde only. Hope to read more about peoples opinions versis my own.

Steve

Good points Steve and glad you have joined the discussion. You bring a good insider's perspective. There is no problem with you expressing your preference. My dad still thinks that Cadillac is the best luxury car in the world, so there are plenty of GM loyalists out there.

I think you may be a bit behind the times as far as Japanese cars when it comes to engine size and HP. The Toyota Tundra has an optional 4.6L V8 that packs 382 Hp (the same engine that is in the super-lux Lexus LS460) The Tundra is faster off the line than either the Chevy Silverado or the Ford F150. The same engine is also available in the Sequioa and Land Crusier. Nissan's 3.7L V6 at 330Hp is stronger than any GM V6 in production and is more powerful than the Ford V8 Mustang GT. Ford's coming 3.5L ecoboast V6 packs 350Hp.

The Accord V6, The Camry V6 and the Nissan Altima V6 have higher horsepower ratings than V6 engines in the Lucerne, Malibu, and G6. Due to a closure of Pontiac GM is losing its best sedan, the Pontiac/Holden G8 which came with GM's 300Hp DI as a base engine and a 425Hp optional V8. The hardware does live on under the Chevy Camaro.

Also having a lot of power does not mean a lot if a car cannot put it down on the pavement effectively. The Impala may have an optional V8 but it is handicapped by being front wheel drive (same with Lucerne and Cadillac DTS) FWD cars with more than 270HP tend to start suffering from torque steer, which hinders acceleration and makes the car a lot harder to handle in perfomance driving. The combination of FWD and V8 makes no real engineering sense but GM is the only car company that continues to stick with it.

Frankly the future of the V8 engine is going to be limited to trucks, large SUV's. and boutique performance cars like the Mustang, Camaro and Corvette. I believe that CAFE regs are going to make it more difficult to justify these engines elsewhere. I also believe we are in the midst of a turbo revival. GM is going to be rolling out small turbo engines to boast mileage in the future (1.5-1.7L) in its small cars. The engines are expected to pack 140Hp and will debut in the coming Cruise (Colbalt Replacement)

Good discussion!

The manufacturer has to pay for all the warranty work that a service shop does. Also all those incentives and rebates that you see advertized comes out of the pocket of the automaker. GM/Ford/Chrysler/Honda/Toyota etc.. are required by the franchise agreements to guaranty the dealership makes money off of every car it sells. If the car goes out below invoice, the maker has to pay the dealership the difference. Also the manufacturer pays for all the marketing and advertizing including the local commercials.

Reducing the number of dealer's cuts out some of these expenses. Not to mention if you are cutting brands and downsizing you do not need as many outlets to sell your product.

The good news is that Ford sales are going up and Ford is expected to increase production in the next 2 quarters. That means that some of these dealers can become Ford/Lincoln Stores and ulimately get back in business.

Update-The Hummer Brand has been sold to a Chinese Firm that builds commercial grade trucks.

I know some might be worried the military jeeps, but fear not, those are built seperately by a defense equipment contractor and have nothing to do with Hummer vehicles sold to the general public.

While I absolutely understand that Honda and Toyota have factories here (Sen. Shelby made that all too clear) in North America and yes they employee North Americans, the profits do not stay here.

I realize I may seem narrowminded and like a bulldog with this issue of GM, and for that I apologize. I love hearing the opinions of others on this and the intellectual discussion that can leave passion out of it. It helps a lot.

I grew up, and moved back to, a very small farming community about 20 miles outside of Flint, MI. I'm only 40 so by the time I was old enough to pay attention, downtown Flint was already on the decline, but GM and AC Sparkplug were Flint. 90% of the parents of kids at school had parents that worked at one or the other. The other 10% were farmers. My dad started at GM after serving in the Army. He started as a janitor in the cafeteria and worked his way up to a General Manager. He worked there for 30 years. His last three years he gave up the GM position to work on the line--willingly. I don't know anyone who, in some way or other, isn't impacted by this. Just a short explanation of why it's hard to see the forest for the trees for me.

Totally makes sense!! See my previous post for explanation as to why I can't seem to think logically on this....too much passion, too close, too stubborn.

I had written a long post but decided that it might be best for me to just listen in on others discussions.

Happy chatting.

Totally makes sense!! See my previous post for explanation as to why I can't seem to think logically on this....too much passion, too close, too stubborn

(((Cantstopcrying))) it is far better to be too passionate, than to be indifferent especially with your family history and background, worry not!

we have a Toyota plant up the road...they make the Sienna minivan and a couple of SUV's

they dont pay a lick to the state of Indiana as far as tax revenues....

I can understand tax incentives, but sometimes states go too far with them. I think with the budget crunches in every state right now that policy may be revisited

You mentioned being a Saturn Owner, GM currently has 16 different offers under review for the brand name. One of the local dealers actually thinks that this change of ownership could turn out to be a good thing for Saturn in the long run.