GM: Chrysler-Like Sale Most Likely Form of Bankruptcy
General Motors said Thursday night, it would most likely pursue the same legal strategy as Chrysler if it spirals into bankruptcy, while Chrysler unveiled details for slashing its dealer network.
The GM disclosure, in a regulatory filing, marked the first time the automaker has said it would most likely follow the same legal strategy Chrysler is using under federal oversight to slash debt and restructure dealerships.
GM [GM 1.1319 -0.0181 (-1.57%) ] faces a June 1 deadline to restructure its bond debt and reach a sweeping deal with the United Auto Workers. The company restated in its filing with the Securities and Exchange Commission that it expects to seek Chapter 11 if negotiations with bondholders fall short.
Chrysler Cutting Dealerships
Chrysler said it would terminate business with 789 of its 3,181 dealerships as of June 9, a move that could cost up to 40,000 jobs, according to the leading dealer trade group. Dealers in Pennsylvania, Texas, Ohio, Illinois and Michigan -- where Chrysler is based -- would be hit hardest.
"The bankruptcy process that we are in allows us a once-in-a-lifetime chance to achieve a right-sized dealer body," Chrysler Vice Chairman Jim Press said on a conference call. "We do not have enough production or sales to keep all the dealers alive or prosperous."
Chrysler sought permission from a U.S. bankruptcy court in New York to terminate franchise agreements with the dealers. Fifty percent of its U.S. dealers account for 90 percent of sales, according to court documents.
GM also plans to announce up to 2,000 dealer terminations as early as this week, sources have told Reuters.
Chrysler and GM face pressure to bring large sales networks in line with those run by more successful automakers. Toyota has 1,200 dealers in the United States.
Chrysler dealers reacted with a mix of anger and sadness, but most, even those surprised by the news, entertained little hope they could stop Chrysler.
U.S. Rep. Gary Peters, whose Michigan district includes Chrysler headquarters, and other lawmakers from the state said they would consider whether legislation may be needed to provide a softer landing for outgoing dealers.
The National Automobile Dealers Association has spent this week urging Congress and the Obama administration's autos task force overseeing industry restructuring to slow the process.
Chrysler's move to cut dealers will help it cement an alliance with Fiat. U.S. antitrust officials said on Thursday the plan poses no competitive issues.
Ford Optimistic
In Wilmington, Delaware, Ford executives told shareholders at the company's annual meeting that restructuring is on track to be at or above break-even in 2011 excluding special items.
Ford shareholders also approved a funding plan for a healthcare trust for union retirees and rejected a challenge to the share voting structure that gives the Ford family control of the automaker.
Ford shares rose 4 percent to $5.16 on the New York Stock Exchange, while GM shares fell 4.9 percent to $1.15.
The entire industry is dependent on a sharp reversal in plunging U.S. sales. Consulting firm A.T. Kearney said in a report on Thursday that domestic sales are expected to drop 24 percent to 10 million units this year. Industrywide sales were 13.2 million in 2008.
Notice how the good news is breaking for Ford after the offering and the bad news just keeps coming for GM. It spirals into bankruptcy now (nice choice of words) it gives you that warm fuzzy feeling. Remember a few days ago the directors sold and the stock is worth only 2 cents.
I smell a setup here ...we'll see ...Mikey
buy ZSL @9.32...short silver
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