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General Motors Files For Bankruptcy
By
Jen Chung
Published Jun 1, 2009
Modified Jun 1, 2009
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By
Jen Chung
Published Jun 1, 2009
Modified Jun 1, 2009
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General Motors, an "icon of American business," has filed for Chapter 11 bankruptcy this morning at US Bankrutpcy Court in New York's Southern District. The NY Times reports, "The company was forced into the filing by President Obama, who is betting that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive."
The government is providing $30 billion to GM—on top of the $19 billion already given to the automaker, which has seen its sales drop 50% this year—during the bankruptcy. The government's contribution will become a 60% stake in the company. Of course, as the Wall Street Journal puts it, "The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?"
The WSJ also details some of the issues ahead, from not knowing when "consumer demand for new cars will rebound" to the "possibility of meddling by Congress in the company's daily operations and business plans," plus "closing more than a dozen factories and shedding the Pontiac, Saturn, Saab and Hummer brands...[which]could take years, with potential extra costs to taxpayers if the process bogs down." The Obama administration is also dealing with claims that the restructuring plan is more favorable to UAW workers, than to other stakeholders.
Cantor Fitzgerald's chief global strategist in London, Stephen Pope, told Bloomberg News, "It’s been a long time coming, but the reality of a GM bankruptcy is still a bitter pill to swallow -- it’s a bit like the Titanic sinking. This is a step they should have taken more than a year ago, which could have put them in much better shape before the economy went down.” The NY Times lists some missteps by the automaker, such as "bungl[ing] efforts in the 1980s to cut costs by sharing the underpinnings of its cars across different brands, blurring their distinctiveness" and giving "in to union demands in 1990 and created a program that paid workers even when plants were not running, forcing it to build cars and trucks it could not sell without big incentives."
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automaker
bankruptcy
business
general motors
gm
recession
Jen Chung
Jen Chung is a former WNYC and Gothamist editor.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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