GM to Leave Bankruptcy

From the St. Louis Business Journal:

A New York bankruptcy judge on Sunday approved the sale of General Motors‘ primary assets to a new company led by the U.S. government, the New York Times reported Monday.

Judge Robert Gerber of the Federal Bankruptcy Court in Manhattan overrode the objections of several creditors, agreeing with GM that the sale was needed to keep the automaker in business, according to the publication. It is possible, however, that some creditors will pursue an appeal.

The Detroit-based company filed for Chapter 11 bankruptcy June 1.

The decision sets the stage for the new GM to emerge from bankruptcy Thursday, the Times said. Besides the U.S. government, the Canadian government and health-care trust for the United Auto Workers will have stakes in the new company.

The new company, which will operate under the General Motors name, will focus on manufacturing fuel-efficient cars. The government hopes to take GM public in 2010. In the meantime, the old GM will remain in bankruptcy as trustees wind down the business.


12 Responses to “GM to Leave Bankruptcy”

  1. 1 Nathan Martin July 8, 2009 at 9:38 AM

    I do not understand the protection of these inefficient companies. I think that the government’s intervention in the market is going too far at this point. At what point do we need to say “enough is enough, you paid your CEO’s too much, you built unreliable cars for 20 years through the 80’s and 90’s, and now you are going out of business”? It is frustrating to me to see the market unable to govern itself because of political reasons and fear of higher unemployment. My personal thought is that if we don’t let this economic downturn happen, we are going to have inefficient companies for the rest of our lives.

    I do understand the pressure of the enormous number of workers who receive paychecks from GM, but how is letting them fail any different than what they themselves did years ago when they outsourced thier work to Mexico and other countries with lower wages? GM was willing to remove jobs from Michigan but the Federal Government is not.

  2. 2 Dave Stevenson July 8, 2009 at 12:35 PM

    I couldn’t agree more. We give them the money, they still file bankruptcy (total disregard to their stockholders), and then turn around and get to come back in a year after the top exec’s have been paid and left the company.
    We should have stepped away from this one and let it go down as any other company would have. Yes, a severe ripple would have been felt, but as with everything else in history, we would have adjusted and moved on.

  3. 3 Joseph Garcia July 8, 2009 at 8:49 PM

    I honestly don’t understand GM. Why didn’t they start making more fuel efficient cars years ago? There’s a reason why their business was being diverted elsewhere, and yet they still shoved these horribly inefficient SUVs (their most profitable vehicle) while gas just kept on getting more expensive. Michigan will be hit hard, but maybe this will be one step to a better future.

  4. 4 Dave Crider July 9, 2009 at 9:57 AM

    I came from Michigan where I worked for an automotive supplier whose main customer was GM. Due to the economy the company I worked for closed the plant in my area. Having spent 16 years making parts mostly for GM I agree that they should have been left alone to sink and then the government step in to help the workers some how. I personally blame both the union and these high paid CEO’s for the company’s failure. I would often have to visit the GM Bay City plant and could not believe the workers as I walked through, some sleeping, others kicked back reading newspapers and magazines making more an hour than most in the country at the same skill level. As the previous head of the UAW had stated on his way out, more and more pay for less and less work will lead to a dead end. They should have just filed bankruptcy a couple years ago then restructured using a model similar to Toyota.

  5. 5 Tanisha/ Econ 100 July 9, 2009 at 10:59 AM

    If GM is bankrupt, then they are bankrupt. Why is the government interveing? GM is going out of business for a reason so what would selling it do? And whats with this “old” and “new” GM? Its all GM. If anything the cars are going to be the only difference. Something doesn’t sound right…

  6. 6 Dave Stevenson July 9, 2009 at 11:45 AM

    I think it’s a combination of a few things. Low fuel efficiency, UAW wages, and overall quality of American cars.
    Sorry if I offend anyone, but I have owned 3 US made cars (2 GM) in my lifetime, along with 4 Japanese models (2xToyota, Honda and now Nissan), and you just can’t get better value for your dollar than Japanese cars right now. If the US can improve their industry, including GM, then maybe. But as long as a Toyotas will run for 200k miles without major problems, as well as get ~30 mpg, how can you possibly argue with that. Meanwhile, we pay the union workers thru the nose for what? Very poor business model if I have ever seen one. Time to let this one go and rebuild from scratch – stop sending taxpayer dollars to the rescue.

  7. 7 Evangelina Alvarez July 15, 2009 at 1:02 PM

    I agree with everyone above. I mean why attempt to rebuild and financially support a company that got themselves into their own mess. It’s like when I person files bankruptcy and a week later you see them in a new car, back into more debt and the same old mess. I mean can we really expect GM to reinvent themselves and some new cars that will suddenly be more efficient and eco friendly then what toyota and honda is making right now? I agree with Dave, I’m a honda owner and come from a family of Honda owners and there is just no comparison, and it’s unrealistic for a car company to top that with 20 years of inexperience in eco friendly, durable car making.

  8. 8 Sanamjit Bains July 29, 2009 at 11:53 PM

    I see this a opportunity for GM to make more fuel efficient cars and more reasonable priced than other cars that are imported. If they can come up with such a plan then their cars can be more appealing to new car buyers, specially the ones that don’t have much to spend due to the economic condition.

  9. 9 Lauren Swartz July 30, 2009 at 3:49 PM

    We are attempting to intervene to save the company because GM has over 252,000 employees. If GM shut down that would be 252,000 out of jobs meaning- less aggregate demand and falling prices, resulting in further job losses, even less aggregate demand and continuing falling prices which would lead to less aggregate demand…you get the picture. Even Keynsian free-market enthusiasts admit the government needs to intervene when consumption is not at maximal levels due to crises in confidence.

  10. 10 Jessica Tsai August 2, 2009 at 4:46 PM

    I agree completely with what Nathan has said, so many companies’ failures during this recession can only be attributed to problems within the company and poor choices. At the onset of bankruptcy, AIG chose to take their annual corporate vacation at a million dollar resort instead of attempting to correct their mistakes or at least show their regret through saving these funds and perhaps applying them towards saving the company. Instead, these corporations play innocent and wait for the federal government to rescue them knowing full well that the government will not let big companies go bankrupt without attempting to put up a fight for them. GM has gone through the same dilemma and I can only hope that they will take this opportunity to correct the way they manufacture their products; other car companies have existed for just as long and are not faced with the same problems and the time has come for these companies to target what they have been doing wrong and attempt to fix it instead of relying on the government for survival.

  11. 11 Alejandro Cortez August 3, 2009 at 12:24 AM

    It is ironic that when American industries are given suggestions by the U.S. Government, the government is told to stay out of private industry, but these same industries are quick to accept bailouts and government help by filing chapter 11. While I believe that we should let every single auto company fail, I am glad that the government is guiding GM’s business model (at least to some extent). At least some good might come by bailing out bloated and inefficient companies. Focusing on fuel-efficient cars is the silver lining, but it is sad to think of how much further our country’s alternative energy transportation program could evolve if we were to redistribute all the bail-out money to them.

  12. 12 Carolyne Abrams August 4, 2009 at 2:55 PM

    It does seem absoultely obsurd that the government would get involved with a company going under,especially one that had done busniess like GM does (not producing energy efficient cars which are in demand) but I don’t know what other option we would have.

    A great report written by the Center For Automotive Research explains the results.

    According to the report, if the top three were to go under, we would lose 3 MILLION jobs in the US. It is not only the automakers that are supporting the employment, but also the suppliers of the auto companies. It would be devastating to our economy for this to happen.

    Good report…

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