General Motors is no longer alive

Global Automotive World is rapidly changing its appearance under the influence of the global economic crisis. General Motors, founded in 1908, the largest automakers in the world for 77 years, applied to the court a statement of voluntary bankruptcy on June 1, which provides court protection from creditors. Most recently, symbolizing the power and dynamism of the American economy GM is now entering a tenuous band of crisis management under state control.


General Motors told the court that its overall debt has reached $ 172.8 billion, that is twice the value of its assets, and it could not undertake a restructuring. This is the largest-scaled of bankruptcies in the American industry.

Restructuring under the leadership of the American state would require the U.S. government $ 50 billion, in exchange for this the U.S. government will receive about 60% GM. The government of Canada, on which territory there are a number of GM factories, will receive 11.7% stake in GM in exchange for loans of $ 9.5 billion. A further 17.5% stake in the health insurance fund will go to the union United Auto Workers, acting on a North American factories GM. Owners of GM bonds will receive 10% of the shares of automakers, since their share can be increased by another 15%.

«The new GM» must occur in 60-90 days, after which the company will get out of court protection from creditors. Basically, the restructuring will bring to a quick sale of unprofitable assets and the elimination of unprofitable brands such as Saturn and Hummer. At least 11 North American factories of GM will be closed. Also, due to a new contract with United Auto Workers union costs for labor will be reduced. About 21 000 members of the 54 000 workers at GM plants in North America will lose their jobs.

As a result of the restructuring the «new GM» should reduce its debt by half and reserve the brands Cadillac, Chevrolet, Buick and GMC in the U.S. market. However, it is clear that as a result of the restructuring the «new GM» will be much smaller than the «old» one.

Almost simultaneously with the GM, Crysler, the third-largest U.S. automaker declared about its voluntary bankruptcy. Italian Fiat will restructure its assets.

Immediate effect from the bankruptcy of the pillars of the American automobile industry will be the sharp decline of its share in the domestic market, which inevitably will take the competitors. Asian companies – Toyota, Honda, Nissan and Hyundai are more likely to do so.

General Motors is no longer alive