Stage Set For GM To Declare Bankruptcy Monday is B-day for General Motors — the day the giant automaker is expected to file for bankruptcy protection in a New York courtroom. NPR's Frank Langfitt fills in host Jacki Lyden about the implications of this move — for the company and the country.
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Stage Set For GM To Declare Bankruptcy

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Stage Set For GM To Declare Bankruptcy

Stage Set For GM To Declare Bankruptcy

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Welcome back to ALL THINGS CONSIDERED from NPR News. I'm Jacki Lyden.

The biggest industrial bankruptcy in American history; if all goes as expected, that's what General Motors will declare tomorrow.

GM's move, along with Chrysler's earlier filing, will reshape the car business and a hefty chunk of the U.S. economy.

Frank Langfitt, of course, covers the auto industry for NPR. And Frank, thanks for joining us.

FRANK LANGFITT: Happy to be here, Jacki.

LYDEN: So at this point, GM's bankruptcy seems inevitable. Remind us of why that's so.

LANGFITT: Well, this company is suffocating under a mountain of debt. It owes retirees, bondholders - those are the people who have lent it money - and suppliers more than $60 billion. And by just about all accounts, it can't get out from under all this debt without the help of a bankruptcy judge.

LYDEN: And how long is this bankruptcy procedure expected to take?

LANGFITT: Well, Chrysler filed at the end of April, and a judge is going to rule tomorrow on a critical sale that could probably push a sort of new, healthier version of Chrysler out of bankruptcy in a couple of days. Now that would be near-record time.

Chrysler, of course, was a dry run for GM, so this is pretty encouraging. On the other hand, GM's a much bigger company, so it's going to take longer to deal with the partners that it has all over the world. Now some of these bondholders and some of the dealers that GM is trying to cut, they're certainly going to fight this in court.

Treasury now is estimating it's going to be 60 to 90 days for kind of a new, leaner GM to come out of bankruptcy, but it's going to go back into a very competitive marketplace, and of course the economy's almost certainly still going to be in recession.

LYDEN: When GM comes out of bankruptcy, Frank, what's it going to look like? What happens to its brand?

LANGFITT: It's going to be dramatically smaller. Saturn, Pontiac, Hummer, Saab, they're all going to be gone sooner or later, probably sooner. They're going to be focusing on their core brands, the ones we know best: Chevy, Cadillac, Buick and, to a lesser extent, GMC Trucks.

Now GM's been losing market share for three decades, and it didn't reduce these divisions and models, kind of, at the pace at which it was losing market share. So it's been really bloated, this kind of confused consumers. It muddied the brand image. And there haven't really been enough marketing dollars to support all this product.

So essentially, if you look at it, the government is kind of forcing GM to do through this bankruptcy what the executives over the years just weren't able to do on their own.

LYDEN: Frank, I understand that the American taxpayers will spend a total of more than $50 billion to rescue this company. That's a lot. Let's say GM comes out leaner, fewer debts, fewer divisions like Saturn or Pontiac. Is this going to ensure that it survives?

LANGFITT: No, it's not. You know, there's this old expression with business: you can't cut your way to profitability. GM has to sell more cars, and that's not going to be easy. It has some good products. The Chevy Malibu sedan is - it's quite popular and quite good, I think people think, but it has to stabilize this market share. And what the company predicts is that it's going to get market share down to about 18.5 percent in several years, and that would be actual progress, would kind of stop the bleeding.

LYDEN: So, Frank, as we know, the recession's really demolished car sales, and they're down 50 percent. Can GM market its way out of this? Are people going to start buying cars as they once did?

LANGFITT: No. A lot of this is going to come from consumer confidence, and it is getting a little bit better. What we've seen in the last month or two is car sales beginning to pick up in some places, but it's going to take a long time for it to build back up to anywhere near where it was, which was around, a few years ago, 16 million.

So one of the things the company is going to have to do is also figure out what are the news cars people are going to want to buy. There's an expectation that oil prices, not that bad now, they're going to go up again. GM is going to have to get better at building smaller, more fuel-efficient cars.

LYDEN: Like the Volt.

LANGFITT: The Volt. And this is going to be a really interesting thing to see next year. If all goes well at the end of 2010, they are going to introduce this electric car they've been touting for years, the Volt. It's going to cost a lot of money, GM's going to lose a lot of money on it, the batteries cost so much to build.

But what's going to be really interesting is if it's a good car, it could really help GM's image. And frankly one of the things going forward for GM, beyond all the financials we've just discussed, is if this company can turn around its image, it has a much better chance of succeeding.

LYDEN: NPR's Frank Langfitt, thanks for coming in.

LANGFITT: Happy to do it, Jacki.

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