We are in June 1, 2009. At approximately 8:00 am EST General Motors fills for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court.
The filing reported US$82.29 billion in assets and US$172.81 billion in debt. Is the fourth-largest filing in U.S. history after Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.
Shortly after, Obama administration is announcing that the Government will invest an additional $30.1 billion in General Motors(GM) to finance its bankruptcy reorganization – this after the U.S. government provided $20 billion in aid.
And GM is becoming the new GM – without Hummer, Saturn, Saab and many more operations…
So mission accomplished. Right? Wrong!
GM’s boat is once again taking water, writes Louis Woodhill at Forbes.
The US still owns 26% of the company and would need about $53 a share to break even, a far cry from the current price of $20. That adds up to a current “unrealized loss of $16.4 billion,” writes Woodhill.
“GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.”
Woodhill goes on to note that the government’s (read: taxpayers’) GM stock is worth about 39% less than it was on November 17, 2010, when the company went public—49% less relative to the Dow Jones Industrial Average, which has risen by almost 20% during the intervening period.
The main problem here is that GM is unable to compete – to create competitive vehicles. In 1960, General Motors averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011.
Also the company is having big big problems in Europe, where Opel is still losing money very fast. And I’m talking about huge loses. From April through June GM lost $361 million in Europe.
Opel produces an excess capacity of 500,000 vehicles a year, according to a mid-May report by Reuters. Excess European capacity is particularly damaging in the current economic climate where European demand and consumer confidence are depressed by the never-ending debt crisis.
Now – where is the hope?
The hope comes from the “D-Segment” cars, which are mid-sized, mid-priced, family sedans.
The D segment—mid-size, to those of you who aren’t automotive product planners—is the car world’s golden heifer. In annual sales terms, this is among the largest classes of vehicles in the United States. “A” grades in the D class are essential for any brand aspiring to sales dominance.
The hope comes from the new Chevy Malibu – GM’s D-Segment vehicle. And GM is in the process of introducing a totally redesigned 2013 Chevy Malibu.
Oh yes – the new Malibu – oh yes, but it must compete for sales with cars such as the Ford Fusion, Honda Accord, Hyundai Sonata, Nissan Altima, Toyota Camry and the Volkswagen Passat.
Yes and according to Forbes columnist Louis Woodhill, the new Malibu is not only inferior to its competitors, it’s not even as good as the 2012 Malibu.
Also, James Healey from USA Today is asking himself: Great Chevy. Good-enough midsize sedan?
“Uh-oh,” writes Woodhill.
If Obama wins again, he better start figuring out how to justify a second bailout of the company and its UAW workers.