1. Irfan Hossain, 2007-2-10-101
Business Communication, BUS 231 (4)
Journal 2, 7 June 2009
AU REVOIR GENERAL MOTORS
June 1 marks the end of a golden era as GM has opted to go for bankruptcy protection under
Chapter 11. This move will lead to downsizing of the automaker to a sustainable size and a
majority ownership will be under the federal government. GM has $172 billion in debt and &
$82 billion in assets. This bankruptcy is regarded as the largest for any industrial company
and the 4th largest in the US history. The bankruptcy came despite the best efforts from GM.
However the GM officials are positive about a new beginning in the fiercely competitive US
& International market. The recoup game plan will depend upon the $30 billion of financial
assistance from the Treasury Department & $9.5 billion dollar from Canada. Apart from the
latter GM has already received $20 billion of tax payer money in the form of low interest
loan. GM will follow a similar path followed by the smaller rival Chrysler LLC. The Court
has given consent to sell lion’s share of its assets to Fiat, enabling the US automaker a legit
and quick exit from the Court protection.
The Federal Govt. is likely to take a 60% ownership stake in the new GM followed by 12.5%
by the Canadian Govt., 17.5% by the United Auto Workers and Unsecured Bondholders
receiving 10% share. Present GM shareholders are most likely to lose their investment.
Albert Koch is serving as GM’s chief restructuring officer who has the experience of
assisting Kmart Corp via its Chapter 11 reorganization.
President Barack Obama will address to the nation regarding GM’s future from Washington
followed by GM’s CEO Fritz Henderson who is likely to hold a news conference from New
York. Seeking anonymity administration officials expect the legal procedures to move on for
2/3 months and even after the successful completion, GM will emerge as a leaner company
with a small work force, fewer manufactories and a trimmed dealer network. GM has already
announced that it has closed nine manufactories for perennial period and idled three.
Founded in 1908 GM’s demise comes after 101 years of operation. GM had global activities
in 34 countries and GM cars were marketed in approximately 140 countries. Even after a
sales figure of 8.35 million in the 2008 financial year, it incurred a loss of over $30 billion.
GM had 850,000 employees in its sunny days, but the recent Financial Crisis was a hard blow
for GM to digest.
Source: The Daily Star, 2 June 2009