European Automakers Dispute Assumptions of "Let GM/Chrysler Go Bankrupt" Case

The advocates of having GM and/or Chrysler file for Chapter 11 make their case often implicitly or explicit resting on certain assumptions. The fundamental notion is that Chapter 11 will produce less, or at least no more, economic damage than some combination of rescue funding and auto industry downsizing.

Now we are willing to grant that any future for the US automakers may be much darker than most are prepared to accept. One reader in comments today offered a back-of-the-envelope analysis for GM:

As a though experiment, I looked at GM’s November sales and tried to see what models would be worth saving (i.e. sales have not fallen off the roof this year).

This is what I found:


Cadilliac CTS
Chevy Cobalt
Pontiac G6
Pontiac Vibe
Saturn Aura
Chevy Malibu


Buick Enclave
Chevy HHR
GMC Acadia
Saturn VUE

Although they are not selling well, you have to include the Silverado/Sierra in the mix — still the best selling vehicles in the US.

Almost all these vehicles are made in the US, except for the Vue (Mexico), VIBE (made in US at the joint plant with Toyota), HHR (Mexico), and Silverado (some Canadian production)

Based on that, I see the following GM plants surviving:


Ft. Wayne
Lans Delta

Canada: Oshwa
Mexico:Ramos Arizpe

Eyeballing it, it looks as we can expect GM to shut down 3/4 of their plants in the US.

That is massive hurt to suppliers, dealers, etc.

Remove the Pickups, and it is even worse.

Yves again. I’ll assume this is a good first order approximation. I have a sneaking suspicion that few in the financial community have gotten their minds around the notion that GM might shutter 3/4 of its production.

With that as context, the proponents of Chapter 11 focus on the potential (in their view) upside, mainly gutting UAW contracts, but also dealer agreements and (in theory) cramming down bondholders. But the flip side is that once a company files, the process is irreversible. And if things do not work out as expected, there is no way to go back.

Some of the main assumptions of the Chapter 11 advocates include:

The automakers will emerge in a thinned-down state, rather than having Chapter 11 morph into a liquidation

Non-core brands and foreign ops could be sold

Other participants in the US auto industry, such as foreign transplants in the US not suffer much (any) harm unaffected

A telling issue is that European car manufacturers, who in theory ought to welcome the elimination, partial or complete, of competitors, are instead very worried about the way damage to the Big Three could hurt them. From the New York Times:

Ferdinand Dudenhöffer, director of the Center for Automotive Research in Gelsenkirchen, Germany, warned that the indirect effect of a potential G.M. collapse for American parts makers would be severe. He added that German manufacturers in the United States, like Mercedes and Bayerische Motoren Werke, the maker of BMW cars, would have to rethink not just their American supply chains but their global ones as well.

“There would be no winners, only losers,” Mr. Dudenhöffer said. “This would create a huge mess around the world.”

Both G.M. and the Ford Motor Company were profitable in Europe last year and in the first half of 2008. But neither of their European operations is large enough to survive on its own, said Graeme Maxton, an economist who has long tracked the car industry.

“They’d need a parent of some sort,” Mr. Maxton said.

Other automakers may be reluctant to assume that role, given the slack sales of European giants like Renault, Fiat and Daimler. The tight credit markets would also inhibit any large deals.

“Two drowning men clinging together don’t make a good swimmer,” Mr. Maxton added.

Recall that the reason that an automaker bankruptcy is problematic for parts-makers is that they are unsecured creditors, and do not get paid until the Chapter 11 process would be complete, which one analysis says would not take place before late 2010. Even if a special facility could be devised to keep parts-makers on life support, that adds more taxpayer-borne cost and complexity to the Chapter 11 scenario.

And per the comments above, this is not a good time to be trying to unload car brands or manufacturing operations. The other big automakers all have their own survival worries.

Nevertheless, some options are under consideration. Back to the article:

Mr. Dudenhöffer said the image of Opel, G.M.’s German subsidiary, is suffering among German consumers because of bankruptcy speculation, and suppliers could become nervous if the talk persists.

Because of this, many analysts say they are skeptical that Opel can survive as an independent company if G.M. seeks bankruptcy protection. A more workable solution might be to combine G.M.’s entire overseas business, they said, which would produce roughly three million to four million cars annually.

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  1. baychev

    “This would create a huge mess around the world.”

    subscription to such a viewpoint could beong only to someone who does not want to do anything all day long, all year long. if this guy is so concerned about logistics, he can outsource it to ups/fedex. then he can enjoy his wurst with beer in trouble free state of mind.

  2. mxq

    Via Detroit Free Press:

    “Only in America are automotive companies being subjected to the disdain displayed by Congress and the country in recent weeks. Foreign governments generally provide broad support to their home-based auto companies, which employ thousands. In Europe, Japan and elsewhere, the governments usually provide health care coverage for workers, and in some cases, they even own a stake in their auto companies.

    “There is no way that France, Italy or Germany would let their auto industries disappear for lack of government help,” said Paris-based veteran automotive journalist William Diem. “European countries are not afraid to invest in the industry.”

  3. Daniel

    I cannot talk about the Japanese auto industry. But there is a difference of nature between the species we have here in Europe and the one born in Detroit.

    No banker or financial analyst, or why not lawyer (#){?), would dare post the kind of word that Yves has put here. No willingness to bruise her by the way, the post certainly brings some useful data for an outsider like myself.

    Why would anyone here in Europe restrain from emitting an articulated view on the automotive industry?

    Because this industry here requires the kind of organizational and engineering skills that forces respect on anyone with financial background. The car industry is still deemed, at its core, a center of excellence including intellectual excellence.

    Right or wrong I do not know. But as far as I am concerned, I have no experience in finance, let alone finance banking, only a highly valued MBA not even majoring in finance …

    I can tell you that I have NOT restricted from giving advice to relatives holding executive positions in banks. That bears some meaning as well…

  4. eh

    Considering the time it will take to redesign and retool it is also a safe bet that GM will continue to lose market share, which will further complicate any recovery efforts. Thisis why in terms of bailout money people say all the numbers talked about so far are just the start of what will be needed.

  5. PeakVT

    …warned that the indirect effect of a potential G.M. collapse for American parts makers would be severe. He added that German manufacturers in the United States, like Mercedes and Bayerische Motoren Werke, the maker of BMW cars, would have to rethink not just their American supply chains but their global ones as well.

    Rut-roh. Sounds like more imported parts. Auto-related trade balances are bad enough as it is.

  6. Richard Kline

    I ‘preciate the back of the envelope summation of a ‘survivable’ GM by the commentor hoisted to the post. I lacked the background myself to go brand by brand, but it sounds about right. GM has been for years like a huge tree, most of which is dead wood, which threatens to topple in any modest storm crushing the few swatches remaining with actual growth. Their own overcapacity overshadows what would be better and growing brands on their sheet. This is one of the real problems with being too big.

    So take the estimate that three-quarters of GM should be cleaved off of the stump; add two-thirds of Chrysler, and perhaps one-third of Ford to that. What remains is the potentially profitable core of the US auto industry _as presently configured_. Selling overseas plants makes no sense; they aren’t survivable on their own, but are profitable, and hence could provide cashflow to get the re-organizing core corps back on their feet. Forget about dividends, these won’t be paid for years.

    The question, then, is what to do with the brands/plants/capacity now salvaged as core? Combining them with other existing automakers is ridiculous: the major problem in the auto industry is oversized behemoths which can’t remake themselves. If the markets don’t limit the size of individual carmakers, than governments certainly should. —But what we need is more diversity of autos. The industry has made infantile, for-visuals-only efforts to bring wholly new designs to markets for decades, with very little actual result. And this is no surprise, since in the over-marketed, market-share-hogged retail environment there is no space for any new brand to sell enough to scale up to the point where they can get costs down into competitive range. Innovation in the auto industry has been _structurally_ impossible in this environment unless a Big Player chose to subsidize a new line. No Big Player has been willing to cannibalize existing lines through such an effort, so they did not, and would NEVER make the effort, much of why they have just about killed themselves.

    Sooo, it would be interesting if some of the existing capacity being cleaved off from the present automakers, which for our sake as an industrialized nation we need to preserve (sans their failed equity and management), might be offered on the [real] cheap to speculative _smallish_ investors who wanted or could be induced to try their luck in putting out new designs. The list above means that more than half of existing capacity could be available on a pick-n-choose basis. Tax credits from the US and certain kinds of subsidies for smallish pieces of this might make sense over the near-term. Not all of it, but some of it. If, down the road, these ‘baby autos’ didn’t make it in the market, we would at least not have all of the employment loss and supply chain impact at once while trying to save the core of the existing companies. And if one or two or more of the ‘autolettes’ came up with a popular new design, then the get in the game for potentially far lower costs than starting from scratch. The downside is that existing plants many not be particularly well-tooled and sited for new designs, but there it is. We need to think big here; not Big, but broadly different. Just huddling around our existing core isn’t much of a future. We need more, small producers, and much more innovation, so let’s shape the environment for that. Oh, and I suspect that the unions would _jump_ at such a proposal, since the alternative is walking away from a locked gate with unmarketable skills.

  7. locust

    The back of envelope calculations don’t seem to take into account fleet and commercial vehicles which at one point accounted for 25% of sales.

  8. Anonymous

    A large part of GM’s problem is that it ended up being a bank which loaned to car buyers with a side business of making cars. Ignoring this then GM still has problems and I suspect that the fault may lie with Government past actions than with the actual auto manufacturers.

    GM brand names include Chevrolet, Buick, Saab, GMC, Pontiac, Cadillac, Hummer, and Saturn, Opel, Vauxhall, Isuzu, Holden, and Daewoo. You have to ask what it is about Opel, Vauxhall, Isuzu, Holden that make them competitive while the other brands are less so. Many have argued that it is about the quality of the cars which I disagree with. Saturn cars are based on the Opel and Vauxhall models from Europe. There is actually no reason why Opel,Vauxhall,Holden and Saturn could nto be spun off into a profitable company.

    The question should be why is it unprofitable to make the car in the US but not in Europe. The obvious answer might be that labour costs are higher in the US as a result of unionisation. Looking at the labour costs in the US and Europe then it is clearly not true.

    GM would appear to have two problems. Firstly it puts additional things into their cars that the consumer does not really want and secondly its suppliers are not as efficient as suppliers in others countries. If Chyrsler had been allowed to gracefully exit during the goods times then this would have focused both suppliers and GM. Any rescue package needs to deal with a costly and inflexible management layer at the same time that the supply chain needs to be consolidated. Sort of allong the lines of what Toyota annouced it was attempting recently with its US plants.

  9. fresno dan

    “A telling issue is that European car manufacturers, who in theory ought to welcome the elimination, partial or complete, of competitors, are instead very worried about the way damage to the Big Three could hurt them.”
    Nothing of substnace to add, but being a cynic, could it be that the Europeans want to compete against a “bloated, mis-managed, struggling with debt competitor”?
    BTW, being a particulary cynical cynic, I don’t really buy the above characterization (except for the debt part). GM made cars – er, Truacks (SUV’s) that the American people gobbled up. They made generous deals that are in hindsight overly resrictive and generous, but at the time were thought to be progressive.
    What the best way to make US automaking sustainable takes someone much smarter than me to figure out.

  10. John Rosevear

    That’s a pretty good list of GM plants — Lansing Grand River and (the newly revamped half of) Oshawa are probably their most advanced plants technologically, and the products at the others are definitely the company’s strong points. The only one I’d add offhand to that list is Bowling Green KY — that’s the Corvette factory. It’s a huge symbol for the company and it’s one model that always seems to cover its costs no matter how the rest of GM is doing.

    But yeah, half or more of their North American facilities probably should be toast. Sobering to look at it that way.

  11. patrick neid

    As posted yesterday, I think we can agree that GM, no matter the plan, will be 1/2 its current size at the end–if it exists at all.

    If we take that as a given then the discussion simply moves to how to get there. Before starting the journey we can also admit that GM currently loses about $1500 per car produced and has lost that amount for years. Obviously its current business plan is a failure.

    Unless you believe that all the disparate parts have now got religion and this one last loan will produce a come to Jesus moment under government tutelage, Chapter 11 is the only current process that guarantees such a result–if a result is even possible. I think it is preposterous to think that a government body led by the “Car Czar” would be capable of such an outcome. Only the draconian aspects of Chapter 11 will bring all the parties to a resolution, admittedly at gunpoint.

    Under government supervision what I think you would see are rats abandoning a ship, such that the company would be gutted right before our eyes on the public teat no less.

  12. K T Cat

    I guess I just don’t know enough about economic issues to figure this one out rightly, It seems to this slow-witted fella who’s done a turnaround or two in his time that immediately and ruthlessly killing off everything that won’t make or contribute to a profit in the future is the only way to save a dying organization. Anything else condemns the entire group to a slow and painful death so it kind of doesn’t matter who gets hurt in the Chapter 11 process because without it they’re all dead anyway.

  13. Stephen


    You are correct that there is a disdainful view of the car companies. Some of it is because the car companies ceased being about engineering and design. Their brands are associated with value, comfort and indulgence.

    The workers are seen as spoiled, rightfully or wrongfully. History of strikes, high wages, outspokeness (especially in Canada)fuelled by a perception of priveledge.

    Dealer experiences suck in NA. And finally, the problems have been known for a long long time. I have heard about global overcapacity for about 20 years. But every time it comes up the union and car companies lock arms and run to the government, and fundamental change doesnt take place. The union and management are locked in a co-dependent relationship.

    So from a Canadian perspective it is hard to say that there hasnt been significant “investment in the industry”. To some degree we have been successful, producing 14% of the cars in NA based on 10% or less of the sales.

    The question is, with a blank sheet of paper would you build GM to look anything like what it looks like today, and the answer is a clear no. Would you have the labur contracts you have today, no. WOuld you have the capital structure you have today, no. There are lots of assets but they are completely buried.

    I think building auto’s well is an important function, the strategic elements to society are the toll and die and supply chain capacities. Once again, dealers are a dime a dozen and not to be cold but who cares, there is no speaialty other than access to capital there.

    The transplants show that a good wage is paid but less than a union wage….and the effective wage, which is based on production without the work rules and big bennies is lower. There needs to be an adjustment.

    Another back of the envelope. Even if Labour is only 7% of the cost, at an avergae cost per vehicle of 25000 to dealer then then labour reps about $1,750 per vehicle. Assuming a 20% cut in effective wage and at a low sales volume of 12,000,0000 cars (they normally sell 17,000,000) then the car industry saves 4 billion a year! at normal sales thats almost 6 billion a year.

    So in 5 years the car companies save between 20 and 30 billion, which is about what they are asking for now. Labour MUST participate. The bondholders can easily take a haircut…they are the ones who SHOULD take a loss for making a bad investment, suffer the consequences of this. Maybe capital suppliers will learn to restrain themselves and management better and earlier. Finally the health and benefits and other mgt overhead, land, mkting, lawyers yada yada. There are cuts there.

    It is all doable, the money is there….but oxes need to be gored.

    If there are loans or money it should be to pay the parts suppliers, the real industry.

    If this is SUCH a crisis and will cause SO much pain then the government can move with its power. The two large targets are Labour contracts and Bondholders. Government should gore both and remove recourse.

    If that is too draconian then maybe the crisis isnt as big as being indicated. If you are going to do it, do it right (clearing out structural problems), do it fast (buy the companies for $1, then refloat immeadiately relived of all responsibility…i.e. new legal entity).

    If this doesnt warrant that action then let the process of CH 11 take its course. The players have put themselves in positions they cannot abandon, a stable worst case equillibrium.

  14. J Mann

    Yves, do you have a pointer to a good comparison of bankruptcy vs bailout?

    AFAICT, bailout proponents tend to argue that bankruptcy would be terrible, and bankruptcy proponents tend to argue that bailout would be terrible.

    They’ve both got me convinced, but which do you think would be least terrible, and why?

  15. tompain

    This idea that there is no going back after Ch 11 is simply not true. All options that the government has to support the companies are still available to the government after Ch. 11. If it looks like Ch. 11 is somehow “morphing” into Ch. 7 (no way, in my view), then the government can inject whatever it is now planning to inject and the only difference will be that bond holders and equity holders will have picked up some of the tab. The essential component of Ch. 11 is not to screw the unions. It is to wipe out equity and hand ownership over to the bondholders. Breaking the dealers would be pretty helpful as well. THere’s actually not that much that can be saved on labor – it’s the legacy costs that need to be fixed, not the wages. The wages are only a little higher than in the south. Over time if you want to try to force parity you can but there is no reason to assume that wages everywhere in the country will be the same, since the cost of living differs and the supply/demand balance of labor differs. Allowing the Senate compromise to fail over the wage issue was stupid.

  16. Ray

    From my own back of the envelope calculations, a 75% decrease sounds about right. I didn’t have information on assembly plants, but looking at the dealership ratio of GM compared to toyota or honda its about 6:1. I know its been discussed here previously, the GM total GM dealerships is somewhere in the mid-6000 range, toyota and honda are in the mid-1000 range. Here’s what I think needs to happen for GM to survive:
    * consolidation to 3 brands and a total model count under 15
    * cut factory production to match the brand and vehicle lineup
    * cut total dealerships to under 2000 (66% decrease)
    * renegotiate union contracts to match transplant worker salaries or remove the unions all together and start over
    * eliminate retiree health insurance benefits, this alone adds $1400 per vehicle
    * reduce health benefit expenses for current employees with higher deductibles and co-pays
    * sell some of the other brand names to other car manufacturers that currently do not operate in the us (european, asian, etc)

    I think it will require all of these things in order for GM to survive and it will take years to get there. To complete this size of a corporate restructuring it would take at least 36 months, if not longer. They will need more money to get them through this. Even if they get back to breaking even in 2011, they are going to have a very large government debt that will need to be paid down which will keep them from being profitable even longer. Like many people here I don’t want to see these companies fail, but I just don’t see how its possible.

  17. Stephen

    Fundamental problem with government support is there is NO COST.

    Capital suppliers must learn that a government bailout means they get SCREWED big time…All capital suppliers. Once this lesson is learned then maybe they will starte exercising more discretion over who they give money to.

    The fact that GM was able to stumble around for 20 years destroying capital is reason enough to teach them a lesson.

    We are at this point BECAUSE the market was coddled for the last couple of decades. The only creditors who deserve anything are the parts suppliers. Everyone else deserves to the loss, and unless the union can justify the reason its workers deserve the pemium (productivity, quality) then the union should be de certified as well and the workers can make the transplants wage….beats no wage at all.

  18. sanjay

    Do Europeans feel the same way about the quality of their domestically produced automobiles as Americans do about GM. If GM was producing high quality high performance cars I would have respect for them.

    The basic question never seems to get answered. What does it take to make GM viable. The consequences of taking those steps is irrelevant since they will occur anyway unless the goal is prop up a non viable auto company forever.

    I think an argument can be made that under current economic circumstances it makes sense to defer the restructuring of GM. However, if that is the logic then the Tax payer should buy the GM assets in a bankruptcy and operate them until the company can be restructured. I believe it would be simple- Chapter 7 filing followed by an immediate government bid for the assets- plants and IP.

  19. mxq

    Stephen…I don’t disagree with your points.

    I think that “the car companies ceased being about engineering and design [and] their brands are associated with value, comfort and indulgence” is a symptom of a fundamental disadvantage the Big 3 operate from.

    The cost structure that haunts the big 3 is and has been jointly borne by foreign gov’ts and private enterprises since inception(not unlike FRE and FNMs in the US?!).

    Big 3 can’t take care of their brands b/c they’re busy taking care of their workers…in EU, Japan, etc. that’s not even an issue b/c the gov’t has been JV’ing for years.

    Now, i’m sure the US gov’t has helped Big3 out quite a bit across the decades, but not in the same capacity or with the same consistency with which other countries’ gov’ts appear to do.

    Non-US auto makers can feel passionate and prideful b/c they don’t have to worry about the same things that US companies do…they have the explicit guarantee of their gov’t.

  20. FairEconomist

    While everybody’s talking about savaging the unions to cut GM’s per car cost by 1% or so don’t forgot GM is very top-heavy with management and finance people. It has the overhead of a much larger company. Cutting back to 2-3 brands will obviously help; but even then there’s probably too much overhead.

  21. mxq

    sorry…just to add…i’m not implying that the US needs to bail out the auto makers.

    what i am saying is, after this all gets sorted out (if it ever does), the US gov’t needs to set aside laissez faire and enter into a long-term partnership w/ auto makers. that is not to say they are another FRE/FNM. I think the risk expectations are a little more realistic w/ cars vs. homes(everyone knows that 99% of cars depreciate from day 1). Plus the US has case study upon case study of how Germany, Japan, etc. have managed to pull it off.

  22. charlie

    Hmm. It was my back-of- the-envelope calculations that started this, so I should disclose:

    1. Numbers include fleet sales and are based on the total 2008 sales. You can find the numbers on the GM investments page.

    2. The plants are the ones producing the models that sell, plus the pickups.

    3. I didn’t include SUVs because their sales have cratered so much. Will their sales pick up now that gas in cheap? My guess is probably not. They are expensive, people won’t get loans for them, and they have moved out of fashion.

    4. Yes, Corvettes and the Bowling Green factory will survive but that is an extreme niche car.

    5. NUMI is the Toyota/GM joint venture; perhaps Toyota would be able to keep it afloat.

    My fear is that GM’s management has the same DNA as DELPHI, and that they have given up making cars in north america.

    At an annualized rate based on November sales, GM is going to sell something like 1.8 million vehicles in the US. I don’t see sales recovering until mid-2009 (at best). At those numbers there is not a viable business. We need to address the demand side of the equation, and figure out how to finance the suppliers for 2 years.

  23. Stephen


    the biggest JV that happens in Germany and Japan is healthcare and pensions. When companies are relieved of that task, probably a task best left to governments anyway, then they are freed up to focus.

    GM defintiely has too much mgt overhead as well, per someone elses point.

    My point ultimately is, if this is the serious situation that means that CH 11 is unacceptable, because of time uncertainty, then it means a radical solution driven by the sovereign power is required. If that is deemed unacceptable, then maybe Ch11 is such a bad idea.

    Governments are the most powerful actors when they are focussed and unleashed. But they require a reason to generate the legitimacy of action. Waving a legal wand for a specific solution is well within the power of the US government, shortening time etc, the question is does the situation demand it. To me, if you dont allow Ch 11 then you are advcating a government dictated solution, and if so, then lets do it quickly and deal with the consequences later. If not let the companies follow their course to Ch 11 or otherwise.

  24. Anonymous

    Let me repeat something I wrote yesterday but posted rather late.

    The fight between the Southern senators and UAW is not about wages!
    They are the stalking horse. It is about what happens on the shop floor,and the confrontational relationship between management and labor. This is a cultural war in the same way as abortion and gay rights. Remember that unions especially UAW has put a major effort into unionizing Southern plants

  25. K T Cat

    After thinking about it for a bit, I’ve decided that I’m not terribly interested in taking advice about car manufacturing from a country that produced the Renault.


  26. BondsOfSteel

    I think the BK is inevitiable because of the huge legacy costs asociated with retiree healthcare.

    A BK could be a way for GM to offload these costs to PGBC/medicare. Yes, this has a huge political cost, in the context of a larger Obama health care plan, it will be more acceptiable.

    Plus, it seems to be the best way to cram down bondholders and revisit dealer contracts.

  27. mxq

    “if you dont allow Ch 11 then you are advcating a government dictated solution, and if so, then lets do it quickly and deal with the consequences later. If not let the companies follow their course to Ch 11 or otherwise.”

    I agree…this sort of ambiguous signaling (no pun) by congress and the executive branch is doing more harm than either solution offers. uncertainty is about the worst thing in this environment.

  28. ps

    Have the parts suppliers filed purchase money security interests? If not, why? If so they have a senior security interest in the parts they have sold.

  29. ps

    What never shows up in these discussions of GM bankruptcy vs. bailout is the balance sheet. At 9/30/08 GM had
    $110 B of assets, $170B of liabilities leaving a shareholders’ deficit of $60B. They need at least $60B of equity (not debt) to be bailed out. We need to just let this puppy die by taking into bankruptcy, selling off plants and product lines. Parts suppliers may need to go through bankruptcy too if their GM A/R are heavy enough but if they can operate profitably at market volumes they can survive.

  30. Anonymous

    I didn’t include SUVs because their sales have cratered so much. Will their sales pick up now that gas in cheap? My guess is probably not. They are expensive, people won’t get loans for them, and they have moved out of fashion.

    Well the marketing people call them something else but have you actually seen an Enclave/Arcadia (same vehicle, BTW)? Not on a truck frame but they encapsulate everything that people claim they buy SUV’s for – they are simply monstrosities designed soley to impress the neighbors as far as I can tell.

    This is not to pick on you at all, just the opposite – it illustrates how hard it is to figure out what people actually want in the automobile market.

    — a different chris

  31. tompain


    A pair of new surveys suggests consumers maynot be as cautious about buying a vehicle from an auto maker that has filed for bankruptcy as originally thought, as long as the U.S. government is willing to play a role in the Chapter 11 process.
    One study, conducted by Merrill Lynch for its clients concluded that a “large majority of consumers would consider buying or leasing their next vehicle from an auto maker that is backed by U.S. government funding and may emerge as a strong company, following a restructuring through the bankruptcy process.”
    The Wall Street Journal reviewed a copy of the survey, which will not be released publicly.
    (This story and related background material will be available on The Wall Street Journal Web site,
    Another survey of 9,700 domestic car owners, completed Dec. 14 by CNW Research, suggested 48% of buyers would be willing to consider a product sold by an auto maker in bankruptcy court, as long as the government was involved in the process, CNW President Art Spinella, said Tuesday.
    CNW had been the source of an earlier study whose conclusions raised concerns about the impact of a bankruptcy filing on a car company. That survey found buyers would stay away, and the company’s revenue would plunge. But Mr. Spinella said in an interview that people would feel much better about a bankrupt auto maker’s chances, “as long as there are loan guarantees by the government.”
    The results contradict much of what executives at U.S. auto makers and the United Auto Workers argue would be the impact of a bankruptcy on one or more of the auto makers. General Motors Corp. (GM) Chief Executive Rick Wagoner has said a Chapter 11 filing would quickly spiral into Chapter 7 liquidation because an auto maker would be branded as insolvent by consumers, even though many companies simply use bankruptcy as a vehicle to restructure.

  32. Juan


    think i’d use the term class rather than culture, though decades of ‘market knows best’ neoliberalism has certainly infected culture and beliefs.

  33. Anonymous

    Ferdinand Dudenhöffer, director of the Center for Automotive Research “There would be no winners, only losers,” Mr. Dudenhöffer said. “This would create a huge mess around the world.”

    Herr Dudenhöffer is 100% correct. Why does anyone suppose the parts suppliers for domestic assembly plants are purely domestic? They are not. Check out how Delphi (GM’s spun-off parts division) and Tower Automotive (sponge entity for much of Ford’s old parts plant base) have evolved.

    Where does anyone think most of the UAW’s former jobs went? They were spun off, outsourced and offshored along with much of the manufactured content of “automobiles”.

    All these companies have been in and out of bankruptcy multiple times in the last 20 years. And a funny thing happened along they way. No longer being captive GM-Ford-Chrysler-AMC entities they started bidding parts contracts industry and world wide.

    “Surprise surprise surprise” as Gomer Pyle used to say.

    its suppliers are not as efficient as suppliers in others countries.

    Ignorance is curable with education. Many of GM’s suppliers ARE the suppliers in others countries. This is why the Euro manufacturers are getting so agitated.

    A GM bankruptcy will be no more purely “domestic” than was Lehman’s Ch 11, or the subprime securitized mortgage blowout before that.

    These parts plants are located in the BRIC, in Mexico, Argentina, Uruguay, South Africa, North Africa, Southeast Asia…

    Anyone who cares to try is welcome to explain how Paulson can TARP these separately from GM, or what kind of “facility” Bernanke can create for them without provoking a political insurrection.

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