Tuesday, June 02, 2009

GM to undergo Genetic Modification

GM or you may call it General Motors, which was regarded as a a champion of American Manufacturing prowess and which formed the part of " The BIG 3" trio of Detroit Auto Companies filed for Chapter 11 Bankruptcy on June 1, 09. This event was preceded by series of high level talks between GM and its shareholders to agree to a Debt Restructuring plan but it did not materialize due to tough stand taken by Bond holders. Let me remind that not only one of the BIG 3 is surviving i.e FORD Motor Company which has politely refused any govt. support. Chrysle also went Bankrupt about a month ago and is about to be sold to group led by FIAT of Italy.

GM which was the world's largest Car maker till 2008 filed for bankruptcy to create a smaller company with manageable balance sheets and which could compete in throat cut competiton of world markets. GM succumbed to falling Sales and rising GAS prices. At the time of bankruptcy GM reported $82.3 Billion Dollars of Assets as compared to $173 Billion of Debt obligations. The event is just like sinking of TITANIC, said Stephen Pope, global strategist at Cantor in London. It is the largest Automobile Bankruptcy ever.

As a part of restructuring US govt. would conver most of its $50 Billion of debt to GM( 30 + 20 earlier) into equity.This would translate into a 60% stake in " NEW GM". Another $9.5 Billion would come from Canadian Govt. GM in its bankruptcy filing named major debtors viz. Wilmington Trust($22.8Billion Dollars), UAW( United Aerospace, Automobile and Agricultral Implement workers of US), $20.6 Billion USD and Deutsche Bank $4.4 Billion.

GM also has to present Govt a proposal mentioning how it would rise on its feet as a more cost competitive company with a sstrong portfolio of fuel efficient small cars. GM will have to shed some of its brands like PONTIAC,HUMMER,SAAB,SATURN while it can retain CHEVROLET, BUICK will be retained by new GM.

With this GM will make an exit from DJIA(Dow Jones Industrial Average) along with another US Biggie CITGROUP.

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