Journal - Gm Goes Bankrupt

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.