GM filing for bankruptcy

bubblesmoney

GM Said to Plan Bankruptcy Filing Tomorrow Morning

General Motors Corp. intends to file for bankruptcy before 8 a.m. New York time tomorrow

loads of dealerships will close and loads of suppliers wont be paid. so there will be knock on bankruptcies and effects on the share market for sure. the haircuts for the creditors surely will not jump start the bond market.

wymondham

sure I heard this is only a very temporary situation?

julieq

It's bankruptcy protection, not bankruptcy. Under US Chapter 11 companies have temporary protection from their creditors so they can restructure their finances. That is involving in GM's case a European rescue plan, and a means of splitting up profitable and unprofitable parts of the business in the US.

It's been rumbling along for weeks, so not exactly a surprise.

The automotive industry has a surprisingly large influence on all sorts of companies incidentally, a very large percentage of even apparently unrelated industries such as chemicals goes into that sector. They haven't been buying much of anything for 3 or 4 months so a lot of what might happen is priced in to markets and expectations already. There's a chronic over capacity so it's not a bad thing really if some manufacturers go to the wall.

poppy10_2

wymondham wrote: »

sure I heard this is only a very temporary situation?

Yep. Chrysler has already filed for Chapter 11. The US government won't let either company go under.

Chapter 11 in't necessarily the end of the road for a company. American Airlines and United Airlines both filed for Chapter 11 bankruptcy after 9/11, managed to continue operating while restructuring their debts and are now still going strong.

poppy10_2

julieq wrote: »

It's bankruptcy protection, not bankruptcy.

Its the same thing. Chapter 11 is bankruptcy - the company is declared legally unable to pay its creditors.
You're confusing bankruptcy with liquidation in which the company is forced to stop operating and sell off all its assets to pay whatever it can to the creditors.

purch

The Federal Rules of Bankruptcy Procedure has lots of codes/amendments to suit different circumstances.

Chapter 11 is a Re-Organisation under the Bankruptcy Code. Under Chapter 11, Creditors have a major say in how the Debts are restructured.

Yes, it's highly likely that GM will emerge from Chapter 11 as a going concern, albeit a much much smaller concern.

lostinrates

purch wrote: »

Yes, it's highly likely that GM will emerge from Chapter 11 as a going concern, albeit a much much smaller concern.

This is exactly what the news is saying. smaller, leaner and hopefully greener GM. It would be a very great shame not to use the infrastructure and ''goodwill'' of such an established name and if they can start producing more ''europe inspired'' cars and convince america that small is beautiful.

Regardless of the ''save'' of the company by restructuring however, it is likely there is a significant amount of pain to be felt from the ''restructure''.

penguine

lostinrates wrote: »

Regardless of the ''save'' of the company by restructuring however, it is likely there is a significant amount of pain to be felt from the ''restructure''.

Another 20,000 jobs lost in the US, according to the BBC.

julieq

Poppy, you're splitting hairs but Chapter 11 is bankruptcy protection, not bankruptcy. You can emerge from Chapter 11 without being declared bankrupt.

I was in the US two weeks ago visiting automotive industry suppliers and what is really quite scary is the lack of any optimism at all in the US industrial sector, for a generally upbeat country the mood is dire. Most of the US chemical, heat treatment, plastics and a lot of the glass industry feeds the automotive industry, a hell of a lot of the high tech does too.

It's not the 20,000 jobs that's the problem, that's small beer in the US which is historically a highly productive economy with great flexibility of employment. It's the knock on effects when a whole sector wobbles and causes increasing wobbling in its wake.

flyingscotno1

You have to say it has been coming for a while though. Too many brands and models, too many poor sellers, too high fuel economy and fierce Japanese competition.

Ford I notice are starting to import the EU product range into the US- basically because it is better regarded than the US range. GM were doing this too- Saturn's were basically just Opel/Vauxhalls, the Astra was there for example.

A slimmer GM will be good over-all, but the pain of getting there. Detroit has suffered badly before, and looks like motorcity will have it all again.

poppy10_2

julieq wrote: »

Chapter 11 is bankruptcy protection, not bankruptcy. You can emerge from Chapter 11 without being declared bankrupt.

No. Chapter 11 is bankruptcy. By filing for Chapter 11 you are declaring that you are bankrupt, cannot pay your creditors and need protection to get them off your back while you undergo restructuring. You are not getting protection from bankruptcy, you are bankrupt, and are getting protection against your creditors pursuing you. All actions you take as a bankrupt company under Chapter 11 must be approved by the bankruptcy court. You may or may not emerge as a viable company.

http://www.telegraph.co.uk/finance/5251172/Chapter-11-bankruptcy-protection-explained.html