I was checking in at my home-page this morning when I saw an article in MSN Money. It’s an article about a proposal to save GM by spliting it up into two parts which would divide it into “Good GM” and “Bad GM”.
On the surface it looks like a good idea…unless you happen to be a Saturn owner and you dig deeper into the proposal.
The article reads like this:
General Motors executives and Treasury Department officials have made it abundantly clear that they want to keep the auto giant out of Chapter 11. But behind the scenes, GM and its advisers have been war-gaming various bankruptcy options as a last-ditch way to save the company.
One scenario being taken seriously goes like this: The automaker is split in two –- a “good GM” consisting of the brands and operations deemed most viable, and a “bad GM” made up of the brands slated for the junk heap, a big chunk of debt and underperforming operations.
The bad GM likely would be liquidated, say several people familiar with the automaker’s thinking, and the good GM would emerge fairly quickly from bankruptcy as a going concern.
If GM ends up in bankruptcy court and chooses that strategy, it could solve some big issues.
So far, bondholders have shown little willingness to compromise — at least not as much as GM would like. Under the plan, the automaker would convert much of its $60 billion debt into equity, and creditors would take stock in the “good” company and receive proceeds from the liquidated “bad” company.
With the threat of contracts being torn up in bankruptcy, the United Auto Workers might accept scaled-back staffing and benefits.
The two-company strategy also offers significant political and marketing advantages. The government, which would likely finance the company while in bankruptcy, could credibly tell taxpayers that the good GM had an excellent chance of prospering. And the move would tell consumers that it’s safe to buy GM vehicles.
What would the good GM look like? Much like the company that executives described to Treasury officials in a restructuring plan filed in February. The good GM would keep Cadillac and Chevrolet. Ditto for GMC trucks, which are profitable in economically sound markets, and Buick, which continues to pack brand muscle in China.
GM would load up the bad company with Hummer, Saturn and any factories or operations it needs to ditch. Unless GM were to find a buyer, it would unload those assets in bankruptcy court, where they would be liquidated.
Dealers would have a tough time suing to be made whole while Hummer and Saturn are in Chapter 11. GM could even put its Canadian operations into bankruptcy. GM does good business there, but its pension plan is seriously underfunded. (Such a move would be less likely if the Canadian government provides GM the financing it has requested.)
Even with federal backing, a Chapter 11 filing would be risky, though. Creditors could hold up proceedings for a long time. As GM struggles to extricate itself, consumers could balk at buying its cars.
“Bankruptcy is like war,” says Michael L. Cook, a bankruptcy attorney at Schulte Roth & Zabel. “You think you know about it until you go through it.”
GM and the feds seem to agree.
So why is GM war-gaming bankruptcy? Partly over concerns that the auto market could worsen. What’s more, even if the union and bondholders were to give the automaker what it wants, GM would still need to borrow $22.5 billion to $30 billion from the Treasury to survive.
Add $8.4 billion in Energy Department loans to help GM make more fuel-efficient vehicles, and the automaker could end up with a debt load of more than the $60 billion it already has.
If the Treasury decides it doesn’t want taxpayers paying GM’s creditors, a creative bankruptcy might be the only way out.
This article was reported by David Welch for BusinessWeek.
Okay, on the surface this looks great. It’s a coheisive plan to save GM and keep many of their workforce employed. More importantly it’s a way to keep a lot of their suppliers employed for many years to come and we avoid a major catastrophy by having a huge employer go down the drain.
Yeah, I can hear a lot of you Southern Conservative Republican Politicians working it and I don’t want to hear about how we should let Detroit fail. The only reason you guys were giving the CEO’s of GM, Ford and Chrysler a hard time was because you wanted them to go down taking the UAW with them, so that you could get “campaign contributions” from all the foriegn car manufacturers who happen to have plants in your state. Yeah I’m talking to you Jim DeMint(R) and Lindsey Graham(R) from South Carolina who just “happen” to have two BMW plants in your state. I also mean you Mitch McConnell (R-Ky) whose state has the largest Toyota plant outside of Japan. I see you hiding in the corner Richard Shelby (R-AL), the top Republican on the Banking Committee who has Honda, Hyundai and Mercedes plants in his backyard! And don’t think I’ve forgotten about you Bob Corker (R-TN) who has a Nissan plant in his state.
All Republican Senators, all from the Deep South, all opposed to bailing out the Auto manufacturers yet want to give billions of our tax dollars to AIG et al. Gee, I wonder why?
But, I digress.
Like I said the plan to save GM seems a solid one indeed, but do we have to refer to Saturn as “bad”?
Come on, how many of you have ever test-driven a Saturn?
How many of you have ever walked onto a Saturn lot and wondered when you were going to be descended on as if you were chum to hungry sharks, only to never have the sharks approach you?
How many of you have ever gone away from a Saturn lot after having the most plesant experience you have ever had on a car lot in your life?
Yeah, I know. Those are the experiences I have had in dealing with the people who work for Saturn every time. I have always had a positive experience there so why in the name of everything holy are they considered to be a “bad” asset?
Because they are not selling as many cars as they used to, that’s why.
Look I love Saturn as a company and I love the cars they produce. They are one of the companies that is making a line of Hybrid cars right now and it doesn’t deserve to die a slow, humiliating death. Nor do it’s workers deserve to be shoved out the door and told “thanks for coming”. The vehicles and the company deserve a better fate than this. I would like to see the company survive in some way, shape or form so that the cars that are already on the road can continue to be serviced, and so that people who don’t want to have to deal with high-pressure sales tactics can walk off of a Saturn lot with a positive story to tell.
No matter what anyone tells me, I will never consider a Saturn to be “bad”.
Same goes for any vehicle made by an American company.
I haave never had a bad experience with a Saturn Dealer. In fact, I did not find them pushy or customer hungry. My husband bought me a Saturn for my birthday a few years ago, and I have never had a problem with milage or going through gas like some cars I have had in the past. It runs smooth, and I can get 26 miles to the gallon, and I wouldn’t drive anything else, unless it was Chevy. My family is particial to Chevies.
As for the good and bad of it, I think in times like this, there won’t be many dealers selling their products until the economy picks up, period! People can barely afford necessities right now but when the economy picks up, people will start buying what they trust and what they like. Hybrids may be made by several companies by then and going green may be the thing but there are some diehard fans of certain products out there that would not buy anything but their favorites no matter what. If companies can keep the name brand and adjust them to efficiencies, then they might work. Chapter 11 may or may not be an option, as well as the Bankruptcy alternatives. It depends on the company and what would be beneficial to them. I personally think that with so many lay-offs that they can’t afford to close the industries down. People need to work and they need to keep their own families from bankruptcy, unemployment benefits and such. Companies are too quick to file these outragious proceedings to cover their butts with little or no regard for their employees. Most employees would take a pay decrease if it meant losing their job altogether. Companies need to be aware of the affects and effects on everyone, not just their own needs. workers do deserve better but so do the people who are their customers, both past, present and future.
I would love to see Saturn stick around as a company because I have always liked their philosophy for doing business. It’s easy on their customers and it says a lot that they are willing to try a different approach.
True, there won’t be many dealers selling cars until the economy picks up. I know that GM wants Saturn to survive in someway and they have said that there may be some options for doing that. One involves finding an outside investor or investors to buy the company from GM. Another involves the retailers themselves banding together and buying the company from GM. That last option is not as likely as the first.
The first time we went to our local Saturn lot was to have my car serviced – this was shortly after we moved up here. While the car was being worked on we decided to take a look around the lot – you know, just to look. Well we found something we weren’t looking for – my wife’s new wagon. A Saturn wagon. We had always wanted to get one and at that time we were in a position to get one used. We went back in, asked questions, took a drive and left that day with two vehicles. Never at any one time did anyone at the lot try to talk us into anything – they let us make the decision ourselves.
Saturn treats their customers with respect. They deserve to survive as a company, their employees deserve their jobs and their customers deserve the good service they provide.
Amen! I love my Saturn, and would definately buy another. I think it would be shameful to let this company lose out because of the bailout. I do not agree with the bonuses the higher ups get, and from how they contributed to the bailout money but why make the employees, and company name brands, suffer for the stupidity of others? Employees livelyhoods are in jeopardy. These employees have families to support. And lets face it, if the car companies go under, so do many others who supply parts, tires, oil, etc.. Is it fare to see the dominoes fall in unison because upper manager couldn’t get their greedy minds and hands off the bailout money they got to save the companies in the first place?The workforce in the auto industry isn’t the only one affected. When will this end? I agree that the car company CEOs should have been forced out of their position because of what they did or did not contribute, in misuse of the funding, and handing out bonuses that should have been used to effectively get the company back on it’s feet. Those bonuses could have waited a little longer to be handed out when the time was a little more appropriate. I do not agree that employees and the company brands should be compromised and left for the junk yard ( no pun intended) because of the downfall. If this all amounts to Saturn’s demise, I will hold onto mine for as long as it takes, until the bumper falls off, among other parts, and it is barely putting up and down the roads…why? Because I am a die heart fan and believe in the quality, as well as the top notch service I was given when I first drove it off the lot with 14 miles on it. It is over 100,000 miles since and still as smooth as that first day of driving and I think I can squeeze another 100,000 or more out of it before I buy another brand. (OK- well, maybe a Chevy but that is as far as I go…)
Yeah I know, if I couldn’t get another Saturn then I would definately be looking at Chevy. The prospect of having to bang heads witha car salesman who fancies himself to be the second coming of Zig Zigler notwithstanding.
Bottom line is we as a nation need a car industry not just from an economic standpoint, but from a security standpoint. Think about this – most if not all of the vehicles that are being used by our military forces in Iraq and Afganistan right now are made by Ford, GM and Chrysler. If one or more of those companies go down, where are our troops going to get their vehicles from, Japan? Do we honestly think that Japan or Germany or Italy is going to be able to make military vehicles up to the standards that our troops need? Here’s another question, even if they were able, would they want to? Would they put in the effort making the best military vehicle for our troops, or would someone on the assembly line do a half-assed job because they don’t like that we are over there?
And it’s not just our military that’s effected. We already rely on other countries for our gas and oil. What’s it going to be like if we have to rely on them for all of our transportation as well. Not just passanger cars, but planes, trains and busses if things get bad enough.
Hopefully things will start getting better soon for everybody and we will all be able to pull out of this – soon. Here’s another thing to ponder…the limo that President Obama rides in which has bullet-proof glass and is armored, which is why it is nicknamed “The Beast” – is made by Cadillac – a GM company. Who is going to build the next generation of limo if GM doesn’t pull through?
Good questions. I think if more people thought about the questions and what could be the effects propsed, they would think twice about letting GM go and other companies that this country depended on for so long. My husband spent 22 years in the service. His speciality was planes. If he didn’t do his job, those planes would be out of maitenance and would have crashed when our defence needed them most. It goes beyond the military. Goverment officials use these vehicles everyday and yet, many do not take this into account.
Don’t think I would want to drive another car or vehicle that was poorly done or distributed by another company that would not have my best interest and safety at heart. People work on a variety of features that go into any moving object; planes, trains, trucks, cars. Half the trucking industry alone, we rely on for transporting goods and merchandice. Buses that transport our children. If people are forced out of their jobs because they are no longer in use, what will happen when our children’s buses need parts? It goes beyond just a company.
My son has a 71 classic Cheyenne Chevy truck. Do you realize how hard it is to find parts for it now? Think what it would be like if they take away the Chevy company? Granted it still has original parts on it but we have had to replace a couple of things on it. He has had that truck since he was 15 years old.
People’s lives rely on the car companies to feed their families. Without them, they will be forced into assistance and welfare. Eventually, we will all suffer the intangible consequences one way or other. Then there is the fact, that combining companies are having to redo things their way. It might not be better. Although, I hope that they take and keep the integrity of these products and do not compromise on value and service. The consequences are something that should be taken into factor. It is deplorable that because the heads of these companies are to blame, not the company or brands themselves, that they have brought on such a disaster. They have misused and misappropriated money meant to build up the economy but their selfishness will make us all suffer one way or other. Let them walk but not force us to have to pay for their mistakes by driving vechicles we don’t want or use.