DealZone

GM: Before any bankruptcy, the backlash

May 14, 2009

USA/For weeks, General Motors has been working to prepare its customers, suppliers and employees for the hard landing most analysts see waiting at month end: a bankruptcy filing.

The embattled automaker’s drop dead date is Monday, June 1 when it has $1 billion in bond payments due that it plans to skip.  Five days earlier, on May 27, GM learns how much of some $27 billion in bonds it was able to retire in exchange for its devalued stock.

Analysts and restructuring experts see little chance GM will meet its target of wiping its balance sheet almost clean of bond debt. That would leave one option: a Chapter 11 filing.

There’s another reason that bankruptcy has now become all but certain in the view of most analysts: the drag of too many GM dealers competing against each other for the same shrinking pool of Chevy, Cadillac and Buick shoppers.

As expected, Chrysler LLC used  its bankruptcy ask a federal judge to cut it free of almost 25 percent of its U.S. dealerships. GM is expected to detail its own plans to eliminate about 2,600 dealerships as soon as this week.

Outside bankruptcy, industry executives say GM has no chance to tear up those contracts and walk away.

The backlash has already begun and seems certain to grow bigger.

Civil rights leader Jesse Jackson used an appearance at Ford’s annual meeting to announce that he has already lined up a protest intended to call attention to the economic fallout from a GM bankruptcy.

“If GM goes down, we are going to have a demonstration the first of June in Lansing, Michigan,” he said. “We are going to have mayors and auto workers and civil rights groups and others.”

“We must warn the American people if GM goes into  bankruptcy the impact will be devastating.”

Echoing a line of protest raised by the United Auto Workers, Jackson said he was worried about the loss of GM-related factory jobs and the possiblity of jobs shifting to China as imports increase.

“If they go down, whole cities and towns and state revenue budgets will go down with it,” he said.

Comments
12 comments so far | RSS Comments RSS

sorry but the line up in the survival of the american auto industry has two major disadvantages,an interfering socialist government and obstructive auto trade unions.this line up must be concerning also for efficient producers like toyota,because the only way GM and chrysler are going to survive under this partnership,is to tip the market in their favor,and because of their limitations it is going to be long term subsides and tariffs against none american made cars.

Posted by brian lee | Report as abusive
 

US is paying the price for its past excesses. If GM has to go bankrupt, so be it. People and Governments need to learn a lesson at some point of time. If the Japanese can run this business profitably, so can the Americans (if they want to!!!). Demonstrations by civic rights leaders are uncalled for.

Posted by Ramesh | Report as abusive
 

A chapter 11 filing is the easiest way to get rid of debts, employees and dealers contracts. Did they ever intend to make this work or was the bankruptcy scenario planned from the beginning?

 

Hurray for Captain Obvious!

Someone please tell Mr. Jackson he is no longer relevant and needs to go away and never come back.

Posted by Effected | Report as abusive
 

The entire situation is both sad and long overdue. Experts are trying to help all parties but there are many conflicting interest.

My only comment is that Mr. Jackson should get a day job and not lurch from one photo op to the next. He has nothing substantive to contribute.

Posted by Robert Bainbridge | Report as abusive
 

I concur. Jesse Jackson needs to go away. The UAW had a huge helping hand in all of this mess, but they refuse to hold themselves accountable for the part they played. Sometimes Capitalism can be just as bad as Socialism; the only bright spot is that with Capitalism, only the company suffers, not the whole country. Chrysler and GM’s bankruptcy does not affect me one bit, nor any of my family members. Let them die a peaceful death; RIP.

Posted by unsympathetic | Report as abusive
 

The auto industry is suffering the fate of having the biggest and final domino for the rest to topple.

How many folks in these auto industry towns have spent years refusing to support other american workers, and have instead filled their lives with imported garbage that brought down everybody else’s wages, job security and financial stability?

an auto loan went from 2 to 6 or 7 years now, and they don’t get it. we’ve been expected to work 2 jobs to get by while they demanded obscene wages working for a company making trash nobody wanted to buy.

welcome to the new united states. you helped create it, now you can come down and roll in the muck with the rest of us.

Posted by Brian Foulkrod | Report as abusive
 

Mr Jackson’s heart is in the right place. But he’s going in the wrong direction. GM should fall if it needs to. It is an over dependence on large companies like GM that is to a large extent, at the root of the public suffering to begin with. If Mr Jackson wants to be a champion of the people, then perhaps he should campaign for a financial system that puts human beings at the center of priority instead of money. That way, if GM fell, it wouldn’t matter, and no one would be placed in a position of suffering.

Mr Jackson is supposedly a reverend. Why then, does he not see that the core problem is our regard of money over that of the value of our fellow human beings? Why isn’t he waking people up to the fact that the financial system they depend on is robbing them of their most productive years, in exchange for less money than it costs to pay for living here?

Why isn’t he waking his followers up to the fact that the game is set up to help keep them behind the eight ball? Why is he inciting them to protest for the right to keep living paycheck to paycheck?

Is this the best the good reverend can do?

 

It’s unanimous! Jesse needs to stick to the religious pulpit and stay off the financial one. This is a typical example of the baby boomer generation mindless eyes on the grindstone whip-lash we will see more of in the future. If cities and towns want to support corporations, then then they should be willing to fall with the corporations. If fall out like this can be aloud, then the painful lesson will be learned by the people to not only work hard, but to work hard toward a goal that is not based off of corporations that stagnate technological evolution for financial gain alone.

 

I am only one, but I am one of the thousands of General Motors employees whose jobs are teetering in the balance between now and June 1st. It continues to distress me to see how eager many are to simply dismiss our lives and our livlihoods with catch phrases that have little, if anything, to do with our current situation. For example, Brial Lee comments, “If the Japanese can run this business profitably, so can the Americans (if they want to!!!);” however, if you have been following the news, you know the Japanese automakers are not operating profitably during these economic times and the American automakers were not on the brink, before the economic crisis hit. I encourage you to think of us as mothers, fathers, aunts, uncles, daughters, sons, friends and neighbors who go to work every day and do the best job we can, in the hopes of educating our children, paying our mortgages, maintaining our healthcare and maintaining our dignity. When you think of us in that way, if you cannot be supportive, please at least try to be compassionate.

Posted by JCP | Report as abusive
 

Here in Canada Chrysler was the first to strike a deal with auto workers in return for no shut down of Canadian plants. Then GM strikes a deal with Canadian auto workers with less demands that Chrysler needed. Two weeks later all Canadian Chrysler Plants are closed because of a lack of parts from the USA, suprise suprise. Chrysler auto worers declare previously agreed on concessons are now null and void as Chrysler did not keep its end of the bargin. GM says to auto workers they need bigger concessions more like what chrysler got so they can compete with Toyota and Nissan. The auto workers say no and the Canadian Government steps up to declare that auto workers have to give more before they’ll release $4 million in aid to GM. So now we have auto workers that are responsible for 7% of the cost in a vehicle having to take on both the Corporations and the Government. The President of CAW said it best, with the business model both of these corps. are operating under the CAW could work for nothing and these outfits would still be in trouble. Worker are always the target because they are so easy to compromise with little or any adjustments anywhere else.

Posted by RayF | Report as abusive
 

JCP,long term survival is to be part of a viable competitive car maker,it is tragic, i have been in a similar situation,but the feedback that we are getting is that obama,s concern is the union activists and they are like the death of a thousand cuts in a situation like this.the british car industry is now almost extinct because the then socialist government of harold wilson tried the very same solutions, which did not alter the fact that the union manipulated british brands had lagged behind the competition.this is a reality, all the talk about a union managed company is as tragic as long term unemployment.(ex union member and union representative)

Posted by brian lee | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/