ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist®.com: Duke's Damage Control</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { font-size: x-large; } .style3 { text-align: left; } .style4 { font-weight: bold; text-decoration: underline; } .style5 { font-size: x-large; font-weight: bold; } .style6 { font-size: small; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="116" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="24" height="118" rowspan="2"></td> <td width="465" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="18" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="283" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr height="26"> <td width="624" height="26" colspan="6" valign="top" align="left" xpos="0"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#8226; <a href="articlesindex.html">ARTICLES</a> &#8226; <a href="books.html">BOOKS</a> &#8226; <a href="teflon.html"> THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#8226; <a href="mailto:letters@onlinecolumnist.com"> REACTIONS</a> &#8226; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="1"> <td width="116" height="2574" rowspan="2" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="489" height="1" colspan="3"></td> <td width="18" height="2574" rowspan="2"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> </tr> <tr height="2573"> <td width="489" height="2573" colspan="3" align="left" xpos="116" content valign="top" csheight="2573"> <font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="5"><b> <br /> GM Goes Broke</b></font><p><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b> by John M. Curtis<br> (310) 204-8700</b><br> </font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright June 2, 2009<br> All Rights Reserved.</i></font></p> <p><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<span class="style2">&nbsp;&nbsp;</span></span><span class="style5">F</span><span class="style6">i</span>ling for Chapter 11 in New York June 1, General Motors, an icon of American industry, bit the dust, hoping to emerge from bankruptcy to eventually sell stylish, fuel-efficient cars.<span style="mso-spacerun: yes">&nbsp; </span>Announcing that Chinese manufacturer Sichuan Tengzhong Heavy Industrial Machinery Co. agreed in principle to buy GM s Hummer line of heavy-duty quasi-military vehicles.<span style="mso-spacerun: yes">&nbsp; </span>GM entered into a  memorandum of understanding with the Chinsese company to buy its rugged, heavy-duty, gas-burning line of military-style SUVs.<span style="mso-spacerun: yes">&nbsp; </span>Rusting in dealerships around the country, the Hummer line nosedived when skyrocketing gas prices and a stubborn recession killed the market from $60,000 vehicles.<span style="mso-spacerun: yes">&nbsp; </span>GM hopes to save some 3,000 jobs, taking Hummer off the government payroll.<span style="mso-spacerun: yes">&nbsp; </span>Hummer s Shreveport, La. assembly plant hopes to continue manufacturing until 2010, after which Hummer switches operations to China.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>GM s spectacular collapse stemmed largely from failing to anticipate the public s changing needs and expectations.<span style="mso-spacerun: yes">&nbsp; </span>GM continued to manufacture larger, gas-burning car lines, watching sales lose ground to Japanese and German competitors.<span style="mso-spacerun: yes">&nbsp; </span>GM also announced intent to sell its Swedish Saab, American Saturn and German Opel car lines, hoping to emerge from BK in 60 days.<span style="mso-spacerun: yes">&nbsp; </span>While everyone including Wall St. expected GM to go broke, watching an American icon bite the dust rattled financial markets.<span style="mso-spacerun: yes">&nbsp; </span>GM s bankruptcy, while expected, depressed U.S. currency markets, continuing to drop U.S. currency rates against the pound Sterling and euro.<span style="mso-spacerun: yes">&nbsp; </span>GM s bankruptcy spooked many foreign and domestic investors, uncertain whether the new GM would have any more clout in world currency markets.<span style="mso-spacerun: yes">&nbsp; </span>GM tried to get a single buyer like Chrysler but its filing was too complicated.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <![endif]>Selling off Hummer, Saturn, Saab and European Opel, preserves its core lines of Chevrolet, Cadillac, Buick and GMC.<span style="mso-spacerun: yes">&nbsp; </span>Once the world s biggest automaker, GM will emerge from bankruptcy as shell of its once mighty self.<span style="mso-spacerun: yes">&nbsp; </span> Unlike Chrysler, where Italy s Fiat Grop SpA acquires its main assets, GM was too debt-ridden and unwieldy for any one company.<span style="mso-spacerun: yes">&nbsp; </span>GM personified the American Century that bigger is better.<span style="mso-spacerun: yes">&nbsp; </span>Now it s reinventing itself that less is more, dropping brands that don t fit within the new concept of technologically advanced, fuel-efficient cars.<span style="mso-spacerun: yes">&nbsp; </span>Canadian auto supplier Magna International and Russian-owned Sberbank agreed to purchase GM s highly successful European division of Adam Opel GMBH, a real shame when you consider Opel serves as a model of GM s future.<span style="mso-spacerun: yes">&nbsp; </span>Opel competes favorably in Europe with the continent s most successful brands.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <![endif]>GM hopes to emerge from Chapter 11 in 60-90 days, far longer than the expected 30 days for Chrysler, whose new parent company Fiat wants to hit the ground running.<span style="mso-spacerun: yes">&nbsp; </span>Fiat hopes to be rolling off it stylish, fuel-efficient cars off former Chrysler assembling plants within a year s time.<span style="mso-spacerun: yes">&nbsp; </span> They have a lot of ducks-in-a-row because the terms of the government financing forced then to get all parties to the table in a very, very short period of time, said Sharon Lindstrom, managing director of Protiviti, that helped put Chrysler s merger with Fiat together.<span style="mso-spacerun: yes">&nbsp; </span>Unlike Chrysler, the U.S. government expects to own about 60%, with the Canadian government getting 12.5% and the United Autoworkers Union receiving 17.5% of the new GM.<span style="mso-spacerun: yes">&nbsp; </span>U.S. Bankruptcy Court Judge Robert Gerber expects to complete the GM sale by June 30, immediately getting GM access to $15 billion in government loans.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <![endif]>Judge Gerber should do more than preside over liquidating GM s profitable assets.<span style="mso-spacerun: yes">&nbsp; </span>Recovery from bankruptcy requires the U.S. get out of the auto business at the earliest possible time.<span style="mso-spacerun: yes">&nbsp; </span>To be successful, Chevrolet, Cadillac, Buick and GMC requires the kind of guidance that only a Toyota, Nissan or Volkswagen could potentially bring.<span style="mso-spacerun: yes">&nbsp; </span> Certainly, the court showed that it can address 363 [sale] transactions in an expeditious manner, said GM CEO Fritz Henderson.<span style="mso-spacerun: yes">&nbsp; </span>Though Henderson said he learned from Chrysler s bankruptcy, he hasn t found a suitable foreign competitor to provide the new designs and technology needed to make GM products profitable in a global economy.<span style="mso-spacerun: yes">&nbsp; </span> Selling off Opel is a big mistake since its platform constituted the blueprint for Saturn s success.<span style="mso-spacerun: yes">&nbsp; </span>GM s remaining lines must adopt the same styling, technology and fuel efficiency to be successful.<span style="mso-spacerun: yes">&nbsp;&nbsp; </span> </p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>GM s bankruptcy shakes the faith of the world s leading superpower, watching the U.S. industrial base and economy crumble on the global stage.<span style="mso-spacerun: yes">&nbsp; </span>Recent declines in the U.S. dollar, and corresponding rise in gold and silver, have left foreign governments leery of massive U.S. debt.<span style="mso-spacerun: yes">&nbsp; </span>GM faces $172.1 billion in debt against a measly $82.29 billion in assets.<span style="mso-spacerun: yes">&nbsp; </span>With the government already kicking in $20 billion, there s no end in sight to the government s financial commitment.<span style="mso-spacerun: yes">&nbsp; </span>Selling off profitable assets isn t enough.<span style="mso-spacerun: yes">&nbsp; </span>GM should look to partner, like Chrysler, with a financially solvent auto company, capable of shifting the burden off U.S. taxpayers.<span style="mso-spacerun: yes">&nbsp; </span>While a bankruptcy plan should eventually help GM reorganize, it also hurts global perception of the U.S. economy.<span style="mso-spacerun: yes">&nbsp; </span>Profitable automakers would like nothing more than to get a bigger piece of the U.S. auto market.</p> <p class="style3"> &nbsp;<span class="style4">About the Author</span></p> <p class="style3"> &nbsp;<b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news.&nbsp; He's editor of OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet </a>and <a href="books.htnl">Operation Charisma</a>.</p> </td> <td width="1" height="2573"><spacer type="block" width="1" height="2573"></td> </tr> <tr height="1" cntrlrow> <td width="116" height="1"><spacer type="block" width="116" height="1"></td> <td width="24" height="1"><spacer type="block" width="24" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="283" height="1"><spacer type="block" width="283" height="1"></td> <td width="18" height="1"><spacer type="block" width="18" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> Homene.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">&copy;1999-2002 <a href="aboutdiscobolos.html">Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>