anjan_c2007 1 Report post Posted June 1, 2009 Source Rediffnews The GM building beside the Detriot River, Detroit, Michigan The star spangled banners wave from near the GM logo in Detriot, Michigan Cars on display inside the GM headquarters The GM logo on a pick-up truckGeneral Motors Corp filed for bankruptcy on Monday 1st June 2009, forcing the 100-year-old iconic car major which has been one of the most visible symbols of American capitalism and economic might into uncharted waters of nationalisation or government ownership. This is the third-largest bankruptcy filing in American history and the largest-ever US bankruptcy in the manufacturing arena. US Chapter 11 bankruptcy protection gives GM time to restructure its finances while being protected from its creditors. The bankruptcy is likely to change GM drastically and 20,000 workers are likely to lose their jobs. GM has 92,000 employees in the United States and supports 500,000 retirees under the contract filed with the workers' union. So why has the world's best known car company gone bankrupt? What led to the fall of the giant and how will the developments unfolding in the US affect GM India? In a nutshell, very high labour costs, rising competition from foreign car makers, a frightening spike in fuel prices, freezing of credit, the collapse of the American economy, drop in sales caused by lack of purchasing power among Americans due to the recession, et cetera have formed a lethal concoction leading to the bankruptcy of the iconic carmaker. However, General Motors's problems run much deeper.Over the years, protesting workers' unions at GM managed to get the company to agree to contracts that provide lifetime benefits to the members. This excessive cost of lifetime benefits pushed labour costs through the roof. These costs have now reached an unmanageable proportion and the automotive giant just does not have enough money to either make these payments or to keep the company afloat, given the decline in sales and plummeting profits. Expansion, upgrade, new investments were totally out of the question. Reports suggest that GM is paying more than $1,500 per car that is built as just benefits to people who are not even working for the auto giant any more. An interesting bit of statistics says that the cost of steel used in a car made by GM is less than what it pays its retired union members in terms of benefits. Added to this is the huge pay that GM workers draw even for low-level jobs at the company.The company does not have much cash and even if it adds receivables to this, it accounts payable and accrued expenses are many times higher than that figure. Even adding the company's current assets (inventories, equipment on lease, etc) to this, still leaves it way behind it current liabilities. The United States government, mindful of the impending death of GM, gave it over $19 billion from taxpayer money to keep it alive. It also sacked its legendary chief executive Rick Wagoner and decided to monitor the company's restructuring itself. However, that has not helped revive the fortunes of the world's second-largest car company, after Toyota.Once it goes into bankruptcy, the US government will infuse yet another tranche of about $30 billion to refinance and restructure GM. The first signs of GM's gargantuan financial troubles began to surface in early 2008. When by mid-2008, the prices of fuel touched a historic high, there was a stunning change in consumer behaviour with Americans deciding to keep off big fuel-guzzling cars and SUVs in favour or smaller, fuel-efficient vehicles. The sudden rise in the price of oil, the deepening recession and the falling sales led to Detroit's Big Three - GM, Chrysler, and Ford Motor Co - almost throwing in the towel. Car loans too were difficult to come by as banks, already reeling under the world's greatest financial crisis, decided to freeze credit. More and more people failed to qualify for loans, leading to a huge drop in car sales. Companies like GM found it almost impossible to raise funds or borrow from the market to keep from going belly up. A study conducted by the car firms said that the historic spike in fuel prices was the '500-pound gorilla' that almost single-handedly kayoed GM and other carmakers. By the end of the year, car giants were begging for help and the then George W Bush-led US administration decided to extend carmakers a lifeline and pumped in taxpayer money to keep the companies from collapsing. Reports say that the US government may own 70 per cent stake in the restructured General Motors, the ailing auto maker which is battling to avert a possible bankruptcy. Under the GM restructuring plan, the United Automobile Workers union would hold up to 20 per cent through its retiree health care fund, and bondholders and other parties will get the remaining share. Shareholders would be virtually wiped out. However, there are some questions on whether the new US government aid help revive the company's fortunes. There are a lot of uncertainties involved here too: no one is quite sure when will the US economy start turning around and when will consumer demand for new cars give GM any hope of coming out this mess. The sales of new cars have plummeted by as much as 40 per cent since early 2009 and even Toyota, the world's biggest car maker, is suffering losses. Amidst all this turmoil, General Motors India has kept a brave face. The company feel that there is little reason for it to panic as the Indian automobile market, even during this slowdown, is still growing faster than in most other economies. An Economic Times report, quoting a GM India source, said that the bankruptcy will not have any impact on Indian operations. The bankruptcy proceedings are only for the reinvention of the US operations of GM. In the US, bankruptcy or Chapter 11 is used to make a brand stronger to suit the changing business environment. Therefore, it will only make GM stronger, the newspaper said. Yours Truly Van McCoy, an American pop instrumental group had a hit, "Change with the times", which perhaps the hidebound GM honchos did not pay heed to, as they were busy acquiring new jets, getting fatter pay cheques, perks and whitest dressed waiters on call, to flaunt their stature.The staid gas guzzlers rolled out of the assembly line endlessly, landing in showrooms and going to deserving homes, only to frequent gas stations for the regular fills. Even the GM retirees never had it so good! And the result- The Goliath is Government Motors now and not General Motors, as the press has proclaimed! anjan_c20072009-06-01 15:12:57 Quote Share this post Link to post Share on other sites
swiftvxi06 0 Report post Posted June 2, 2009 Anjan da, a similar topic regarding GM was started by me yesterday. Please posts the threads under that topic. (Moderators: Please merge this thread with the existing topic GM-GENERAL MOTORS TO GOVT.MOTORS started by me).Thanks. Quote Share this post Link to post Share on other sites
speed 0 Report post Posted June 2, 2009 GM lost touch with the ground realities, churned out vehicles that weren't right for the time, never thought of Fuel efficiency & developed gas guzzlers. The tell tale signs are visible from its global network too. Just see the case in India, GM hardly has any single model doing good, since the days of Opel, it has hardly learn't. Again bringing in re-engineered Daewoo products, hardly helped matters. Quote Share this post Link to post Share on other sites
anjan_c2007 1 Report post Posted November 6, 2009 A few days ago GM has backtracked on its board decision to hive off Opel and Vauxhall to Magna, the Canadian auto parts maker and the Russian bank Sberbank. The duo viz. Magna-Sberbank were expected to axe many mainly German autoworker jobs. The U turn by GM gave a new hope to the auto workers who had expected job cuts and plant closures. GM had said that it was willing to keep Opel and Vauxhall, two very old brands but restructure them and intending to restart from zero. Yesterday GM announced a job cut of about 10,000 mostly in Opel, Germany and plant closures.It has said that its plan is similar to that of Magna -Sberbank. Thousands from the 25000 workers of GM, Germany's (Opel) operations gathered outside the Ruesselsheim factory to protest against GM's refusal to sell its European operations. Quote Share this post Link to post Share on other sites
cartoos 0 Report post Posted November 6, 2009 Every one learn a lessons from slowdown, GM is no different. Quote Share this post Link to post Share on other sites
prashurv 0 Report post Posted November 6, 2009 A few days ago GM has backtracked on its board decision to hive off Opel and Vauxhall to Magna' date=' the Canadian auto parts maker and the Russian bank Sberbank. The duo viz. Magna-Sberbank were expected to axe many mainly German autoworker jobs. The U turn by GM gave a new hope to the auto workers who had expected job cuts and plant closures. GM had said that it was willing to keep Opel and Vauxhall, two very old brands but restructure them and intending to restart from zero. Yesterday GM announced a job cut of about 10,000 mostly in Opel, Germany and plant closures.It has said that its plan is similar to that of Magna -Sberbank.Thousands from the 25000 workers of GM, Germany's (Opel) operations gathered outside the Ruesselsheim factory to protest against GM's refusal to sell its European operations. [/quote'] Magna-Sberbank also had the plans to cut the jobs of 5000 in the opel. Come to the GM to retain the Opel. I think it is wise decision. Bcoz GME is the very important for the product development & plat form. With out opel they cant do the business in Europe. Bocz american's work in GM only Opel & GMDAT will work for the global cars.. Quote Share this post Link to post Share on other sites