New Era in Autos as GM Set for Bankruptcy

Washington DC June 1, 2009; The AIADA newsletter reported that as GM prepared to file for bankruptcy, the question facing 56,000 auto workers, 3,600 GM dealers, and the Obama administration is: Will it work?

According to the Wall Street Journal, the government, which will own a majority of the company, is wagering upwards of $30 billion that it can return GM to profitability, reversing a decades-long decline by shearing away liabilities and creating a freshly competitive car maker by summer's end.

In a potential sign of turbulence, secured lenders to GM, which are owed about $6 billion, expect the government to pay their claims at face value during court proceedings, but only if they release their claims against certain GM property, such as inventory, machinery and receivables. However, according to government and industry officials, as well as other experts, bankruptcy should allow GM to pull off one of the most expedient downsizings in the industry's 120-year history.

Long hampered by laws, union strife, and management practices that kept it from fast action to fix problems, GM plans to eliminate almost all of its debt, halve its U.S. brands, shutter 2,600 dealers, and rewrite labor contracts almost overnight.

To read the Wall Street Journal's report on the future of GM,click here.