GM and CHAPTER 11

General Motors
 Founded by William Durant in 1908
 designs, manufactures, markets, and distributes vehicles General
Motors produces vehicles in 37 countries under ten brands
 Headquartered in Detroit, Michigan (the hub of the US auto)

CHAPTER 11

Origin of chapter 11
 Bankruptcy Act of 1898
 Founded in 1978

What is chapter 11
 Restructuring of debt
 Prevention from shutting company operations

How it works
 Court helps the business restructure its debts
 Lengthy, expensive and complex process
 Causes for GM Filing Chapter 11

 GM stops making profit in 2005 since that time GM lost more

than $90 billion through the 1st quarter of 2009.

 Hard to get car loans and crazy fuel prices hurt GM

 Not filing for bankruptcy sooner

 Driving incentives into the ground.

 Selling control of GMAC

 Loss of innovation and shoddy management.

 Unsuccessful lines of automobiles.

 Overreacting to the truck boom & Emphasis on less fuel-

efficient models.
 Bailout
• 1.European loans

•2. Through the Troubled Asset Relief Program the US Treasury invested a total
$51billion into the GM bankruptcy.

Change in culture

•1.Post Bankruptcy, membership to the board of General Motors changed, selected by

the Federal government, through its automotive task force.

•2. Change in CEO.

 Repercussions
 The bailout was a burden on taxpayers pockets
 Rick Wagoner was forced to retire as the GM CEO on 29th March, 2009
 GM sales went down by 45% as against 37%-the industry average
 GM as a firm was removed from the Dow Jones Industrial average
 Stockholders of the old GM shares were only able to trade on pink sheet markets
at 50 cent/share
 10,000 Jobs were lost and 62,000 employees were offered a buyout
 6,50,000 dependees on the company were left high and dry
 It was estimated that GM would loose 2000 dealerships out of its 6000 in US,
subsequently
 The US government owned a whooping share of 60.8% shareholding post
restructuring
 Hummer, Saturn, Saab were sold
 It was believed that the bankruptcy filing could lower the US GDP by 4 bps
 Reorganizing for a New Future

100
90
 Changes in management 80
70
60
 Transfer to a greener company 50
Old GM
40
Series 3
 Discontinuation of less profitable models 30
20
10
 Changes to benefits of retired workers and their 0
families Brands US
Dealerships
US Plants Debt (in Bn US
$) employees
(in 1000's) (in 1000's)

Comparison of the OLD and the NEW GM (just

after restructuring
 GROUP COMMENTS

GM Management It’s important to keep

could have been or invest in a lean
flexible company

Innovation should
always be a priority

Follow consumer
and economic It’s important to keep
trends or invest in a lean
company