tomhudson's Journal: Canada confirms "B" is for Bankruptcy for GM, Chrysler

CTV is reporting that the goernment minister in charge of industry has confirmed that there is a "Plan B" in place for both GM and Chrysler to go into bankruptcy within the next 2 months - and that GM is seriously considering it.

About time.

The US and Canada are obviously working from the same play book - "either meet our requirements in terms of long-term viability plans or we turn off the taps and let it get worked out in bankruptcy court."

Chrysler doesn't have a real plan. The "alliance" with Fiat doesn't change much for Chrysler - no source of new funds, and "access to small-car platforms" will take years to result in any manufacturing jobs (or worse, it just means importing rebadged Fiats, which as pointed out here doesn't make economic sense because of the high Euro). Additionally, Fiat doesn't assume any of Chrysler's debt.

... and then Fiat's sales dropped 24% at the end of the year ...

... on top of which, it doesn't stop the losses over the next few years at Chrysler, which is too dependent on mini-vans and trucks. Switching to small-car production (with its' lower profits per car) isn't a formula for success for Fiat/Chrysler - the new cars would have to compete with established brands. It's not like Toyota, Honda, Hyundai, Ford and Nissan are going to say "here - take a piece of our market."

And combine the perception of "Chrysler is a dead man walking" with the Fiat "Fix It Again Tony" image problem ... there is no synergy. Fiat pulled out of North America once for a reason ... they can't compete.

Chrysler is bankrupt, and will make a formal bankruptcy filing on Friday, May 1st or Monday, May 4th, for liquidation.

And GM? I'm sure a judge will have an opening on their calendar on either Friday, May 29th, or Monday, June 1st, for reorganization.

On another note, Chrysler's bankruptcy means that Nissan gets out of their commitment to have Chrysler build a pickup for them - the last thing Nissan needs is a Nissan RamRiceroni

Avoiding financial obligations toward employees

[Futurepower(R)]

It's important to understand that bankruptcy is a way of avoiding the financial obligations of previous contracts with employees. The airlines have been doing that for years, long before the present financial problems.

Re:

[tomhudson]

The auto companies have been doing this for a couple of decades, arguing that, with the high stock returns, the pension funds were fully funded just from the contracted contributions from the employees. The employees went along with it, rather than lobby for (1) the matching funds from the auto companies, and (2) universal health care, because the employees figured that both measures would result in a smaller net pay check.

In other words, they're both guilty of being short-sighted and foolish and selfis