Fallout: The Financial Crisis

GM: Future is in ‘substantial doubt’

Ashley Milne-Tyte Mar 5, 2009
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Fallout: The Financial Crisis

GM: Future is in ‘substantial doubt’

Ashley Milne-Tyte Mar 5, 2009
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TEXT OF STORY

Tess Vigeland: As a general rule, corporate America loathes acknowledging any hint of trouble. “We’ll be fine,” goes the mantra. “It’ll be OK.” Yeah, Bear Stearns anyone? Lehman? AIG? Well, today one of the Big Three automakers confirmed something in writing that industry watchers have long suspected — that its future is in “substantial doubt.” Ashley Milne-Tyte reports on what’s next for General Motors.


ASHLEY MILNE-TYTE: GM’s annual report says the company could end up filing for bankruptcy, if a few of its plans don’t work out, including the one to get another $16 billion in government loans. Dave Sedgwick is editor of “Automotive News.” He says the Obama administration will come up with the cash.

DAVE SEDGWICK: Keep in mind that with the jobs market collapsing just about the last thing you would want to do is to have the nation’s largest automaker collapse, drag down hundreds of suppliers with it.

Not to mention, he says, the other carmakers that rely on those suppliers and hundreds of dealerships.

SEDGWICK: On top of that there’s the political issue: The Obama administration is a close ally of the United Autoworkers.

He says filing for bankruptcy would be a last resort. Jon Blank of Decision Economics agrees.

JON BLANK: If they did a Chapter 11 in the most depressed auto sales environment that we’ve seen in 50 years, it would almost certainly doom the restructured company as much as the one that’s in play right now.

He says GM is getting rid of some of its brands, but given the state of the economy…

BLANK: They cannot get out of this by what basically amounts to a modest repositioning of the company’s product portfolio.

Blank says to survive, GM must also slash labor and health care costs. And persuade its bond holders to take a haircut by swapping their debt for company stock.

I’m Ashley Milne-Tyte for Marketplace.

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