General Motors may hit bankruptcy again! image

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.

  • RRR

    This is very inaccurate reporting and an editors should fire the writer immediately. This is not journalism its blatant lying. GM has made 17 billion in profit since the old GM declared bankruptcy. They are producing competitive vehicles as reviewed by Car & Driver, Motor Trend etc…they are the 1st or 2nd largest automaker in the world along with Toyota. The new GM has no financial problems and has generated profit for 10 consecutive quarters and is in no way facing collapse. Someone failed to do fact checking for this article and its plainly lazy of the writer and irresponsible of the editors to allow this misinformation to be printed. Mazda or Mitsubishi might go bankrupt but GM is not in danger. If you cant fact check stop writing erroneous articles and I hope the new GMs legal dept sues this blog for such a gross distortion of the facts and outright lies.

  • John Tamny

    GM’s story is a reminder of why bailouts are such a bad idea. Many will never buy their cars again because they don’t want to aid supplicants of the state, and then thanks to the government’s heavy thumb (Chevy Volt anyone?) when it comes to GM’s operations, the company is no longer in the business of profit which means talented people won’t want to work there.

    John Tamny – Forbes

    • Nevis

      The Volt was under development BEFORE the bail out. New cars, especially ones like the Volt take longer then a couple of years to develop and manufacture.

    • John Cook

      Does the same apply to the Wall Street banks? Supplicants of the state on steroids compared to GM.

    • MarkB

      No less a person than Bob Eaton has said that Volt had nothing, nada, zip, zero, zilch to do with Obama or the bailout. The Volt project was started when W was prez. It was not a government diktat then nor is it now. It was and is a business decision by GM.

  • BGT

    Per the sigTARP quarter;y report to Congress dated April 25, 2012 General Motors and GMAC now Ally Finance still remain in TARP and owe the US Taxpayers: 27 billion for the TARP investment in GM and 14.5 billion for the TARP investment in Ally Financial. If it were not for the shady dealings of the Obama Regime Government Motors would have been nothing but a unpleasant memory especially to the old bond holders and middle management employees. I would never purchase another GM-Obama vehicle and can only hope that someday the taxpayers get their investment back, Chrysler and the banks have paid off their obligations, not GM.
    Good factual reporting, need more of the same when corrupt government wastes taxpayer $.

  • John

    Kinda sad that conservative media roots for the failure of American businesses like GM just because they have union workers. Wall Street was bailed out to a far greater measure than GM. Are those commenting for failure above saying the same vis a vis the banks? I can't hear you…

  • len

    The issue is with GM's PR and MarCom's failure to tell consumer about the huge progress GM has made during last 3 years, and their world-class car lineup. GM should make some REAL changes in their marketing and PR approach, scrap their brick and mortar strategy, and hire some fresh talent.

  • PeteJ

    I don't understand why Americans hate each other. The Chinese, Korean, or Japanese government directs investment in their industries and their people mostly buy their own products loyally. Americans would rather buy Korean/Japanese/Chinese products and wave fingers at unemployed fellow Americans that now must receive their support and be entertained so that they don't riot and overfill their prisons. I think the Asians wisely know that busy productive people are less likely to have time to cause trouble.
    Had the US allowed GM & Chrysler to fail in 2009 it would have rippled throughout the entire economy – thousands of companies large and small would have fallen in a huge wave and pulled the rug from under everything in the Midwest and Northeast. It is not far fetched that it would have precipitated riots and widespread revolt. I doubt that those smug individuals in places like Idaho, California, and Georgia would be unaffected.