GM CEO: Bankruptcy Looks "More Probable"

(CBS/AP)  General Motors Corp.'s new chief executive said Tuesday that more of the automaker's plants could close and bankruptcy is "more probable" as GM works to meet new, tougher requirements for government aid.

In his first news conference as CEO, Fritz Henderson said he expects the company would "need to take further measures" beyond the five plants the company said it would shutter when it submitted a restructuring plan to the government last month.

GM also is likely to offer another buyout program to workers as it looks to cut labor costs, Henderson said.

President Barack Obama said Monday that GM's initial plans to become viable didn't go far enough. He gave the company 60 days to make more cuts and get more concessions from bondholders and unions or it won't get any more government help.

The Obama administration also asked former CEO Rick Wagoner to resign, and Henderson took over as CEO on Monday.

Henderson said that although GM would prefer not to use bankruptcy protection to save itself, it is "certainly more probable" than in the past.

The company, he said, has until June 1 to accomplish changes sought by the government, or it will be in bankruptcy. The 60-day deadline should be enough time, but if it becomes evident that the changes can't be made by the deadline, GM could go into court sooner, he said.

"It doesn't have to take 60 days. If it's quite clear that we're not able to accomplish what we need to do in terms of operational restructuring, reduction of debt on the balance sheet and what we need to do to accomplish these broad parameters of having a viable business, this will be a management judgment" reviewed by the Obama administration's autos task force, he said.

Henderson also said GM is still talking with potential buyers of the Hummer brand, and a decision on the brand's fate will come in the next few weeks. GM said in a viability plan filed with the government in February that it would make the decision in the first quarter, which ends Tuesday.

While the future of plants is uncertain, so too is the fate of the nation's roughly 20,000 auto dealerships, many of whom are already struggling to stay in business.

The Obama administration's increased involvement in the auto industry did not sit well with Republican Senator Bob Corker of Tennessee, who today called the president's demands of GM and Chrysler "a dangerous precedent."

"I think for all of us who believe in free enterprise, this is the crossing of a major threshold, and it actually should send a chill to people all across the country," Corker said on CBS' The Early Show Tuesday.

"You know, we have become numb to all the bailouts that are taking place. And yet yesterday this administration decided that they know best as it relates to this industry - they're going to be making decisions about which plants close, which plants stay open."

(AP Photo/Carlos Osorio)

(Left: New GM CEO Fritz Henderson)

In an effort to increase sales, GM launched a program called "Total Confidence" that will make car payments for customers who lose their jobs through no fault of their own.

GM will make up to nine payments of $500 each to qualifying customers. Consumers must qualify for state unemployment benefits to be eligible for the program.

The program starts Wednesday and runs until April 30.

Ford Motor Co. announced a similar program Tuesday, which will take over customer's payment of up to $700 a month for a year in the event of job loss.

Shares of GM fell 32 cents, or 11.9 percent, to $2.38 in midday trading. Ford shares fell 6 cents, or 2.2 percent, to $2.70.

[sjc_1]

I heard a story yesterday that they might break off Chevy and Cadillac to sell those two brands to someone and back that will money from the government. I have seen no repeat on that story, so it may have been rumor. That would not be a no break up strategy at all, but rather a do it quick fix. I have no idea what they would do with Buick, Pontiac. GMC nor Saturn.

[RayRyan9]

I have "Total Confidence" that GM is a piece of sh....

[RayRyan9]

This is THE FUNNIEST news story I have ever read! I'm referring especially to the last bit:

"In an effort to increase sales [TO DIMWITS], GM launched a program called "Total Confidence" that will make car payments for customers who lose their jobs through no fault of their own. [AS JUDGED BY WHO, EXACTLY?? THE AAA?]
GM will make up to 9 payments of $500 each to qualifying customers. Consumers must qualify for state unemployment benefits to be eligible for the program. [!!!! ARE YOU F'N KIDDING ME???]
...
Ford Motor Co. announced a similar program Tuesday, which will take over customer's payment of up to $700 a month for a year in the event of job loss.
Shares of GM fell 11.9 % in midday trading..."

L M F A : Laughing My Freaking Aaa Off!!!!

THIS COMPANY HAS GOT TO GO ON "THE ASH HEAP OF HISTORY," AND A. S. A. P.!!!!

[sjc_1]

"Yet, nobody has specifically stated what type of changes the government wants GM to undertake before issuing more bailout money..."

This seems to be the case. If you read the latest GM story in the business section of CBS News you will notice that is what Fritz Henderson says. He has no specific direction from the government. At least Chrysler knows what they are suppose to do.

"(CBS/AP) He doesn't know exactly what the Obama administration wants him to cut, but Fritz Henderson, the new CEO of General Motors Corp., isn't waiting around to find out."
http://www.cbsnews.com/stories/2009/04/01/business/main4909711.shtml

[rickwar98]

Bankruptcy is the only option when your business or person cannot meet its debt obligations. A bankruptcy can take various forms. In this case, possibly a reorganization under Chapter 11 would best fit a company of this size. The court would order a receiver to amass all assets and debts, prioritizing them as to their payment priorities and then pay proportionately according to the assets on hand. Reorganizing GM will take a long time but then GM's inability to make competitive adjustments to compete with foreign products sounded its death knell.

Yet, nobody has specifically stated what type of changes the government wants GM to undertake before issuing more bailout money. Does anyone know what those changes are?
Posted by bajajohn1 at 11:32 PM : Mar 31, 2009

Wrong, that's your generation speaking. I've managed and owned businesses and managed a a consultant several bamkrupt companies. It's the very last thing you want to do.

Many times it can be averted by loans, change in market position, creating more cash flow. Working with banks and suppliers.

Bankruptcy is the EASY way out with the assumption that poof, it's fixed. The airlines have been used as an example here many times. Ask yourself this how many went through multiple bankruptcy? More than one. How many have actually been made finacially stronger by their bankruptcy? Answer, few. And airlines are not manufacturers, they actually produce nothing, they simply provide a service that feeds other businesses. Comparing the two is an apples and oranges situation.

As to GM bankruptcy taking a long time----that's what all the talk about a pre-packaged bankruptcy is all about. In and out quickly.

As to GM's ability to compete, think about this until this year GM was the number one producer and seller in the world. They still sold more in the US than Toyota in Jan and Feb until the financial mess they had profitable operations in Europe and Asia. They burned through their OWN reserves at about a billion a month for 8+ months, so they had money behind them in reserve.

Competative adjustments? Being the number one seller in the world for 77 years is not competitive? Get real. They also happen to be #2 in the world at the moment. Once again, not competitive? And once again-Get Real.

They have two problems right now:

Lack of sales generating cash flow (and only 2 manufactuers showed an increase in Jan and Feb. Hyundai/Kia and Subaru, Toyota was off 36% on top of a 38% month) that's a problem with everyone. It's estimated that Toyota is burning through cash at a rate nearly as fast as GM, they just happen to have more in reserve.

Overhead costs of the retired, their current overhead is very close to non union makers.

Your assumption that bankruptcy will cure the problem is a simplistic answer to a very complex situation.

The laugahable part is every other country has promised funds to their automakers. Why? Because they understand the importance of manufacuring, the wages it pays, the taxes it generates and how it flows through the economy.

Also, lets cut through the c**p of "Bailout" and talk about what this really is. A LOAN with interest. Let's also consider that the automakers have a history of borrowing and repaying and living up to long term agreements.

Keep in mind the government never had to get this involved--they could have followed the Chrysler model and GUARANTEED the loans through the financial institutions and taken the interest, the banks could have spread the the risk. However the Bush administration--Not the Obama administration structured it that way.

[rickwar98]

Correct with one addition. Lee Iocca (spelling) told the UAW he had a lot of $16 an hour jobs but no $32 an hour jobs and the UAW renegotiated. Don't see a lot of that going on now.
Posted by mjvwsr at 7:04 AM : Apr 1, 2009

Actually there have been a number of concessions made by both the UAW and the CAW during this and prior to the collapse. Ford reached an agreement that puts their UAW folks at about 1 dollar per hour above the non union plants.

[mjvwsr]

Wrong Chrysler never filed bor bankruptcy, get your facts and years straight and stop posting the same old worn out s**t and misinformation.

1979, the company was teetering on the brink of bankruptcy

Chrysler applied for loan guarantees. Everybody, especially the business community opposed the prospect of Government backed loans.

Chrysler was issued a loan guarantee of $1.5 billion

Chrysler turned around and paid back the LOAN, EARLY. No bailout a LOAN. The same thing that is happening at the moment. They makers are being LOANED the money.

You are right about one thing, here is your model, it worked, use it!
Posted by rickwar98 at 5:10 AM : Apr 1, 2009

Correct with one addition. Lee Iocca (spelling) told the UAW he had a lot of $16 an hour jobs but no $32 an hour jobs and the UAW renegotiated. Don't see a lot of that going on now.

[reasoned1955]

Wrong Chrysler never filed bor bankruptcy, get your facts and years straight and stop posting the same old worn out s**t and misinformation.

1979, the company was teetering on the brink of bankruptcy

Chrysler applied for loan guarantees. Everybody, especially the business community opposed the prospect of Government backed loans.

Chrysler was issued a loan guarantee of $1.5 billion

Chrysler turned around and paid back the LOAN, EARLY. No bailout a LOAN. The same thing that is happening at the moment. They makers are being LOANED the money.

You are right about one thing, here is your model, it worked, use it!
Posted by rickwar98 at 5:10 AM : Apr 1, 2009
============
Accurate synopsis. It did work and the company could've been still thriving if the foundation laid then had been maintained.

[rickwar98]

People also forget the Chrysler Model. Sometime in the 70s (maybe 80s?), Lee Ioccaca(?) filed Chapter 11 for Chrysler. After much heroic business efforts, Lee guided Chrysler out of Chapter 11 and into a leaner much more profitable car company. Why not use this model now?
Posted by ramos1129 at 1:18 AM : Apr 1, 2009

Wrong Chrysler never filed bor bankruptcy, get your facts and years straight and stop posting the same old worn out s**t and misinformation.

1979, the company was teetering on the brink of bankruptcy

Chrysler applied for loan guarantees. Everybody, especially the business community opposed the prospect of Government backed loans.

Chrysler was issued a loan guarantee of $1.5 billion

Chrysler turned around and paid back the LOAN, EARLY. No bailout a LOAN. The same thing that is happening at the moment. They makers are being LOANED the money.

You are right about one thing, here is your model, it worked, use it!

[RepubsSuck]

Healthcare and Union costs are but one issue...until American car companies change who they get their parts from and machine their original parts better, I wouldn't care if they sold a new car for $1 because reliability is number 1 with me. GM and Chrysler need to get out of bed with most of their long-time suppliers and just build a better more reliable car, period! As it stands right now, all I see coming from Detroit is more of the same...new names put on the same old unreliable junk and the warranty will take care of everything,,,,NOT! Game Over Detroit...I don't want to buy an over-priced new car and need a tow truck following me around.