The government committee tasked with restarting the auto industry has issued its ultimatums: Chrysler has 30 days and $6 billion to finalize an alliance with Fiat, and GM has 60 days and an undisclosed “interim financing” to rework its restructuring plan. Should the companies fail to meet their deadlines, they could face bankruptcy.
The task force put the kibosh on GM’s request for another $16.6 billion, and forced the resignation of GM CEO Rick Wagoner. The majority of the GM board is expected to step down, as well. COO Fritz Henderson will replace Wagoner. Also, the government intends to send a team to Detroit to help with the restructuring.
It seems reality is finally setting in. Just two weeks ago, task force chief Steven Rattner said that bankruptcy was not a “desirable outcome.” Now it seems to be the most likely solution.
I have some theories, that may or may not be correct. It seems to me that the Obama administration wanted Wagner to be more forceful with the UAW and bondholders. In my view, the bondholders and the union are engaged in a “stare down” that cost Wagner his job. He might have been axed anyway, but the bondholders won’t give until the UAW gives enough to become competitive with S. Detroit. The Obama administration owes organized labor for the election, but is pragmatic enough to see what has to be done. I believe Wagner’s ouster was to send a message to the UAW without overtly coming out against them.
Chrysler is another issue. I don’t know why Fiat wouldn’t just join forces with the Saturn network and be done with Chrysler.
I think GM proposed to make vehicles people wanted to buy. With energy down there is more demand for trucks and SUV’s. This would have been unacceptable to the current administration
BULLETIN — CHRYSLER, FIAT AND CERBERUS REACH AGREEMENT ON GLOBAL ALLIANCE.
Oops, Chrysler and Fiat announcement “premature!”
Dave,
Imagine the GM profits IF fuel prices stayed low AND people bought GM’s trucks and SUVs AND their cost structure was greatly reduced to the level of South Detroit manufacturers!
The Chrysler turnaround of the eighties was largely smoke and mirrors. When the market came back it wasn’t the K car that saved Chrysler. It was the old gas guzzler New Yorker 5th Avenues and Volare derivatives that did it. The original K car was terrible. The gross profits came from the “heavies.” The K car allowed Chrysler some “cover” to buy time. Later they developed LeBarons and minivans of the “K.”
GM makes plenty of vehicles that are fuel efficient. They just can’t make money on them with their ongoing cost structures. This makes them vulnerable to fuel price spikes.
Even if they get their costs in line I just don’t see enough people paying a “technology” premium for these vehicles in the face of low fuel prices. But if they still make the “heavies” the high gross profits could fuel a Chrysler in the eighties type recovery.
My company does nationwide skiptracing for several auto financing companies, rental companies and insurance companies. We have run into this kind of fraud mutiple times. It still happens way to often. I am glad to see that some of these people have been caught.