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GM Bankruptcy Judge May Rescind Liability Shield

Removing protection allows lawsuits to proceed.

by on Feb.18, 2015

GM CEO Mary Barra may be facing a tougher year in 2015 if a federal judge rescinds the company's bankruptcy shield.

After securing an important court victory in January, General Motors is on the precipice of a potentially devastating loss as the federal bankruptcy judge that approved the maker’s plan is rethinking the company’s liability shield.

U.S. Bankruptcy Judge Robert Gerber heard arguments about whether or not GM can keep the shield, which blocks victims of the company’s faulty ignition switches from suing the automaker, which exited bankruptcy in 2009.

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Essentially, since the defective parts were on vehicles manufactured prior the bankruptcy, the “new” GM can claim it is not liable for those vehicles. However, the shield can be revoked in some cases, including if it can be proven that GM executives knew about the problem when it was putting together it’s plans in 2009. (more…)

The Four Stumbles On The Road To GM’s IPO

How an 800-pound gorilla came on hard times.

by on Aug.20, 2010

It was a long road to Chapter 11...and the upcoming IPO.

Note: This is the kind of column our friend Jerry Flint might have written, though his would have been far more irreverent, eloquent and passionate.  We’ll miss you, Jerry. (Click Here for a remembrance of Jerry Flint.)

I was at a luncheon of dinosaurs the other day, perhaps I should say for dinosaurs, retired auto industry top-drawers, and happened to be sitting next to a one-time GM executive who shall be nameless.

Naturally, we got to talking about GM’s Government Motors status, its rapid CEO turnover and the impending new Initial Public Offering of stock.  This won’t really be GM’s first offering of stock, since founder Billy Durant wheeled and dealed for financing and takeovers back in the early years of the last century—but rarely if ever approached the general public.

Anyway, our conversation turned to how the 800-pound Gorilla of Detroit automakers came to such hard times.  We agreed it wasn’t from excessive costs running the company into bankruptcy two years ago, or even from import and transplant automakers gnawing away at market share from behind their protected home markets over the last couple of decades.

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We identified four basic long-ago GM stumbles that eventually led to its falling flat on its keister, as the Great Communicator used to say.  Here I’ll share them with you, for other dinosaurs to debate endlessly, or perhaps to simply nod their heads in agreement:

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Sorting Out GM Stock – Old versus New

As the maker prepares for an IPO beware of the old stock.

by on Jun.23, 2010

General Motors Company holds all of the productive assets.

As General Motors prepares to register with the U.S. Securities and Exchange Commission for sale of stock in the new Company, confusion exists about the old stock of the bankrupt Corporation. It’s worthless.

General Motors Company is the “new GM,” which emerged from bankruptcy last summer. All of GM’s continuing operations and assets are completely out of bankruptcy and are now operating as an independent and separate company called “General Motors Company.” It holds virtually all of the productive assets of the old Corporation. These include the Cadillac, Chevrolet, Buick, and GMC brands, and the plants and other hard assets that those brands need to continue operations. GM Company also owns all of its overseas operations.

General Motors Company posted a first-quarter profit of $865 million, but it wasn’t a strong performance since the profit came from relief from the interest payments on debt that was wiped out in the bankruptcy. The company has repaid $6.7 billion in outstanding U.S. government loans and $1.4 billion to Canadian governments, with money taxpayers advanced to it.

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Clarity!

There are currently no shares of General Motors Company for sale to the public and there won’t be until it is given legal approval to do so. It’s also unknown how many shares will be offered for public sale or by whom, or at what price.

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Signs of Recovery at GM, Asserts New Sales Chief

Economy bottomed out, adds chief analyst, but recovery slow.

by on Oct.28, 2009

New General Motors Sales czar Susan Docherty would rather fight than have you switch to another brand.

New General Motors Sales czar Susan Docherty would rather fight than have you switch to another brand.

While the recovery is just taken hold, there are positive signs in the economy, and that’s translating into some measurable gains for the post-bankruptcy General Motors, company officials declared during a Wednesday meeting with the news media.

The struggling automaker expects to gain share, when the final sales numbers are counted for October, and those cars, trucks and crossovers are rolling out of dealer lots at a higher transaction price than a year ago, said Susan Docherty, GM’s new director of sales.  Residuals – industry speak for projected trade-in values – are rising and the automaker is hoping to “dial back” on incentives, which remain the highest in the industry.

But Docherty, who assumed her new post just nine days ago, also acknowledged that GM has some significant challenges ahead of it.  For one thing, it has to improve its standing in the annual and highly influential Consumer Reports magazine survey of vehicle dependability.  In a news conference just yesterday, CR editors said that GM’s performance is “inconsistent,” at best.

Keep Track of the Market's Momentum!

Keep Track of the Market's Momentum!

The carmaker’s mediocre performance is “one of the things that keeps me up at night,” said Docherty, who was previously in charge of the Buick-Pontiac-GMC brand group.
“Clearly, there are signs of an economic recovery from the worst recession in 70 years,” noted Mike Di Giovanni, GM’s chief market analyst, who joined Docherty for today’s briefing.  But he warned that while the worst may be over, the economy has a long way to go, and so does the auto industry.

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Reflections on Our Auto Restructurings

Former head of the Obama’s Auto Task Force speaks out.

by on Oct.21, 2009

Presidnet Obama speech on stabilizing the auto industry

Chrysler and GM survived because of the President’s willingness to let them go bankrupt.

In a speech today at the National Press Club, Steven Rattner defended the Administration’s decision to intervene in the auto industry and was harshly critical of the insular culture at General Motors, and years of mismanagement and leveraged debt at Chrysler.

Failure to act, however, was not an option in the Task Force’s view since it would mean the immediate loss or elimination of more than two-thirds of American-owned auto manufacturing capability, cost more than a million jobs in the short run, dramatically deepen and prolong the nationwide recession, and push unemployment rates in several states above 20%.

The question was how to act effectively, and not just buy time for the failed companies.

The Auto Task Force, of which Rattner was a key member, was just being formed when both Chrysler Corporation and General Motors Corporation submitted mandated “viability plans” on February 17. These plans were required when Congress declined to act on behalf of the failing companies before Christmas, and President Bush decided in late December to provide $17.4 billion of TARP funding to GM and Chrysler and kick the problem down the road to the incoming administration.

“Those plans evinced a state of denial as to the magnitude of their problems, the necessary changes and the conditions under which the Administration might provide further assistance,” Rattner said, in a speech sponsored by the Brookings Institute.

It was clear to him that both companies needed massive reductions in their costs and liabilities, including their legacy health care obligations, their labor costs, and their manufacturing footprints.

The government as piggy bank

“The President and his senior advisers were of one mind: No more money except in the context of shared sacrifice and restructurings to become truly viable.”

The next set of surprises came as the Task Force began meeting with various stakeholders at the failing companies. Rattner said the Task Force was startled when bondholders, labor unions, and senior management presented “asks” from the government.

“We had foolishly assumed that stakeholders eager to help would come with gives,” he said.

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Ray Young: Another GM Casualty?

CFO could be next to go as maker pairs exec ranks.

by on Sep.09, 2009

Will GM's 47-year-old CFO Ray Young be the next to go in a top management shake-up?

Will GM's 47-year-old CFO Ray Young be the next to go in a top management shake-up?

The downsizing of General Motors’ executive ranks continues, with numerous sources suggesting that the automaker’s Chief Financial Officer Ray Young will be among the next to go, as part of a shake-up in the corporate finance department.

Rumors have been circulating ever since the carmaker plunged into bankruptcy, earlier this year.  Adding fuel to that fire, GM CEO Fritz Henderson’s announcement on July 10th, the day the company emerged from Chapter 11, that a third of all senior executives would be let go by the end of October.

Shake Up Your News Sources!

Shake Up Your News Sources!

So far, a wide range of once-prominent GM bosses have been packing up their corner offices, including Troy Clarke, formerly president of GM North America, while others, such as Gary Cowger, head of manufacturing, plans to retire by year’s end.  So, few insiders would be surprised to see Young join them on the way out of GM’s  Renaissance Center headquarters.

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Government Motors

Will the White House be an active or passive shareholder?

by on Jun.01, 2009

"My administration feels we need to switch from 18 to 19-inch wheels..."  Will the White House really sit on the sidelines, as promised, or exercise a day-to-day role in managing the "new" GM?

"My administration feels we need to switch from 18 to 19-inch wheels..." Will the White House really sit on the sidelines, as promised, or exercise a day-to-day role in managing the "new" GM?

Though the corporate logo never appeared on the FBI’s Most Wanted list, the U.S. government long viewed General Motors as one of the country’s biggest public enemies.

Back in the 1960s, when the automaker controlled more than half the American auto market, the government began a long-running, but ultimately futile, anti-trust effort to break GM up.  It hauled the maker into court to try to force the recall of millions of midsize cars equipped with allegedly faulty brakes.  And time and time again, the government and GM lawyers battled over issues ranging from the environment to consumer rights.

After today, such protracted legal battles might no longer be necessary.  If General Motors emerges from the bankruptcy it will file for today, the federal government is expected to hold a 60% stake in the “new” GM.  The White House, the steward for the multi-billion dollar taxpayer investment, has already shown the power it can wield, when it ousted former CEO Rick Wagoner, in March, replacing him with the company’s current chief executive, Fritz Henderson.

But just how much control does the government actually intend to take?  Not much, insisted several senior White House officials, speaking on background, Sunday night.  The Obama Administration “does not intend to exert day-to-day control,” asserted one top member, despite holding a dominant share, and getting to not only name one of the reformed GM’s board members but influence the choice of others.  “The government,” said the official, “intends to be extremely disciplined in how it uses even these extremely limited rights.” (more…)