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Posts Tagged ‘chapter 11’

GM Board Writes Their Own Obit and Defense

New GM emerging from bankruptcy will have a new board.

by on Jun.01, 2009

Kent Kresa has been a General Motors board member since October of 2003.

Kent Kresa, GM board member since October of 2003, is experienced with losses. From 2005 to 2009, GM burned more than $40 billion in cash, net worth dropped more than $100 billion.

“The General Motors Board of Directors authorized the filing of a Chapter 11 case with regret that this path proved necessary despite the best efforts of so many. Today marks a new beginning for General Motors. A court-supervised process and transfer of assets will enable a New GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel,” said Kent Kresa, the interim chairman, who replaced Rick Wagoner when  the Obama administration fired him last month.

“The Board concluded that the proposed transformation will maximize the value of the enterprise, and the return to the many stakeholders who have been involved with GM over the years,” Kresa said this morning.

Whether the board fulfilled its fiduciary responsibility will be part of the legal challenges to its members during bankruptcy hearings by objecting creditors and bondholders, hence the existence of this statement.

“We are appreciative of the support from the U.S. Treasury, the President’s Task Force on Autos, the UAW and its members, salaried employees and retirees, concurring bondholders, and very importantly, the American taxpayers. The Board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world. The Board stands behind the people of GM in embracing this unique opportunity to create value and a new company that will design, engineer, build and market the best cars and trucks in world,” said Kresa.

The President, on March 30th, announced that a majority of the directors of New General Motors would be new, so by implication, some existing directors will continue with New GM and some new ones will appear. They will be selected based on consultations between Kresa, his colleagues and the Auto Task Force.

Fritz Henderson’s future?

Senior administration officials were non-committal about GM CEO Fritz Henderson’s future, but said they expected his relationship with the board of directors to continue. Since CEOs serve at the pleasure of the board and a new board is coming, Henderson’s future is unclear. At Chrysler both the Chairman and the CEO are being replaced in the New Chrysler.   (more…)

Chrysler Picks Future Suppliers

Bankruptcy Court Filing lists some winners and losers.

by on May.15, 2009

Scott Garberding, Chrysler LLC

Chrysler will continue to work with those suppliers who wish to become part of the new enterprise.

Chrysler LLC today announced this morning that it would begin the process of assigning the “overwhelming majority” of the company’s supplier contracts to the new company established in with Fiat SpA once an asset sale is completed as it emerges from bankruptcy. Some of the winners are Alcoa, Continental, Delphi, Johnson Controls, Magna International and Penske Corporation.

Chrysler has also started a process by which suppliers may be paid pre-bankruptcy accounts receivable. Chrysler claims that the amount it is willing to pay is higher than those normally assigned during a bankruptcy process, a contentious assertion no doubt with some suppliers.

About 40% of what is owed is offered immediately, with the balance to be assumed by the new company and paid back over time. Whether its ailing suppliers can last that long is an open question. Roughly 20% of Chrysler suppliers were in the “high risk” or “risk” categories Chrysler uses to assess their financial health, and that was before all of its plants were shut down last month. Typically it takes Chrysler 45 days to pay a supplier after it has received the parts.

The bankruptcy continues to have potential dire consequences for Ford Motor and General Motors since 96 of Chrysler’stop 100 suppliers also supply both of those loss-making companies.

Chrysler will mail letters to approximately 1,200 of its suppliers setting forth the amounts that Chrysler has determined will be required to “cure” all contracts to be assumed and assigned to the new company.

It appears Chrysler will attempt to not negotiate the amounts that it will pay. Some struggling suppliers may have little bargaining power to ask for more.

Suppliers have ten days to dispute the Chrysler amount, and a court hearing is scheduled for June 4th to resolve differences.

Some of Chrysler’s biggest creditors were not on the list in the court filing, which could mean that they will not be part of the supply chain for the new company.

However, the “list is not a complete or final listing of suppliers” for the new company. “Chrysler will continue to work with those suppliers who wish to become part of the new enterprise,” Chrysler said.    (more…)

Will Feds Call in the Auto Bailout Loan?

Obama Administration could force GM, Chrysler into Chap. 11.

by on Feb.12, 2009

Fantasy car, fantasy turnaround?

Fantasy car, fantasy turnaround?

Unless the Obama Administration changes the direction laid out by lame duck President Bush last December, on March 31st General Motors and Chrysler will enter bankruptcy as the Federal Government calls loans totaling $13.4 billion. The forced reorganization and break-up of two tarnished American Icons could be avoided if the companies pay back the loans with interest. This seems impossible given frozen credit markets and annualized vehicle selling rates in the U.S. that dipped below 10 million units annually in January.

At these rates no car company in America is profitable. If the bailout isn’t revised or interpreted liberally, there is no future.

The companies must submit by February 17, 2009, a monthly plan through 2010 and annual plans for the next four years on how they will achieve and sustain the long-term viability, international competitiveness and energy efficiency required by the loans they accepted. Recent actions by Chrysler and GM show a drastic and desperate gutting of the industry is underway. But is it enough?