With Judge's Backing, GM Looks To Turn Corner

A federal judge approved GM's bankruptcy plan, saying liquidation would be "disastrous" for everyone concerned. Now the "New GM" faces a formidable task: figuring out a way to make money in an economy that is just starting to heal.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

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And I'm Robert Siegel.

For General Motors and Chrysler, bankruptcy has gone much more smoothly than just about anyone expected. But the companies have tough roads ahead.

As NPR's Frank Langfitt reports, GM and Chrysler, in order to survive, must do something they haven't done in some time: make money.

FRANK LANGFITT: After just six weeks in bankruptcy court, GM got what it had been asking for: a new lease on life. Last night, Judge Robert Gerber approved General Motors' plan to create a new company, built around stronger brands like Cadillac and Chevrolet. And he agreed to let GM leave most of its debts and bad assets behind in bankruptcy court.

The judge's ruling still faces appeals, but most observers think it will stand. And they say, post bankruptcy, a new stripped down version of GM, could make it.

Ms. KIM KORTH (President, IRN Inc.): I think their prospects for success with the narrowed-down footprint that they have and reduced cost structure are relatively high.

LANGFITT: That's Kim Korth. She runs IRN, an auto consulting firm in Grand Rapids. Korth says GM has strong products in the pipeline that should attract buyers. They include the new Buick Enclave, a crossover SUV and the new Cadillac CTS. But with all the publicity around the government's $50 billion bailout, Korth says the company has to do a better job fixing its image and selling its products.

Ms. KORTH: I think General Motors has demonstrated for the last 10 to 15 years they're abysmal at marketing. And you can argue that their product line currently is as good or better than Ford's. But Ford, for lots of reasons, has outmarketed them.

LANGFITT: Korth says GM has to develop a simple, more focused message which should be easier in a smaller company.

Ms. KORTH: They've had so many products and so many brands; the message has been very diluted over time.

Ms. REBECCA LINDLAND (Director, Automotive Research, IHS Global Insight): We're a little bit more concerned about Chrysler.

LANGFITT: Rebecca Lindland follows the car business for IHS Global Insight, a financial analysis firm. Like many auto analysts, she says Chrysler faces even tougher challenges than GM. Chrysler left bankruptcy last month but its sales remain in the tank. The company is staking its survival on its partnership with Fiat. The Italian carmaker plans to give Chrysler fuel-efficient technology and a new lineup of small cars. But Rebecca Lindland says that won't happen overnight.

Ms. LINDLAND: We are expecting the first Fiats to come in probably 2011, at the earliest.

LANGFITT: Seems like an eternity in the car business.

Ms. LINDLAND: It is a long way off, exactly.

LANGFITT: Lindland says her bigger concern for both GM and Chrysler is government influence. She worries that the push for higher fuel economy standards will make for good politics but bad business.

Ms. LINDLAND: If we put in front of the American consumer all of these hybrids of which right now they're only buying two to three percent every month, two to three percent, if you just build cars that government wants, it's a recipe for disaster.

LANGFITT: Right now, gas averages about $2.60 a gallon. Most analysts say the price of gas has to go at least a dollar higher to spark real interest in hybrids.

Frank Langfitt, NPR News, Washington.

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