General Motors Bankrupt! U.S. Government Expected To Take A 60 Percent Ownership Stake

BREAKING NEWS! BREAKING NEWS!

As expected GM filed for federal bankruptcy protection today, in what most analyst agree will be an organized structured bankruptcy process. The federal government is to take a 60 percent ownership stake while the Canadian Government takes a 12.5 percent stake, the UAW has a 17.5 percent stake and bondholders will have a 10 percent ownership stake.

What should be the largest industrial bankruptcy in U.S. history should pave the way for a new GM if the Obama administration plan moves through federal court smoothly as expected.

A Chief Restructuring Officer has been appointed, Al Koch Managing Director of AlixPartners, who steered Kmart through it's Chapter 11 reorganization. Mr. Koch is expected to be the point person in dismantling the "Old" GM (parts, assets, etc.) into the "New" GM, he is also expected to steer the management team assembled to close the "Old" GM when the company emerges from bankruptcy.

The bankruptcy will effect many constituents, including auto warranties (the federal government is currently backing the warranties), retirees pensions, auto suppliers, auto dealerships, shareholders (expect nothing), employee 401k plans and others.

The company should emerge much leaner which should include Chevrolet, Buick, Cadillac and GMC, the companies other brands are expected to be sold off and if buyers can't be found they will be shuttered.

Once the icon of American Industry and the world, GM is far from it's glory days, can it survive and thrive once again, I believe it will, to survive in this current economic crisis, it had to become smaller and leaner and this bankruptcy filing was the only way to get all of it's stakeholders to agree on the restructuring necessary, which includes the Federal government assistance. It would have never survived without the U.S. Government intervening on it's behalf and many more companies would have been brought down with it, including Ford Motor Company.

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That Car Guy

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BANKRUPT! CHRYSLER CORPORATION IS FILING FOR BANKRUPTCY PROTECTION!

BREAKING NEWS! BREAKING NEWS!

Chrysler LLC is filing for Chapter 11 bankruptcy protection as announced by President Obama today at a Press Conference.

As expected from what has become daily speculation, President Obama has made the following statement, "Over the past month, seemingly insurmountable obstacles have been overcome", "Chrysler and Fiat have formed a partnership that has a strong chance of success", in a televised broadcast.

Talks between key stakeholders of the company broke down when certain creditors were holding out from the latest government offer of swapping the debt for $2 billion dollar, the government then increased the offer to $2.5 billion and were given a Wednesday deadline at 6pm.

The President went on to say "Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and it's stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward."

The terms of the partnership between Chrysler and Fiat although not entirely clear, are summarized as follows: 1. Fiat would gain entry into the U.S. automobile market 2. Fiat would have a minority stake in Chrysler ( this would be for a technology exchange, so that Chrysler can make make small auto's) 3. Chrysler would gain access to other global markets that it does not have currently 4. This deal provides no monetary exchange between the two companies.

GM has until June 1, 2009 to have a solid plan in place or it will be forced with the same fate. GMAC and Chrysler Financial it appears will merge under this reorganization plan and these talks are ongoing.

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That Car Guy

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GMAC will not make loans to customers who's credit score is below a 700 beacon score...

BREAKING NEWS! BREAKING NEWS!

GMAC Financial Services has just announced that it will no longer lend money to prime credit customers who's credit score falls below a 700 beacon score.

In a move that will cast a large cloud over the already shaky footing of car dealers across the nation, this move will surely leave most dealers scrambling for alternative sources to assist in financing their customers. This latest move by GMAC is designed because of a lack of access to funds from the global capitol and credit markets.

GMAC has also suspended some sales bonuses to dealers for its highest volume "Platinum" dealers. While only a small percentage of dealer's business, these moves represent the latest curtailment of the fallout from the global financial crisis gripping the U.S. economy.

With these current changes in policy, those GM dealers already facing difficulty with selling cars are getting another death blow by GMAC and General Motors. This move will effect about 1 in 4 customers walking in a typical dealership seeking financing according to recent reports. What that means another 25% of customers who would have probably been provided financing by GMAC will not get financing in an already troubled retail marketplace for car dealers.

What troubles me even more for the retail auto industry particularly for the captive finance arms of GM, Ford and Chrysler is that these finance sources for dealers are their life blood.

In turbulent times the captive has been their for auto dealerships for years when banks or other lenders turned their backs and concentrated on other areas of the banking business. Captive finance companies sole customer were auto dealers, however the writing on the wall is becoming clearer, everyman (or dealership) has to be for themselves.

Dealers wake up for the sake of your businesses and employees, and let your manufacturer know that it is in their best interest to continue to support your efforts in retailing vehicles, to many livelihoods are at stake in this matter. If you don't do it no one will do it for you, in order for you to sell vehicles you have to have access to financing and this current financial crisis is hitting you harder than ever in your checkbook. You cannot survive on customers with 700 beacon scores or higher, don't wait act now by contacting your manufacturer, your captive finance company (GMAC, etc.), your congressman and other elected officials.

If you wait, it may be to late, you have to have a stimulus to get the credit market moving for the auto industry. The focus has been on residential mortgages when the focus should be wider to focus on other sectors, like the retail auto industry, commercial real estate and others. When these sectors become crippled we will be in a recession for a long, long time, as I always say, don't wait, don't hesitate or it may be to late!

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That Car Guy

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