GENERAL MOTORS IS OFFICIALLY BANKRUPT - 2,600 Dealers to be axed this year nationwide.
• Chrysler Soon to Emerge •
GM, having completed negotiations with bondholders and the United Auto Workers, filed for bankruptcy. It comes after GM's loss of nearly 90 billion dollars over the past few years. The federal government will now own 60% of the automaker, but hopes this will be a short bankruptcy, like Chrysler's.
The company will be divided into two parts, the good part and the bad part. The government wants to sell its share as soon as possible, but critics warn this could be Obama's Viet Nam. With many plants shuttered, GM is expected to turn one of them into a small car unit. Will the car buying public support it?
Poof! That is the sound of $172 Billion in debt vanishing into thin air! It's more than double its assets of $82 Billion. If you thought the Sounds of Silence was just a Simon & Garfunkle song, then contemplate the Silence the closing of 11 auto manufacturing plants makes, as well as the idling of 3 others.
On top of the $20 billion American taxpayers have already invested in GM get ready to watch another $30 billion disappear into GM's coffers. It is hoped that government-backed warranties will boost the car buying public's level of confidence in what is the Nation's 4th largest bankruptcy filing on record.
Congress Grills GM & Chrysler executives
With pressure from back home where dealerships are slated to close the House held hearings on dealership closings and heard testimony from the two top executives of GM & Chrysler. They are questioning the closing of so many dealerships and a bill to reverse that decision is gaining momentum and has Obama's team worried.
Koenigsegg makes bid to acquire Saab
Saab has been for sale since February and Koenigseg, a manufacturer that build supercars in small quantities has made a bid for the Swedish automaker. GM has signed the deal, which now goes into the due diligence mode and will close later this summer.
MOTOWN IS IN SHAMBLES
Former NBA great and now Mayor of Motown, Dave Bing, along with Gov. Granholm, are hoping to convince GM to keep their world headquarters downtown in the Renaissance Center.
Chrysler has notified dealers they are out. It was done publicly and without consideration for years of loyalty. Some dealers had recently invested hundreds of thousands of dollars in remodeling theirs stores at the factory's request (read: demand) and now they are used car dealers at best and their inventory is worth pennies on the dollar. Rebates run out soon and nobody is offering to take back the parts or the cars. This couldn't be avoided. The dealers that were cut had below average sales and their balance sheet indicated they were weak. Survival was already in question. Like an injured horse they were shot to put them out of their misery.
CHRYSLER TO BE ACQUIRED BY FIAT
Fiat SpA is acquiring a 20% stake in a bankrupt Chrysler headquarters in Auburn Hills, Michigan. They say they'll take a 20% stake in Chrysler initially, then as Fiat begins distributing Dodge, Jeep and Chrysler automobiles in the US they raise the stake to 25%. It goes to 30% when they build engines in the US and to 35% when they build a car in a US plant that gets 40 mpg. Since Chrysler has no small cars Fiat could provide those, too.
GM LAYING OFF 23,000 FACTORY WORKERS
They are now owned by the US Treasury and United Auto Workers union (89%). President Obama said the US government does not want to be in the car business, so they expect to sell their shares to someone. GM has taken $15.4 billion in loans and may borrow as much as $27 million by year end.
OBAMA WANTS GREENER CARS
President Obama pledged to require cars and trucks built in the future to meet much tougher air quality and tailpipe emissions standards. There was a collective sigh heard from the suburbs of Detroit as American automakers struggle to earn a profit. They claim the added costs of hitting a 35 mpg target by 2020 will make cars more expensive and create a burden on them.
Obama said he wants our economy to be less reliant on Middle East oil and vows his administration will get serious about greenhouse gasses.
States like California and many others that want to write their own standards for air quality that are tougher than national policy set by ex-president Bush are encouraged by this news.
LARGE DEALER CHAINS CREDIT DOWNGRADED
Penske Auto Group & AutoNation, two of America's largest corporate owners of franchised new car dealerships, had their credit ratings downgraded by Standard & Poors. With shoppers being scarce these days in showrooms expect car dealerships to close their doors and lay off hundreds, if not thousands of workers. In the Tampa Bay area Bill Heard Chevrolet has closed, along with two large AutoNation stores, Dodge in Clearwater & Chevrolet in Tampa. A large Ford dealer in Tampa, Ernie Haire, has filed for bankruptcy. more about dealers ...
GM HAS A BIT OF TIME, BUT NOT MUCH
GM is still in real trouble. Their $40,000 Chevy Volt can't compete, much less be their Golden Goose. Somehow they got money out of Washington without coming up with much of a plan. More on the car industry...
CAR DEALERS CLOSING THEIR DOORS
Owning a new car franchise used be synonymous with having a printing press that turned out $100 bills. These days it means negative cash flow, lots of inventory that won't go away and an overhead that is crushing their bank account. Last year 1,000 auto dealers called it quits. More...
Ford Motor is in Better Shape
Ford says they won't need government bailout money. They are betting on importing cars designed for Europe and the economy turning around later this year. They see keeping out of the government spotlight as a way to set themselves apart from the pack. They went to credit markets and pledged all their North American assets before those markets dried up.
But they now must compete with two auto manufacturers that have the US government backing them. An in Europe Ford is crying foul as many governments aren't playing by the rules.
GM Tells Dealers to Wait for their Money
Late last year nearly 6,500 dealers were sent an e-mail by General Motors asking them to wait a couple of weeks for reimbursement of incentive money. Here we go! "The Check's Not Going to Be in the Mail for Two Weeks!" Yikes • GM dealers sold almost 170 thousand cars & trucks last month and are owed an average of $3,400 in incentive "dealer cash." We're talking $575 million! At this point any creditor of GM better cut them off because GM can't pay there bills. More on this story...
Labor Costs Still Higher For Detroit
GM workers average $74 per hour versus $45 for Toyota workers. Their base pay is much lower, but when pensions & other future compensation is factored in the gap is dramatic. GM said Wednesday 30,000 workers will lose their jobs as they work toward equalizing costs.