WSJ Reporting GM is Putting Ch. 11 Bankruptcy on the Table

The Wall Street Journal is reporting GM mulling bankruptcy protection:

The prospect of mighty General Motors Corp. tumbling into bankruptcy protection edged closer on the weekend, increasing the danger of a cascading collapse of a major chunk of the North American auto industry.

Talks between the United Auto Workers union and GM on concessions broke off and then resumed again as The Wall Street Journal reported that the auto maker will offer a restructuring plan to the U.S. government that includes Chapter 11 bankruptcy protection as one of its options.

The Wall Street Journal is also reporting:

The Obama administration will not appoint a "Car Czar." An inter-agency process, led by Geithner and Summers, will instead tackle issues relating to auto companies.

GM, Chrysler May Be Put Into Bankruptcy

GM, Chrysler May Be Put Into Bankruptcy:

General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

GM Using Bail Out Money to Invest in Brazil?

Update: The quoted paper is the Latin American Herald Tribune. But there is a comment left by a supposed GM representative here which I highlight:

GM is NOT using U.S. Government Loans to Invest in Brazil

Re: Robert Oak's post on 1/19/09, "GM using Bail Out Money to Invest in Brazil"...The claims that General Motors is planning to invest $1 billion of U.S. federal aid money in its Brazilian operations is unequivocally wrong and without any basis in fact. No monies from a U.S. government loan would be allocated to investments in Brazil. In the case of Brazil, GM has $1 billion in investments that have been announced over the last two years. These investments are fully financed by GM's Brazilian operations through local sources. GM's operations in Brazil are fully self-funded.

Laura Toole
GM Latin America, Africa, Middle East Communications

Auto bailout has already helped GMAC and GM sales

Emptywheel has looked closely at the numbers for December auto sales, and reaches a startling conclusion:

While GM and Ford still lost more sales across the year than Toyota and Honda (because they also tanked during the gas price crash of the summer), their performance against Toyota and Honda more recently demonstrates the degree to which recent sales are a credit driven issue, and not what Richard Shelby likes to claim is a failed business model. . . .

Both the Prius and the Tundra had worse than average declines last month, with the Tundra down 52% and the Prius down 45%. This isn't about gas prices anymore--it's about money.

What's in a Name? Fed Approves GMAC to become "bank"

It's all the rage to turn your corporate entity into a bank in order to get access to the TARP financial bail out money.

Fed Approves GMAC Request to Become a Bank:

In a 4 to 1 vote, the Federal Reserve Board approved GMAC’s application to transform itself into a bank holding company “in light of the unusual and exigent circumstances” affecting the financial markets. The move will allow GMAC to tap as much as $6 billion in government bailout money. The approval came as GMAC bondholders were facing a Friday deadline to vote to approve a complex transaction that would significantly reduce the company’s outstanding debt.

Now Bush is "Considering Orderly Bankruptcy" for the U.S. Auto Manufacturing Sector

U.S. auto manufacturing being hung out to dry? It sure looks that way!

Today Bush said he is considering an 'orderly' auto bankruptcy.

Uh huh. Anyone know of an orderly bankruptcy that didn't cause thousands of job losses? The automobile manufacturing supply chain is heavily OEMed. This means an entire chain of businesses, suppliers are involved in making cars and trucks.


On Again, Off Again, Paulson Now Says Auto Bail out from TARP will happen "quickly"

Does this sound like yankin' one's chain or what?

Bloomerg quotes Treasury Hank Paulson as saying:

Treasury Secretary Henry Paulson said U.S. automakers will receive a federal aid package as soon as the government can draft a suitable plan that ensures the companies’ long-term survival.

“The autos will get the money as quickly as we can prudently do it,” Paulson said today in a CNBC interview. “Right now what I’m thinking about is autos.”

Bush Now Says Big 3 Auto Can Get Some of the $700 Billion Bail out money

Now why could through all of that hell, have the Senate crush hope, only to turn around and say the Big 3 U.S. auto manufacturers can get some of the bail out money already approved?

The Bush administration dropped its opposition to using the $700 billion bank bailout fund to provide financing for U.S. automakers after the Senate yesterday failed to approve emergency loans

GM to Hire 500 in India

Who says hypocrisy isn't in full swing on the hill?

Indian Newpapers are reporting GM to hire 500 new workers for their new India plant and look at the glow of GM hiring while in the United States GM goes begging to not declare immediate bankruptcy:

It may be laying off factory workers in its troubled home market US, but General Motors will be hiring new workers in India at its new plant at Talegaon in Maharashtra as the company expands .

"Recruitment is on at full swing in India and we plan to hire as many as 500 new workers for our Talegaon plant in the coming months," GM India president and MD Karl Slym told TOI.

GM India is a GM subsidiary and GM has already poured $8.1 Billion into India and China.

If GM falls, Toyota will Suffer

I find nothing more irritating than dealing with people who think that the collapse of GM isn't going to affect them. Even worse are the people who believe that they market will sort it out.

The biggest irony is that the Just in Time (JIT) production system employed by Toyota and the other transplants is extremely vulnerable to any supply disruption. And because GM and Toyota share a common supplier base, a collapse at GM would put workers at Toyota's North American operations out on the streets. Because a GM collapse would cut Toyota's supply chain.