Quote:
Originally Posted by stormwatcher
GM says "Chapter 11 would be catastrophic" with one reason being that buyers will not buy a car from an automaker in Ch. 11. But I bet quite a few buyers are already steering clear of GM products because of its financial situation.
If the federal government gives GM money to get throught the recession, what then?
GM would still come out of a recession with a junk bond rating, excessive debt (because now they owe the feds billions too) and still be saddled with more brands then GM can competently manage.
Since there is so much turmoil in the economy at present, I still support giving the domestics some money to go at least another year. That way Obama and the new administration have some proper time to look at things and the economy doesn't take the psychological hit of GM or Chrysler doing a Chapter 11 right now.
But, in the long run, Chapter 11 is likely the ONLY option. And there the feds could probably better help the domestics by providing financing to them in bankruptcy while the auto companies can properly restructure.
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Thats not the point, GM is still making sales. There is more than just the US market to which GM will be affected in. In the past months, the total vehicles old have gone down by at least 40%. In most of its other markets, GM is still playing strong.
As to what happens next, have a look at slide 10 as to the actions taken by GM. Several of these cuts were made for savings to begin in 2009, while others such as the UAW contract will begin in Jan 2010. These actions put all together can save GM between $15 and $30b per year when they all begin to take effect.
The argument of Chapter 11 is much more serious on the outside of the company if GM was to go out of business. As it stands GM is asking for enough money to make it till 2010, when the most of the money should return to GM's books.