Too Bad GM's Only Hope Is Bankruptcy
Tuesday July 7, 2009
- Close 40% of its 6,000 dealerships.
- Shut down 11 factories.
- Reduce health benefits for 650,000 retirees.
These are all painful emergency measures that should have been made gradually over the last 20 years. Instead, GM offeredshort-term solutions to boost sales, such as zero-percent financing.
What It Means to You
The rivalry between Ford and GM owners has been settled, and Ford has won. Of the top 3 U.S. automakers, Ford is the only one to remain privately owned. However, the government subsidies to GM and Chrysler could mean Ford will be penalized in the long-run for staying out of bankruptcy. GM and Chrysler will have much of their debt forgiven, while Ford may wind up with $40 billion in debt to finance more energy-efficient vehicles. (Source: NYT Dealbook)The GM bankruptcy will be good for the U.S. auto industry. It forces GM to become more competitive,defending the economy from Toyota, Honda and now Indian automakers. It saves as many as 1 million jobs which would be lost if GM shut down. GM stock is now only worth $1. When it becomes more profitable, this will benefit its majority owner - the U.S. Treasury and, ultimately, the U.S. taxpayer.
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(Photo Credit: Chris Hondros/Getty Images)
Comments
The Australian arm of GM – Holden looks like it’s going to escape the fate of its parent company. A $150m ‘green car grant’ helped and now it’s just been announced the Aus government are extending a $200m line of credit.
Thanks for the info. I understand that France is also supporting their auto industry, which helped their economy pull out of recession this quarter. The concern is what will happen after the governments stop with subsidies.
Your point is well taken – green subsidies will probably be ongoing.
Kimberly
What a way for our government to for the auto industry to do what they want, more effecent car. I understand that we need they, but to bailout GM & Chrysler, and they say you only have 60/30 day to be come profitable, or we take over and force you to do it our way… what a joke. they had no real intention in helping GM & Chrysler. Talk of bankruptcy was in the works, before the bailouts were even issued. If they truelly wanted them to suseed they would have made them work at it like Chrysler did in the 70s/80s when they did avoid bankruptcy.. yes once again Chrylser made some bad choices, but this time so have GM, and our government. Believe me more was lost my them filling than Stocks, Contracts, Workers…. How about the faith in our businesses and our government… let give GM to China… they were headed there.