Complain about a product or service

GM Prepares For Bankruptcy Monday

Stockholders to be wiped out, bondholders to take steep loss

By Mark Huffman
ConsumerAffairs.com

May 29, 2009

• Canadian Auto Dealers File Class Action Against GM, Law Firm • GM Introduces Wi-Fi In Cars • GM Offers Money-Back Guarantee • GM's Newest California Showroom: eBay • GM, Chrysler Personal Injury Victims Left Stranded • 'New GM" Exits Bankruptcy • Judge Greenlights GM Bankruptcy Plan • Obama Set to Sign 'Cash for Clunkers' Bill • States Challenge GM Sale • Supreme Court Okays Sale of Chrysler to Fiat • Supreme Court Blocks Chrysler Sale • GM To Scrap Medium-Duty Trucks • Penske Hopes to Drive Saturn Off GM's Lot • New Chrysler Agrees To Honor Old Lemon Law • Consumer Groups Appeal Chrysler's Lemon Law Reprieve • Dumped GM, Chrysler Dealers Not Going Away Quietly • The Hummer Lives to Fight Another Day • GM Files for Bankruptcy; Chrysler Gets Court Approval • Chrysler Sours on Lemon Law Obligations • UAW, GM Agree On New Contract • Consumer Groups Challenge Chrysler Bankruptcy • GM Notifying 1,100 Dealers They're Being Dumped • GM, Chrysler May Close 3,000 Dealers • GM Moves Up Saturn Execution, Plans to Drop 2,600 Dealers • GM Prepares to Scrap Pontiac • U.S. Carmakers Getting More Federal Aid • GM Cuts More Jobs, Eyes China --- • Consumer Complaints about GM • Consumer Complaints about Chrysler

As of now, plans are that lawyers for General Motors will go to court Monday and seek Chapter 11 bankruptcy protection for the nation's largest automaker. The move will be the catalyst for a number of sweeping changes planned for the car company.

With the U.S. Government owning more than 70 percent of the “new” GM and pumping in billions of dollars, the company plans to pare down its product offerings. Cadillac, Chevrolet, Buick and GMC will survive – Pontiac, Saturn and Hummer will not. GM will close as many as 16 factories as part of its streamlining effort.

With U.S. government influence in the boardroom, GM will emphasize smaller, more fuel efficient cars, hoping American consumers will prefer them to the trucks and SUVs that have been GM's profit mainstay over the last decade or so.

To help the reorganized GM quickly become profitable, the government is converting its loans to common stock while pressing bondholders to accept steep losses. The United Auto Workers Union, as it did in the Chrysler bankruptcy, will end up with a larger stake in the new GM, but union leaders have agreed to some pay cuts.

By reducing the amount of corporate debt to $17 billion, auto industry analysts say the new GM will be able to return to profitability much faster on lower sales. Treasury Department officials are hoping to complete the bankruptcy process within 60 to 90 days.

GM CEO Fritz Henderson signaled earlier this month that the car company would most likely end up in bankruptcy court.

In a May 11 conference call witth reporters, Henderson suggested a GM bankruptcy was the best way to handle the company’s huge restructuring needs and signaled the bargaining is pretty much over.

“We don’t have any plan to make modifications at this point,” Henderson said during the conference call.

It may be that GM no longer considers bankruptcy to be the kiss of death it once did. What’s changed?

For one thing, Chrylser has already broken ground in that area. The nation’s number three car maker has already filed for Chapter 11 protection as it completes a merger with Fiat.Also, the government has stepped in to reassure consumers that the U.S. Treasury will back new car warranties if they purchase a car from a company in bankruptcy.

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Follow us on Twitter.