GM: Waiting for Delphi, closing plants

By Jen Lynch

Today General Motors announced that it would be shutting down 13 out of 20 manufacturing plants in North America on and off throughout the summer months to help save money on unsold cars in production. The issue at hand deals with a third party, Delphi Corporation (GM's auto parts supplier) and its lenders. Delphi has rejected a solution that would have solved its bankruptcy case quickly through just one proposal. In many cases of bankruptcy, companies are dealing behind-the-scenes with other parties, often influencing the outcome of bankruptcy filing.

You might also be wondering, what happens to the employees at these plants that are being shut down? GM President Troy Clark said that union workers will continue to receive full pay through a combination of state unemployment benefits and support from GM. Thousands of GM workers are going to be temporarily laid off, but their United Auto Workers union contract requires GM to make up most of the difference between their usual wages and state unemployment benefits. This is also scary because now you have thousands of workers sitting at home, getting by with benefit payments, and certainly not spending- which is even worse for the economy.

The auto-task force has been busy focusing on Chrysler, GM's long-time rival, which is facing an April 30 deadline to submit a restructuring plan to the Treasury Department for more bailout money. Chrysler has already received approximately $5 billion from the government and is still asking for more to keep business going. But now with Chrysler's deadline approaching, Obama's auto-task force is changing its focus to GM and Delphi, giving the auto supplier (Delphi) until May 4 to propose a new plan to its creditors. The U.S. bankruptcy judge set a hearing for May 7, and is giving creditors until the next day to make their decision. 

It is important that Delphi gets the loans it needs, not furthering its current state of bankruptcy. If the company is unable to provide parts to GM at a reasonable price and with cooperation, then GM will face many more economic, production and distribution issues. If creditors decide not to back Delphi's new proposal, GM will most likely be pushed closer to bankruptcy; a situation that would cause even more problems for the auto industry and our overall economy. GM has already received about $13.4 billion in government loans and could possibly get $5 billion more before May 30. President Obama has said GM must significantly restructure by this date in order to be eligible for further financial aid.

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GM Should Run To Bankruptcy

Posted By: Asim Mohammed
After the developments of this week, if there is any intelligent life left at General Motors, it should run--not walk--to bankruptcy court. That may be the company's only chance to free itself from the triple-vise of unions, creditors and now President Barack Obama--who is by no means the least life-threatening of the lot.


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Bankruptcy Good for Auto Makers

by Shu Zheng

(VatorNews) - The once vaunted car industry has been brought to its knees, partly because of the economy, and mainly because of self-inflicted bad management and lack of innovation. Now, the heads of the iconic auto institutions are being dethroned - well, at least at General Motors. While there's a bunch of talk about the government's double standards toward how it's treating Detroit and Wall Street, you won't hear much support to go easy on auto companies from Silicon Valley types.

In this segment, Zag's founder Scott Painter sits down with Bambi Francisco in the second-part interview to talk about why Washington - despite its tough love bailout ultimatum - shouldn't be bailing out the car companies. "It's horrible," he said, referring to government's bailout plans. "We have a protectionist system that prevents market forces from doing their job." The auto industry has to change, and it's not necessarily up to the tax payers to make sure that happens. Why are there 43,000 car dealerships? Painter asked. That's not rational. Bankruptcy would clean out the system and get the car industry operating rationally again.

Zag is a new online car-buying service. It's the second car startup in Painter's career as an entrepreneur. So, he's got a thing or two to say about the auto industry he's trying to modernize.

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US Stocks Decline Amid GM, Chrysler Bankruptcy Talk

by Shu Zheng

U.S. stocks declined on Monday after the Obama administration said that the best chance for success for General Motors and rival Chrysler may be bankruptcy.

The Dow Jones Industrial Average was down about 220 points. All its components were lower. GM shares, which have slumped to their lowest levels in decades in recent months, were down more by than 24% early on, falling below $3. Given the shares' low price, however, the decline took less than 10 points off the Dow.

Blue-chip banking stocks also dropped. Bank of America and Citigroup fell by more than 10% each, and J.P. Morgan Chase slid 6.5%. The S&P 500 declined 3%, weighed down by a 5.5% decline in its financial sector. Goldman Sachs Group shares were down about 4%. Morgan Stanley fell 6%. The Nasdaq Composite Index declined 3%.

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