Switch to Desktop Site
 
 

Who wins, who loses in GM bankruptcy

The former auto giant gets a new lease on life, car buyers stand to gain, but President Obama’s popularity could take a big hit.

Image

Retired General Motors auto worker Eugene Gains stands next to his truck with a 'Drive American Built With Union Labor' bumper sticker on it outside his UAW union local 735 in Canton, Michigan on June 2.

Rebecca Cook/Reuters

About these ads

The company that once controlled more than half the US car market now sports a negative label: "in bankruptcy."

Yet General Motors Corp. stands to come out a winner, making a fresh start that wouldn't have been feasible without a wrenching revamp under the eye of a judge.

If all goes as planned, the GM bankruptcy will last just 60 to 90 days, but the effects will be broad and long-lasting. Not just a new GM but a new US auto industry will emerge.

Here's a reckoning of who may gain or lose in the process, according to economists and industry analysts:

Winners

General Motors: The industrial icon gets to clear away big debts with the stroke of a judge's pen. It also has a new investor called the White House, providing both money and a nudge for stakeholders to make concessions. Without that, GM wouldn't have reached this clean-slate moment. But after many Detroit missteps over the years, it's up to the firm's management to make the most of it.

Lawyers: Attorneys will be raking in fees faster than you can say "brief." This is one of the largest bankruptcy filings ever, and even if it's quick, there will still be mountains of paperwork.

Car shoppers: The fact of fewer dealerships could actually raise car prices. But the industry will remain competitive. And lighter corporate debt loads, thanks to restructuring, could allow carmakers to put more focus on customer satisfaction. "The GM that ... let too many of you down, is history," GM chief Fritz Henderson pledges.

Ford Motor Co.: Of the Detroit Three automakers, only Ford has avoided bankruptcy and a federal bailout by restructuring on its own. It is gaining market share. But watch out: Bankruptcy may give GM and Chrysler a cost-structure edge over Ford, which still has big debts to pay.

Next

Page:   1   |   2

Share