On June 1st 2009, Vauxhalls parent company General Motors announced filed for what’s effectively bankruptcy (but not as we know it) and reached agreements with the U.S. Treasury and the government of Canada, which it believes will accelerate its reinvention and create a leaner, stronger “New GM” positioned for a profitable and competitive future.
Chapter 11 is bankruptcy, is not the liquidation of the company, but more an opportunity through a court supervised process to restructure a business, but what does that all mean?
The Rationale behind the arrangement is that the value of a business is greater if sold, or reorganised as a going concern, rather than liquidating it, breaking it up and selling the business assets off individually. It follows that it may therefore be more economical to allow a troubled business to continue to run, cancel some of its debts and indeed, even give ownership of the newly reorganised company to the creditors whose debts were cancelled.
Alternatively, the business can be sold as a going concern with the net proceeds of the sale distributed to creditors ratably in accordance with statutory priorities. In this way, jobs may be saved, and the business, could now run under better management, rather than being dismantled. This outcome would see the companies creditors end up with more money than they would if the company was liquidated and sold off (known as chaper 7 in the USA).
In the case of General Motors, it intends to accomplish its reorganisation and exit the chapter 11 process within 60-90 days with a clean balance sheet and a more profitable outlook for the future. The company will continue to operate during this process and it’s been stressed that the process does not impact on any of GM operations outside of the United States (and that includes Vauxhall / Opel) which will not be affected and will continue to operate as normal, so dealers, and of course, those requiring warranty & support in Europe, need not worry.
Further to that, General Motors Europe have announced they have secured €1.5 billion bridge financing from the German government and is working on a partnership with the global automotive parts maker Magna International who are likely to take over the Vauxhall/Opel business in Europe.
The other UK GM brand, Chevrolet UK Limited is managed by Chevrolet Europe GmbH, and is unaffected by these developments. Chevrolet UK Limited is a separate legal entity and is a wholly owned subsidiary of GMDAT, South Korea – a joint venture between General Motors, the Korea Development Bank, Shanghai Automotive in China and Suzuki Motors Corporation of Japan. Neither Chevrolet UK nor Chevrolet Europe require government support and will continue to operate business as usual. In a recent statement, GM UK said Chevrolet UK is a successful business which has adequate liquidity to meet all its obligations, including warranty and services for the foreseeable future
Looking back in history, for 77 years, between 1931 and 2007, General Motors made and sold more vehicles than anyone else on this planet (can that really be just two years ago). General Motors was formed in 1908, so last year was able to celebrate its 100th anniversary but that’s scant consolation for GM’s 252,000 employees, many of who will lose their jobs as plant closures have already been announced as part of the restructuring process.
Clearly life is never going to be the same again for many auto industry workers, but it cuts deeper than that it’s put a huge dent in the pride of many Americans as the auto-industry for many symbolized the modern American dream with brands that became household names even over here in the UK, such as Cadillac, Pontiac, Chevrolet, Oldsmobile, Buick, Hummer and many more
Anyway, it now seems that pretty soon GM will be loaded up with borrowed money, have a clean balance sheet and will be 60% owned by the American people whilst having flogged off all the stuff it cant afford to operate, and for us over here, that means Vauxhall, Opel and Saab so its going to be a worrying time for all of the British Vauxhall employees as rumors abound that there may possibly be plant closures within the UK.
