Can GM find turnaround in bankruptcy?

General Motors CEO Fritz Henderson announces that General Motors Corp., the world's largest automaker for 77 years, filed for Chapter 11 bankruptcy today, at a news conference in New York City.

TEXT OF INTERVIEW

Kai Ryssdal: We all knew it was coming -- General Motors and Chapter 11. So really that's not the news. Now that GM is in bankruptcy officially, we figured it was worth exploring how it might get out. Our New York bureau chief Amy Scott is on the story today. Hi Amy.

AMY SCOTT: Hello, Kai.

Ryssdal: Amy, there are a lot of things that need to happen now, in this case, for it to work out for General Motors. All of them pretty much have to go right too, don't they?

SCOTT: Pretty much. We can talk about the things that are in GM's control, like making cars that people want to buy. Analysts say there are some good ones in the pipeline. A replacement for the Chevy Cobalt will be coming within a year, a competitor to the Toyota Yaris is coming. But then, of course, there's a lot that's beyond GM's control. The plan requires U.S. auto sales industry wide to recover to about 10 million a year just for GM to break even. Right now those sales are at about 9.3 million. So in addition to making cars people want, GM really needs the economy to come back. And you know with plants closing and another 21,000 people losing their jobs, GM's bankruptcy isn't exactly a shot in the arm for the U.S. economy.

Ryssdal: I wanted to ask you about something that GM CEO Fritz Henderson said in his press conference, which followed the president's remarks today. He said, the thing for us now is speed, pure unadulterated speed. Why is it so important that GM do this bankruptcy filing quickly?

SCOTT: Well, of course, the longer a company is in bankruptcy the more confidence in the company can erode. Both from the standpoint of customers and the suppliers that are helping build the cars. And President Obama addressed those issues when he spoke today. In the case of Chrysler, it's set to come out of bankruptcy probably within the next few days, just about a month after it filed.

PRESIDENT BARACK OBAMA: Keep in mind many experts said that a quick, surgical bankruptcy was impossible. They were wrong. Others predicted that Chrysler's decision to enter bankruptcy would lead to an immediate collapse in consumer confidence that would send car sales over a cliff. They were wrong as well. In fact, Chrysler sold more cars in May than it did in April.

SCOTT: Now GM is obviously a much bigger company. And its reorganization will be much more complex. But there is a lot of pressure to get out of bankruptcy, and really out of government ownership, before too much damage is done to GM's brands.

Ryssdal: So with car sales at 9.3 million a year in this country, that's not a good thing for the whole auto industry, but there has to be opportunity here for somebody right?

SCOTT: Right. The obvious beneficiaries are the Japanese automakers that have been making a bigger push in this country, Toyota, and Honda and of course, Nissan. GM's market share is expected to drop from around 20 percent to more like 12 or 13 percent. So somebody else is going to snap that up, or maybe a few somebodies. And one of them is Ford. On one hand, Ford won't have had the same opportunity to shed some of its legacy, labor and health-care costs the way that Chrysler and GM will have in court. But analysts say Ford has done a pretty good job of restructuring on its own. And it's making more of the cars that people are excited about. So Ford is in a good position to benefit from any customers that do shy from Chrysler and GM. And one analyst told me Ford is expected to surpass GM in sales in the next 12-18 months.

Ryssdal: And General Motors, of course, the company that spent 70 years as the biggest car company in the world. Amy Scott in New York for us. Thanks, Amy.

SCOTT: All right, you're welcome.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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