GM Files For Bankruptcy Today

After failing to get its debt-for-stock offer approved last week, and missing the June 1st deadline for concessions from creditors and its union, GM will file for bankruptcy later today. Reuters notes that its filing will be the third-largest in U.S. history, after Lehman Bros and Washington Mutual, and the largest ever in manufacturing.

As the Washington Post reported last week, the U.S. government will control about 60% of the company during the reorganization. The plan is to try to get GM up and running again by the end of summer as a smaller, leaner auto manufacturer:

The GM plan as detailed by U.S. officials is for a quick sale process that would allow a much smaller GM to emerge from court protection in as little as 60 to 90 days.


By preparing to take a 60 percent stake in a reorganized GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota Motor Corp after its debt is cut by half and its labor costs are slashed under a new contract with the United Auto Workers union.


In the case of GM, the goal of restructuring is to allow it to return to profitability if U.S. industry-wide auto sales
recover even slightly to near 10 million on an annual basis.

Until now, GM had counted on a recovery to the 16-million-unit mark the industry last saw in 2007 in order to stop losing money, officials said.

For a great overview of the history of GM, from its huge success over half a century ago to the management (and design) failures that plagued it over the past three decades, check out “GM: Death of an American Dream” from last November’s Fortune magazine.

“GM to file for bankruptcy, Chrysler sale cleared” [Reuters]


Edit Your Comment

  1. STrRedWolf says:

    Is it Chapter 11 or Chapter 7 Bankruptcy? The first is a re-org, which is what all the press is saying. Chapter 7 is the complete melt-down nuclear fire-sale, which is what SCO is facing after trying to sue for profit.

  2. AgitatedDot says:

    It’s about time! I hope they never recover. They should have never received all that money in the first place. If you can’t make a decent product that’s priced right you won’t do good in the capitalist economy. And no I don’t feel sorry for the workers neither. Your employer goes out of business – you lose a job. Simple.

    On the other hand I wish Ford all the best! They seem to get it and that’s why my next car will hopefully be a Ford.

    • th1nwhiteduke says:

      @AgitatedDot: It’s nice to see people who know nothing about what they’re talking about are up this early.

      • thereij says:

        Agreed. I suppose the least you could say is that they realized a bit earlier than everyone else that something had to change and took some steps, but they’ve got just as much blood on their hands in this as well.

      • Joe Reilly says:


        Yeah, because that $20 billion investment (and the additional $30 billion we’ll pay to carry them through bankruptcy) is really paying off.

        Even though businessmen who have worked their entire lives in the industry couldn’t figure out how to make it profitable, I’m sure a bunch of politicians will figure it out. Long live Government Motors!

        • snowburnt says:

          @Joe Reilly: a lifetimes worth of experience with a company that’s been perpetually failing because of something you failed to foresee at the mid point of your career does not equal good experience.

          At the same time a politician running something rarely will result in a good experience as well.

    • Alexander Saites says:

      @AgitatedDot: Yeah, screw the workers, like my dad, who’ve been working there all their lives and are now screwed out of a retirement. It’s not like I needed someone to help me finance my education and first apartment, or help me with health care. Besides, I’m sure it will be easy for him to get a new job at 60 years of age, especially in this economy.

    • shmianco says:

      @AgitatedDot: freedom of speech my butt, that’s the most banal and idiotic comment i’ve read on this site. can we have your commenting privilege revoked? thx

  3. crymson777 says:

    Hopefully, this is their chance to throw off the yoke of the union that has plagued them for so long. That is the biggest single expense they have and the reason for all the management failures. If you have to spend BILLIONS every year just paying pensions, you are not running your business right.

    • EllaMcWho says:

      @crymson777: fuel for this fire: []
      Yes, the author is highly partisan, but still a good read.

      • snowburnt says:

        @EllaMcWho: Definitely extremely partisan and insultingly so at that.

        Some of the points are good ones…But I’d like to look how it got the way that it did. The UAW was needed when it was started and it did a lot to help out the workers.

        Billions in pensions wasn’t necessarily due to bad business, it seems like it’s part bad negotiations (good for the workers) part health care allowing people to live longer than they were before, kind of like the problems Social Security is encountering now.

        The biggest failure isn’t the existence of the UAW, it’s the UAW’s failure to evolve.

  4. Mark Aaron Murnahan says:

    This is *great* news for me! I have a huge garage full of these vehicles. I am not sure who made the mistakes … me or GM, but guess who gets to pay for those mistakes. Yeah, me. :-(

    • myasir says:

      @Mark Aaron Murnahan: How would this be trouble for you? Your warranty is still valid and backed by the government now. The only hit you’ll take is resale value but really, you should have know that would suck when you bought the cars. Hell, this is a great time for me to find that Pontiac G8 GXP I’ve been wanting for a while.

      • FooSchnickens - Full of SCAR says:

        @myasir: The biggest problem I see is that as part of the “restructuring” they are probably going to close dealers en masse similar to what Chrysler did last month. So that could lead to issues with people having to drive much farther in order to have their vehicle serviced, be it for warranty issues or general maintenance.

        I still look at this whole thing with a big frumpy face, though. I have my doubts as to if this will all really work. I guess time will tell, and I hope I’m wrong in my outlook. As much as I like seeing the free market work, the aftershocks felt in other markets (dealers, parts vendors/manufacturers, etc) would be an unfortunate consequence for those people. Granted, they could have seen this coming as well, but that’s enough speculation for me, I can only do so much per bowl of cap’n crunch.

      • HiPwr says:

        @myasir: Backed by the government. Let me know how that works out for you.

        • ARP says:

          @HiPwr: Perhaps as well as our t-bills or other investments, which are one of the safest investments out there.

          The government is not going to be working on your car directly. They’re providing interim funding while the company restructures. So, they’ll probably operate the same as before.

          • HiPwr says:

            @ARP: Who knows. They may offer a tax credit in compensation for warranty work. However it works, count on it being inefficient and frustrating.

  5. HiPwr says:

    I hope the Feds don’t try to screw over the share-holders like they did with Chrysler. Screw you, retired Indiana teachers!

  6. Blueskylaw says:

    GM files for bankruptcy and the DOW futures are up 110 points?

    • H3ion says:

      @Blueskylaw: Probably because the filing is a prepackaged plan so a lot of the suspense is gone. Also, the filing itself has been anticipated for months and this also gets rid of the uncertainty. Finally, since when does the market make sense?

      • downwithmonstercable says:

        @H3ion: you hit the nail on the head…+200 one day, -200 the next. If everything sucks right now, I keep wondering why it doesn’t just stay the same or slowly move up/down as numbers come out.

        • wardawg says:

          @downwithmonstercable: Because everyone’s trying to make a buck on market fluctuations. Prices go up and everyone sells, which drives prices down causing people to buy, driving the prices back up. I invested in forex for a few years and made some good money following trends as a short term trader, but it’s incredibly stressful to rely on it as a main point of income while you’re in school.

    • grapedog says:

      @Blueskylaw: WHy shouldn’t they be up… finally this company can get back to making money. it’s like a phoenix reborn…hopefully. I’d love to see the american auto makers actually run a good business and actually compete with foreign auto makers.

    • cecilpl says:

      @Blueskylaw: That’s because Cisco is replacing GM on the Dow as of June 8.

  7. zibby says:

    @Mark Aaron Murnahan: Look at it this way, those vehicles are collectors items now!

    Oh well, at least it will be fun to watch this turd work its way through the large intestine that is our government. What are they talking, $30bn to straighten this out? Anyone want to take the under?

  8. chucklebuck says:

    I know this is probably obvious, but I can’t imagine we’re ever getting that hajooba-billion dollars we loaned them back.

    Here’s what hasn’t been answered in all this – how are we going to prevent any company from becoming “too big to fail” in the future? If the government is going to intervene in these kinds of matters, I’d rather they do it proactively to keep them from happening at all than reactively to pump billions into dinosaur business models.

    • mzs says:

      @chucklebuck: Why not? Suppose the market cap becomes $100 billion and a 60% stake is sold. That takes care of it. Also what if you consider all the taxes that would have had to have been paid for social services under a collapse and liquidation of GM and related companies, it’s clear that it is quite possible to come-out okay for the the gov this way. Also if all these people lost their jobs, you know that the challenger to every next election would run on “I would have done it differently and you would have had a job right now” regardless of if that challenger was D or R. It does not matter why politicians try to save jobs, it’s good that they do, and not that expensive if you consider how much it saves in welfare.

  9. aph3x says:

    This is fantastic! I am so happy the two current cars sitting in my garage are:

    Saturn Outlook
    Jeep Grand Cherokee

    Awesome!! Why the f&#$ didn’t I have the foresight to buy a Ford or a Toyota?

    • DashTheHand says:

      @aph3x: You were attracted to ugly, gas guzzling, cheaply made, expensive to maintain, unnecessary SUV’s is what I am going to guess off the top of my head.

      • downwithmonstercable says:

        @DashTheHand: zing!

      • snowburnt says:

        @DashTheHand: Jeep grand Cherokee’s are quality vehicles that last forever. Of all the Chrysler brands, Jeep was one of the best, sturdy, sporty, rugged…but they were gas guzzlers, this is true.

        SUVs have their place, Toyota SUVs (highlander, Rav4, even the 4runner) and Honda SUVs get better gas mileage than most sedans. They usually handle better than Minivans (in my experience driving both) and still sit a crew of people with room for groceries, sports equipment, dogs, etc.

  10. philipbarrett says:

    I encourage anyone interested in this subject to google “British Leyland” for a 1st hand look at how this will all end.

    Here’s a starter –

  11. dave491 says:

    Personally, I find this line really disturbing:
    “…the Obama administration is gambling that the automaker can compete with the likes of Toyota Motor Corp…”

    Do they not realize that Toyota has manufacturing facilities in the U.S. that employ thousands of American workers? Honda alone employs more than 145,000 Americans in their U.S. facilities (including 10 plants). And Obama wants to compete *against* these companies? Who’s really going to win?

    • Joe Reilly says:


      Great comment. So many people lose sight of the fact that Honda and Toyota have employed American workers for years and they are doing fine (yes I know toyota had a rough year but it wasnt a rough 5 years like GM).

      But honestly, they are in trouble- how do you compete with a company in a country where the controlling shareholder of the biggest competitor is… the president of that country?!

      • dave491 says:

        @Joe Reilly:

        Exactly. And how do you suppose automotive legislation will be skewed if the government itself has a monetary stake? It definitely won’t be in favor of the so-called “transplant” companies, because they’re now the competition.

        There’s enormous potential here for conflicts of interest.

        Don’t get me wrong — I’m all for rescuing GM. The automotive supplier base in the U.S. would be utterly devastated if it goes under — something none of the auto companies, whether U.S. or foreign-owned, can afford to have happen. But the way the administration is going about it creates far too many potential problems for the American auto industry as a whole. They may be successful in saving GM, but may end up damaging far more.

        • snowburnt says:

          @dave491: Despite my previous statement I could care less about whether or not GM survives. What I’m concerned about it the overall ramifications of GMs collapse. Anything that can be done to try to at least soften the blow and let the country down easy will be much appreciated by me.

    • snowburnt says:

      @dave491: A) That’s commentary, not a statement from the administration.

      B) Who doesn’t win when there is competition playing “fair”? Processes get streamlined, products improve, everything gets cheaper for the consumer and customer service is key to keeping business.

      Until recently, everyone had written Ford off as a crappy American car maker. What did they do? They stepped it up and made cars that people wanted again and made a huge marketing push to create a new image of fuel efficiency, style and value. It seems to be working to an extent, but they probably have a ways to go.

      • dave491 says:


        I’m not clear what’s meant by competition playing “fair.” This will no longer be an even playing field, so fairness isn’t all that conceivable. Make no mistake — the U.S. government will do what it takes to protect their investment in GM — and that’s not going to translate well into the American automotive industry as a whole. And perhaps moreover, it sets a dubious precedent.

        • snowburnt says:

          @dave491: By playing “fair” I meant ideally. If a new GM succeeds does that mean that Toyota will fail? My point was that competition isn’t a bad thing, its one of the best things. I take your point though that a government owned company seems like it has a distinct advantage over a privately held one, but having worked for the government I’d still maintain they’re on even ground. Things move slowly and very counter-intuitively. Often painfully slow.

          I also agree that it sets a bad precedent and hope that this experiment ends soon and that the country and economy ends up better in the end.

    • Anonymous says:

      @dave491: The Honda America website home page says that Honda has 27,000 American employees. Go look at and see for yourself. Where do you get the 145,000?

  12. Shane Elliott says:

    Ding Dong! The Witch is dead. Which old Witch? The Wicked Witch!
    Ding Dong! The Wicked Witch is dead.

  13. minsky says:

    It’s about fucking time! I’m so sick of this melodrama.

  14. GoonieGooGoo2 says:

    Wow…this is a no brainer….slash 1/2 the lines of GM and actually focus on making a good car….and it will sell.

    Its amazing how crappy the cars from GM are…….its amazing they didn’t go bankrupt sooner.

    • BuddyGuyMontag says:

      @GoonieGooGoo2: Bingo. If they focus on Chevy, Caddy, and Buick, and then remarque the popular models from the discontinued brands (like the Plymouth PT Cruiser just becoming the Chrysler PT Cruiser”, it’ll make for smoother sailing)

    • MooseOfReason says:

      @GoonieGooGoo2: Actually, they could have gone bankrupt a lot sooner without the government bailouts.

      But “the free market destroyed the economy,” so we couldn’t let it happen.

      It’s BS. If this proves anything, it’s that when the government has a choice between capitalism and intervention, it goes with intervention. Government cannot resist the urge to grow and become more powerful.

  15. waltcoleman says:

    So remind me again why the gov’t gave away billions in bailout money to GM?

    • MooseOfReason says:

      @waltcoleman: To prevent them from going into ban— ooh… you have a point there.

    • jamar0303 says:

      @waltcoleman: Because that’s the difference between Chap. 11 and Chap. 7. Pretty much every airline came out of Ch. 11 alive (though I wish they died- let foreign companies start running the routes for some proper competition) but Ch. 7 is like Circuit City and CompUSA.

  16. jwissick says:

    It’s a shame that they did not have the honor to turn down the billions of tax dollars and just do this on their own…

    Now General Motors is Government Motors. Should send a shiver up the spine of every private (not government owned) company that makes vehicles for the government…. Now GM may be the company of choice by default instead of the others.

  17. Mint137 says:

    Personally, I hope that this leads to companies focusing less on gas fuel based cars and more on alternative energy powered ones. The only real thing I think this bankruptcy has shown is that we need to think ahead and always plan for the worst even if we are “too big to fail”.

    It as if the people running the company never even thought of having a backup plan for the worst of the worst. Then when this stuff comes they go “Well, who could have seen that coming.”

  18. KMan13 still wants a Pontiac G8 says:

    I want a Pontiac G8 regardless of bankruptcy. I wish i had the funds to get my hands on one while they’re cheap.