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GM Bankruptcy Day 1: A Well Executed Failure

Posted in auto industry, Cars, General, GM, Newsworthy by Nathan Redden | June 1st, 2009 | Leave a Reply |


The bankruptcy of General Motors hit me with all the shock of a sunrise. But if we all saw it coming, then why the wait? A couple months ago, a friend was commenting that if GM had entered Chapter 11 back in October, they could be on their way out by now. The problem with that idea is the tendency for consumers to overreact. No auto company this size has ever successfully emerged from such a massive reorganization. The truth is, their insolvency started years ago. And for the past nine months, when it seemed like management was fighting tooth and nail not to declare Chapter 11, they were actually warming us up to the idea. Follow the jump for a quick recap of events that paved the way, and stay in touch for daily updates on the General’s progress.

April 2005 – GM experiences its first quarterly net loss in over a decade, $1.25 billion.

May 2005 – GM’s debt rating is cut to junk status

October 2005 – Delphi Corp. files for bankruptcy

July 2006 – Billionaire Kirk Kerkorian injects massive amounts of cash and influence into GM, pushing for massive reorganization and a partnership with Nissan’s savior, Carlos Ghosn.

August 2006 – GM sells major stake in GMAC to Cerberus Capital to finance restructuring of North American operations.

October 2006 – Rick Wagoner and the GM board shoot down Kirk’s idea and go it alone. Kerkorian and his cash make like an exorcist and get the Hell out.

July 2007 – Amidst multiple rounds of job cuts, GM manages to score big against the UAW and renegotiate contracts, saving billions and shifting most health care obligations into a union-controlled trust.

December 2007 – U.S. economy sees first signs of a recession

Summer 2008 – Gas prices top $4 per gallon and large truck and SUV sales are clobbered.

October 2008 – S&P analysts fear GM will not be able to avoid bankruptcy

November 2008 – GM announced it may be out of cash by early 2009

January 2009 – Rick Wagoner and other domestic auto execs are paraded in front of Congress in exchange for billions in bailout money. Also, GM slashed production, but it was too little, too late.

March 2009 – President Obama’s automotive task force rejects GM’s restructuring plan, citing that proposed changes were insufficient given the nature of the company’s steep slide. Obama booted out CEO Rick Wagoner and appointed former CFO Fritz Henderson.

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