General Motors Files For Bankruptcy Protection
STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. I'm Steve Inskeep. Renee Montagne is back, just in time for a big development in the auto industry. Hi, Renee.
RENEE MONTAGNE, host:
And in fact it is a very big day for General Motors; once the world's dominant automaker, it has filed for bankruptcy. It's a humbling moment for the industrial giant, and later today President Obama will explain his plans for GM in a national address.
INSKEEP: Now we already know many of the details. Taxpayers will fund the bankruptcy with another 30 billion dollars. And if the proceedings go according to plan, a new and healthier version of GM is supposed to emerge with the government as majority owner.
MONTAGNE: Frank Langfitt covers the auto industry for NPR. He's here with us in the studio. Good morning, Frank.
FRANK LANGFITT: Good morning, Renee.
MONTAGNE: There was a time when half the cars on the roads in America were made by GM. Would you ever have imagined that it would go bankrupt?
LANGFITT: You know, a couple of years back, no. I mean, some analysts talked about it, but I kind of dismissed it back then. But I'd say really, since last fall, it's become clear that this company had way too much debt, plunging sales and just not enough cash. And frankly, you didn't need a finance degree to see that GM just wasn't going to be able to make it on its own. But, you know, what I didn't imagine is what Steve just mentioned a moment ago, that the government is going to end up owning General Motors. I'm still kind of getting my head around that.
MONTAGNE: Well, you know, Chapter 11, it's not about killing companies. It's about saving companies. The White House talks about a new General Motors emerging from this bankruptcy. What might that company look like?
LANGFITT: Well, you know, in many ways we are not going to recognize it. It's going to be dramatically smaller. Today General Motors is expected to name at least a dozen plants it's going to shut down, up to 21,000 more layoffs. Now in bankruptcy, its plan is to slash its liabilities, you know, what it owes people, by more than half. It's going to take Saab, Saturn, Hummer and Pontiac, they're going to be sold off in bankruptcy court. This new GM, there's going to be Chevy, Cadillac, Buick and the GMC Trucks - the stronger brands. They're going to come out of bankruptcy court.
MONTAGNE: And coming out in what point in time, do you imagine?
LANGFITT: The White House is saying 60 to 90 days. And based on what's happened with Chrysler so far, they may well be right. Just yesterday, a judge ruled on the sale of new Chrysler. It's only been in court for a month, so that's getting out - it's going to get out very soon. GM, of course, it's a bigger company, it's more complex, So it will take a bit more time.
MONTAGNE: Okay, so if everything goes as is hoped, that is a very brief time in bankruptcy, GM gets out of court fast - what are the chances that the company will actually stop losing money and begin to succeed?
LANGFITT: Well, the White House says they think pretty good. They say the company has taken a real axe to its costs and can break even under this new structure, even if US annual auto sales are just 10 million cars. Now right now, it's about nine and a half. Some analysts, though, are skeptical of this. They say, you know, it could take years for the car market to rebound from the recession. And also with cutting all those brands I just mentioned, that means you're going to sell fewer cars. It's going to be interesting to see how this math plays out in the real economy.
MONTAGNE: Okay, all together, government assistance to GM will reach 50 billion dollars. How much might taxpayers get back?
LANGFITT: Well, on the conference call of the White House last night, that a lot of auto reporters had, I asked that question and they wouldn't give an answer. A very interesting point in the call - the government says it doesn't want to own this company for a long time. They said they want to sell shares as soon as, quote, "practicable." Now clearly the government sees that they're in a dicey position owing an American car company. But the administration said, you know, if they want to get out of the company with relative speed, that could mean the taxpayers don't get back as much money. 'Cause of course, if the government sells the stock sooner, it won't have enough time for those shares to rise. So the taxpayer could lose a lot of money in this.
MONTAGNE: And what kind of role are we looking at for the government to play in running General Motors?
LANGFITT: Well, the administration, it will get to name board members. But it says it is going to leave auto executives to run the company day to day. Now one issue the union, the United Auto Workers has raised is, you know, with so much taxpayer money going into this company, they say, GM shouldn't be allowed to import cars made in its Chinese factories, you know, take more jobs from Americans.
But the administration says it's not going to take a position on these kind of commercial issues.
MONTAGNE: Frank, thanks very much.
LANGFITT: Happy to do it, Renee.
MONTAGNE: NPR's Frank Langfitt covers the auto industry.
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