GM dérape vers la faillite

[LTS]

A Bridge Loan? U.S. Should Guide G.M. in a Chapter 11

 

By ANDREW ROSS SORKIN

New York Times, November 18, 2008

 

Tony Cervone, a spokesman for General Motors, has a warm and friendly way to summarize his ailing company’s ongoing dance with disaster.

 

“The fact is we’re looking at a short-term liquidity crisis that needs a bridge loan,” Mr. Cervone said this weekend to The Detroit Free Press.

 

To him, G.M. is merely in a temporary bind. If the government — that is, taxpayers — were just willing to spot G.M. some cash to get it over this little rough patch, everything would be just fine.

 

Mr. Cervone’s comment reflects what’s wrong with the mind-set in Detroit.

 

G.M is using money so quickly that a $10 billion infusion made today would disappear by February. That is why taxpayers shouldn’t fork over a cent, at least until shareholders are wiped out, management is tossed out and the industry is completely reorganized.

 

But there is a fix. Call it a government-sponsored bankruptcy, a G.S.B., if you will. It might sound a bit like an oxymoron, but it is an idea that has been quietly making the rounds in Washington. It makes a lot of sense.

 

Here’s how it could work:

 

First, let’s recognize that G.M. doesn’t need life support. What it needs is Chapter 11. The bankruptcy process is not a bad thing — indeed, it should be embraced. Bankruptcy allows companies to do tough things they could never do in the normal course of business. It has helped many companies turn themselves around and come out even stronger.

 

Bankruptcy would give G.M. enormous leverage with its debt holders — and, perhaps more important, with the U.A.W., whose gold-plated benefits are one reason G.M. is no longer competitive. A bankruptcy filing would also give G.M. the cover to close plants, rid itself of unprofitable brands and shed dealerships. In fact, unless G.M. files for bankruptcy, state laws would make it prohibitively expensive to shut dealerships.

 

So, first, the government would force G.M into a prepackaged bankruptcy now — even before policy makers may think it needs to be. As an inducement, the government would allow the merger with Chrysler to go forward. (There’s a lot of resistance to saving Chrysler too, but we need to look at the industry as a whole. And don’t worry: Cerberus, the private equity firm that owns Chrysler, would have its equity wiped out too.)

 

The merger should reduce costs by as much as $7 billion. But that’s not the tough stuff. The harder decisions are these: Both companies would have to jettison brands — lots of them. In the case of G.M., frankly, the only ones worth saving are Cadillac, Chevy and Buick. (Buick? Yes. Despite its lackluster sales and fuddy-duddy image in the United States, it’s a huge seller in China.)

 

That means Saturn, Pontiac, GMC and Saab would all disappear. Deutsche Bank estimates that reducing G.M.’s brands from eight to three would bring down the company’s cost base by $5 billion annually. If you’re able to shut the dealerships too, lop off another $4 billion. Chrysler is an even sadder situation: the only brand with any value is Jeep. Its Dodge Ram truck lineup could be merged with Chevy, which would also pick up pieces of the GMC business. And Chrysler’s minivan business could be combined into the Chevy brand as well.

 

In all, the 35 plants of G.M. and Chrysler would probably be cut by half.

 

Then the auto workers, whose benefits are off the charts.

 

G.M. currently employs about 8,000 people who actually don’t come to work. Those who do go to work are paid about $10 to $20 an hour more than people who do the same job building cars in the United States for foreign makers like Toyota. At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs.

 

Those costs are already coming down slightly because of a renegotiated deal with U.A.W. last year, but not nearly enough.

 

Part of the problem is summed up by comments like this one in The Detroit Free Press, made by Kandy O’Neill, 39, an assembler at G.M.’s plant in Lake Orion, Mich., where she builds the Chevy Malibu and Pontiac G6. “I think we’ve given enough,” she said about the cuts to her salary and pension plan.

 

“Everybody wants to come down hard on the workers,” she said. “Nobody knows what we do inside there but the people who work there. It’s hard. It is not an easy job.”

 

When you read a line like that you might sympathize with her, but then you realize that nothing can be accomplished without bankruptcy. Ms. O’Neill: your company is asking the taxpayers — many of whom don’t have health care coverage — to pay your salary and health insurance.

 

And then we need these companies to agree to serious, strict enforcement of gas mileage standards. They should be producing the cleanest cars on the street. We may lose hundreds of thousands of jobs in this industry in the near term, but with the right kind of innovation, we should have millions of new jobs in the next 10 years.

 

Finally, we need to kick out management. That Rick Wagoner, chief executive of G.M., can say with a straight face that he still deserves to run this company is laughable. It would be impossible for him to put in place the serious changes that need to be made because he carries too much baggage. He’d have to undo years of his own neglect.

 

After all that is agreed, and only then, the government should come in with what’s known as debtor-in-possession financing to help the company through the bankruptcy process. Ideally, the government would be a “seed investor” and others would join it.

 

The goal should not be to keep these companies from filing Chapter 11, but from filing for Chapter 7 — which would mean liquidation.

 

With the debt market virtually closed, this is the time the government can come in and try to help. But to jump in front of the train now, without the requisite changes made to the industry first — which we all know can’t be done without Chapter 11 — would be foolish.

 

The automobile industry has argued that bankruptcy will be a disaster for the industry; that people won’t buy vehicles while they’re in bankruptcy for fear that the warranty won’t mean anything. There’s a fix for that too. The government should establish a warranty insurance fund that would insure the warranties of all G.M. and Chrysler vehicles bought while the combined company is still operating under bankruptcy protection. The cost to taxpayers should be next to nothing, assuming the company survives and can takeover the warranty obligations.

 

The government also should consider using some of the money for the financial industry rescue not to save the companies, but to retrain employees in the Detroit area and help promote development of new industry. A lot of people complain about the role of government in business and free markets. But it is hard to complain about efforts to make the nation’s workforce more employable.

 

Barack Obama, on “60 Minutes” Sunday night, said that government assistance must be “conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan.” He said, “So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere.”

 

Take note, Mr. Cervone: that bridge is called Chapter 11.

 

http://www.nytimes.com/2008/11/18/business/economy/18sorkin.html?_r=1&hp=&pagewanted=all&oref=slogin

[Habsfan]

What a great article. Too bad nothing close to this will ever happen!

[MTLskyline]

G.M. currently employs about 8,000 people who actually don’t come to work. Those who do go to work are paid about $10 to $20 an hour more than people who do the same job building cars in the United States for foreign makers like Toyota. At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs.

Completely ridiculous for a job that needs no education. They make more than most people with degrees!

 

To an extent, yes chapter 11 would let the companies trim the fat. However, the US Government most make sure that the companies get back on solid footing again rather than watching them disappear. America needs its auto industry. Keep all American Auto Companies independent.

 

Here's what I propose:

General Motors Corportation:

Cadillac - Luxury-Performance Division (Kind of like BMW, Infiniti, Mercedes-Benz)

Chevrolet - Mass-market division. Expand the Chevrolet brand to make up for the disappearance of the other brands. For every car that Toyota, Honda, Nissan and Ford make, Chevy should have a rival that is among the best in class.

Saturn - Could become a "Green"/small-car division. All the products have 35MPG or more, eventually could be composed exclusively of hybrids and electric vehicles.

 

Keep Buick exclusively in China (the only place it can move vehicles at the moment).

Cut Pontiac, cut HUMMER, cut GMC and cut Saab. Focus on the core 3 brands.

 

For owners of vehicles from brands GM will cut, honour their service contracts.

 

Ford Motor Company

Keep ownership in Mazda, and use Mazda and Ford Europe's resources to improve North American operations.

Ford - Sell quality vehicles, identical to what's sold in Europe plus keep America's best pick-ups. (Make it America's Nissan except with good pick-ups)

Mercury - Upscale Green brand. Similar to what I propose for Saturn, except a little more luxurious, and the more large vehicles.

Lincoln - Luxury (incorporating high-tech features)

 

Chrysler LLP

Make a partnership with Renault-Nissan in a bid to rebuild the brand.

Chrysler - Keep Chrysler upscale, but make it extremely high-quality, and eco-friendly.

Dodge - Mass market, focus on affordability. Cars should be affordable like Korean models, except higher quality.

Jeep - Continue to serve its current role but bring build-quality up, perhaps have 1 or 2 green models.

[cjb]

Ford doesn't own mazda, and it sold its minority part 2 days ago.

 

Renault-Nissan is not interested in a partnership with a dying company.

[MTLskyline]

Ford doesn't own mazda, and it sold its minority part 2 days ago.

 

Renault-Nissan is not interested in a partnership with a dying company.

Ford still owns 13% of Mazda, and when the economy improves it will buy back what it sold (20%). Ford had a controlling interest in Mazda until 2 days ago, and turned that automaker around in the late 90s and early 2000s.

 

Chrysler isn't going to die. Cerberus has deep pockets and will keep Chrysler afloat until it can find another buyer.

 

Renault-Nissan has expressed interest in linking up with a US Automaker. Chrysler seems like the perfect fit.

[Habsfan]

I thought Ford had bought 100% of Mazda back in the late 90's???

[monctezuma]

États-Unis

Un deux pour un sur les voitures! !!!!!

Mise à jour : 18/11/2008 11h49

 

http://lcn.canoe.ca/lcn/infos/lemonde/archives/2008/11/20081118-114920.html?4ce8904280f84e03b383efa536381a68

 

Aux États-Unis, un concessionnaire automobile a trouvé un moyen original de stimuler les ventes de véhicules.

 

«Achetez-en un, obtenez-en un deuxième pour un dollar»: c'est la formule imaginée par Frank Mancari, un dépositaire de la marque Chrysler Jeep en banlieue de Chicago.

 

«C'est toute une offre. Vous ne reverrez jamais une offre pareille!», affirme le concessionnaire.

 

La crise économique affecte sérieusement les ventes de véhicules neufs aux États-Unis.

 

Frank Mancari vend des automobiles depuis 40 ans: il n'a jamais vécu une telle situation.

[cjb]

Ford still owns 13% of Mazda, and when the economy improves it will buy back what it sold (20%). Ford had a controlling interest in Mazda until 2 days ago, and turned that automaker around in the late 90s and early 2000s.

 

Chrysler isn't going to die. Cerberus has deep pockets and will keep Chrysler afloat until it can find another buyer.

 

Renault-Nissan has expressed interest in linking up with a US Automaker. Chrysler seems like the perfect fit.

 

oops you are right, i misread the article about mazda. sorry.

[WestAust]

 

Here's what I propose:

General Motors Corportation:

 

Ford Motor Company

 

Chrysler LLP

Make a partnership with Renault-Nissan in a bid to rebuild the brand.

Chrysler - Keep Chrysler upscale, but make it extremely high-quality, and eco-friendly.

Dodge - Mass market, focus on affordability. Cars should be affordable like Korean models, except higher quality.

Jeep - Continue to serve its current role but bring build-quality up, perhaps have 1 or 2 green models.

 

GM will not keep Saturn, all of saturn models can be/are sold as Chevy already, and it's not a brand that has a big following.

 

They need to keep Buick in North America, because that's the reason the Chinese are buying them, they want to have what's available in north america, plus it could command a higher price tag than a chevy, but not as high as a cadillac.

 

Ford: they should get rid of Mercury, all of their models are simply rebadged/repackaged ford's, that's part of the reason they already canned it in Canada, no need to keep to brands selling the exact same car.

 

Chrysler is the one with the biggest problem brand wise, Jeep is definitly the most valuable brand of the 3, that's an "untouchable" if i can use this expression. Chrysler and Dodge on the other hand, they could get rid of Chrysler and simply keep Dodge, however, Chrysler is like the founding father of the group, so it has a lot of history behind it. But keeping dodge makes the most sense considering it has the pickup divisions, the minivans and the models with the best names recognition (charger, challenger) between equivalent model of theirs and Chrysler

[ErickMontreal]

Automobile: entente sur un plan de sauvetage

 

20 novembre 2008 - 13h03

LaPresseAffaires.com

 

Des sénateurs américains républicains et démocrates ont annoncé jeudi être parvenus à un accord sur un plan de sauvetage pour l'industrie automobile.

 

La veille ces efforts avaient terminé dans une impasse au grand malheur du Big Three, ces trois fabricants automobiles américains qui vivent des moments difficiles.

 

Les quatre élus à l'origine de cette initiative sont tous originaires d'États où General Motors, Ford et Chrysler ont leurs usines (Michigan, Ohio et Missouri).

 

Il est impossible à l'heure actuelle d'en savoir plus sur les détails du plan de sauvetage.

 

Click here to find out more!

 

Toutefois, les sénateurs démocrates Carl Levin, Debbie Stabenow et leurs collègues républicains Kit Bond et George Voinovich ont prévu de donner plus d'explication sur le texte, lors d'une conférence de presse qui sera tenue à 14h30 au Sénat.

 

Ces parlementaires prévoient soumettre le texte ultérieurement à la chambre haute du parlement américain