"GM Bankruptcy: Details on the Announcement" Edmunds Daily

GM Bankruptcy: Details on the Announcement

gm 150.jpg In a series of press conferences today, President Obama and GM's CEO Fritz Henderson released details on GM's earlier filing for Chapter 11 bankruptcy protection.

Saying, "give us another chance," Henderson promised that the bankruptcy filing would be "the start of a new and better GM." He predicted that the restructuring process would take from 60 to 90 days. GM has launched its own site to help keep the public informed of its latest efforts and promotions.

Henderson was preceded by President Barack Obama who essentially said that Chrysler's apparent reemergence from bankruptcy bodes well for GM's long term success. He noted that after entering Chapter 11, Chrysler sold more cars in May than in April. However, he didn't mention that most of those sales were at fire sale prices.

GM filed for Chapter 11 bankruptcy protection earlier today to help elimnate debt and other liabilities in hopes that this would allow it to re-emerge as a "leaner, meaner" car manufacturer. An expected promotional campaign, to help bolster confidence in GM vehicles, could be the biggest consumer news to come out of this, and an announcement on a new incentives program is expected soon.

Details of GM bankruptcy filing include the already announced non-renewal of franchse contracts with about 1,100 of its dealerships which were under performing. The dealerships will be "winding down," with many closing over the course of a year, though some have speculated that many will close before the end of this year.

Possibly preparing for bankruptcy, GM stated previously that it will eliminate four of its brands: Pontiac, Saturn, Hummer and Saab. However, current owners of those cars can continue to get warranty work performance at the remaining GM dealerships. Parts for those vehicles remain available but the long term supply outlook is unclear.

As part of the restructuring process, Henderson announced new deals with the United Auto Workers unions. A new ownership agreement would call for a 60 percent belonging to the U.S. government, 12 percent by the Canadians and 17.5 percent by the UAW. The remaining 10 percent of GM's assets would be owned by the bondholders.

The restructuring plan calls for nine factories to be shuttered and three other factories idled. The cuts will put 10,000 Americans out of work. Supplier issues could still play a part, with both Visteon and Metaldyne filing for Chapter 11 protection. GM claims its upcoming green car plans will not be affected by these closings.

For buyers, this means that you can probably buy a GM vehicle at an even deeper discount than in recent months. Both Obama and Henderson assured potential buyers that the bumper-to-bumper warranty would be honored at any of the many remaining GM dealerships.

For current GM owners, the very worst possible effect of all this is that they might need to find another dealership to get their vehicle fixed at under warranty. Routine servicing (oil changes, tire rotations etc.) can always have that done at a closer independent garage without voiding the warranty. Parts availability might eventually be a problem.

For more information on dealership closings, and what this means to you, please visit our Industry News for Car Shoppers page.