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.
