JUNE 2, 2009
A major earthquake in the United States
The Formula 1 world probably will not have noticed, but General Motors went into Chapter 11 bankruptcy yesterday. It is the largest ever industrial bankruptcy in history. The company has assets of $82.29bn and debts of $172.81bn. The plan, being overseen by the US government, is for the company to emerge as a smaller and less debt-laden company in a few months from now. GM has been one of the great icons of America for more than a century. It was founded in Flint, Michigan in 1908 by William C Durant. At its height, GM employed 350,000 workers and had 150 factories. It was the largest automobile company in the world between 1931 and 2007 when it was eclipsed by Toyota. The company nonetheless employs 244,500 people around the world, and sells vehicles in around 140 countries. The bankruptcy has been assigned to Judge Robert Gerber, of New York's Southern District.
The new company that will be launched to replace GM in between two and three months will be 60% owned by the US government and will sell only four brands: Chevrolet, Cadillac, Buick and GMC. Other brands such as Pontiac, Saturn and Hummer are being sold off or closed down. The company's European operations, which include Opel, Vauxhall and Saab, are being split up with Vauxhall-Opel being sold to a consortium headed by Russia’s state-owned Sberbank, under chairman German Gref, a former economic minister and a longtime supporter of Vladimir Putin. The business will be operated by Canada's Magna International, which owns the Magna Steyr automobile production company in Austria and is a major parts supplier to car manufacturers in Europe and the United States.
GM will close at least nine more factories in the next few months with a considerable number of job losses resulting. Parts suppliers and dealers will be the major victims. There are plans for 20% of GM dealerships to disappear and parts suppliers are either operating in Chapter 11 or likely to seek protection from creditors. The big players in that industry Delphi and Visteon are already in administration.
GM is the second of the Big Three US car companies to go into administration, following Chrysler. The hope is that the bakruptcies will create smaller more efficient automobile manufacturers which will rebuild the industry in the years ahead.
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