What 101 years can do to you : General Motors files for Bankruptcy

  • SumoMe

101 years of service, 101 years of luxury; can be of no assurance that you are a titan. After all, it is not only me but the world’s best economic analysts are saying that. More than that, the recent filing of bankruptcy by GM holds testimony to that.

 

General Motors Corp. (NYSE: GM), one of the world’s largest automakers, has its base in 34 countries. Following its smaller rival Chrysler into the bankruptcy court, this global auto giant filed for court protection with a government-financed plan intended to create a viable company that can compete in world markets. On 1st June 2009, GM missed a deadline to show that it could reorganize outside of court and reported debt of $172.8 billion, more than twice its assets. “It could be one of the biggest Chapter 11 cases ever”, analysts and industry observers predicted days before the filing.

 

“The gravity of the circumstances cannot be overstated,” GM said in court papers. The idea is that the “good” GM, which would include the automaker’s most competitive brands like Chevrolet and Cadillac, would emerge from bankruptcy within a few months with a cleaned-up balance sheet. The company’s poor-performing brands, like Pontiac and Saturn, and other unwanted liabilities would be left behind in the “bad” GM. Those assets then would be sold or liquidated in a more lengthy restructuring process. Moreover, Detroit-based GM plans to launch a new company in 60 to 90 days, armed with vehicles from its Cadillac, Chevrolet, Buick and GMC units for the U.S. market.

 

“With delayed payments and ramping down of existing projects, the immediate impact of this happening could be hard. The company officials would retain only projects that are mission critical” news channels reported. GM holds a large stake in the Indian automobile industry as well. And so its bankruptcy can affect the Indian market.

 

As a result, the vacuum created by GM in the market will provide an opportunity for auto majors from Europe and Japan to create a greater market share for them. Indian service providers will, hence, have to grow their accounts with these companies.

 

Where on one hand, recession hit economies are flinging from investing into the automobile industry, U.S. President Barack Obama showed full confidence in the rising of this iconic American company again. Why shouldn’t he when the game is not over yet. Investments that will be made in new technologies and environment -friendly vehicles can certainly give GM a boost and again set the ball rolling all over.

 

Anshika Bansal

[Image source:http://www.flickr.com/photos/tobanblack/2851479080/]

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