FALL OF A GIANT Chapter 11 bankruptcy protection will allow GM to restructure its operations

MAN OF THE MOMENT GM CEO Fritz Henderson says the reinvention of the company will be done in the right way

WHO HAS WHAT? The various stakeholders in GM

By Derryn Wong

IT DIDN’T COME as much of a surprise to industry pundits, but it’s still a sign of the times: on Monday June 1, General Motors, the world’s second-largest automobile company, filed for Chapter 11 bankruptcy protection.

It’s the second of America’s Big Three to do so, after Chrysler in April. With 235,000 employees worldwide, assets of $118.5B (billion) and debts of $248.8B, it will be the third-largest bankruptcy proceeding in history.

GM last turned a profit in 2004 ($4B) and its decline since then, along with the American car industry in general, has been sharp, losing around $88b from 2005-2009.

Just as with Chrysler, GM will receive loans of $43.2B and $13.7B from the US and Canadian governments in exchange for 60 and 12 percent ownership stakes respectively. GM’s new Voluntary Employee Beneficiary Association will own 18 percent and the rest will be held by the company itself.

Chrysler filed its own Chapter 11 on April 30 and is expected to come out of court protection as soon as next week. GM is a substantially larger company though, and will take much longer to restructure, around 30 to 60 days.

The restructuring process will include shedding brands, shutting of plants and dealerships and renewed research and development (see key points below).

GM’s new CEO, Fritz Henderson, who replaced Rick Wagoner in March at the Obama administration’s request, said, “The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right.”

As with Chrysler’s proceedings, GM’s overseas operations are not part of the filing and will continue operations as normal, although they will report to the ‘new GM’ which arises from the ashes.

Meanwhile GM Europe will receive $3.1B support from the German government to continue, with Opel/Vauxhall to be entered into a partnership with Canadian auto supplier giant Magna.

The Hard Facts – Key Points from GM’s restructuring
According to GM’s statement it will:

- continue all customer programmes and warranties without interruption
- respect operating and financing agreements with GMAC (GM’s finance bank)
- continue to pay dealers, suppliers, employees and honour related agreements (pensions, dealer accounts etcetera)

The ‘New GM’ will focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC, and lower overall costs by reducing its North American production output, reducing the number of employees, retiree benefits and so on.

It will also go ahead with key vehicle launches in 2009-2010, like the Chevrolet Camaro, Cruze and Volt.

What this means for Chevrolet, Opel and Saab here
GENERAL MOTORS ENCOMPASSES the brands Chevrolet, Cadillac, Buick, GMC, Hummer, Pontiac and Saturn. International subsidiaries include Holden, GM Daewoo, Opel, Saab, Vauxhall and Wuling.

In the US, Saturn, Pontiac and Hummer will either cease to exist or go under the hammer. Opel’s fate is already decided and Saab will be sold off by the end of this year.

Holden, GM Daewoo and Wuling are owned subsidiary (or in the latter’s case, a joint-venture) companies in Australia, Korea and China respectively, and will continue their operations unabated. GM Daewoo in Korea produces most of the cars badged as Chevrolets in the Asia-Pacific region, including Singapore.

General Motors Overseas Distribution Corporation (GM ODC) is GM’s head office of operations for Singapore and the primary importer for Chevrolet and Opel vehicles here. As GM’s most direct representative here, GM ODC affirmed its commitment to the future here with its own statement.

“GM ODC will be an important part of the new company and will maintain normal business operations. It is a separate entity from GM Corp and has the capability and resource to continue our operations,” said Kittichai Jarusrojpoka, managing director of GM ODC.

He assured Chevrolet and Opel buyers/owners by stating that all warranties will be upheld without interruption and pointed to Chevrolet’s strong performance and exciting new products as indicators to the company’s bright future.

“For example, Chevrolet in Singapore increased sales by 10.15 percent in Q1 2009 compared to Q1 2008, bringing the Chevrolet car population in Singapore close to 9,000 despite the economic downturn. We will continue to offer great products that represent the best in automotive technology, such as our first global compact car, the Chevrolet Cruze as well as our new mini-car, the Chevrolet Spark.”

The company also announced the re-appointment of Alpine Motors as the sole dealer for Chevrolet vehicles in Singapore.

“We are pleased to be reappointed as the dealer for Chevrolet in Singapore, and will continue to offer Chevrolet buyers and owners a holistic and satisfying Chevy-ownership experience,” said Mr. Albert Pang, managing director of Alpine Motors.

Saab vehicles dealers Trans Eurokars also reaffirmed its commitment to providing continued services for customers. Ms Ong Lay Ling, managing director of Trans Eurokars Pte Ltd said, “Saab is committed to Singapore and will continue to serve all Saab drivers as usual. We would also like to assure our customers that all warranties and service packages sold under Trans Eurokars will remain valid.”