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GM News: General Motors Says Bankruptcy is Near

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Reality not only has set in for GM, it’s sinking.

Rick Wagoner, GM’s chairman and chief executive said that a bankruptcy filing for GM wasn’t being discussed. “We have no plans for anything other than running our business,” he said.(2)

However, leaders of GM, Ford, Chrysler and the United Auto Workers union met with House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and other congressional leaders to discuss aid options. Some participants said automakers were seeking $50 billion in loans as part of a new economic stimulus program, the Associated Press reported.(3)

Several factors have led to GM’s struggles and possible demise. In May, GM executives unanimously abandoned a $2 billion overhaul project of the full-size sport utility vehicle. The “CXX project,” which was GM’s frontrunner program to completely revamp their full-size SUVs, saw the end of its days due to consumers abandoning these large, gas-thirsty SUVs for smaller, fuel-efficient vehicles.

GM thrived from its SUV and pickup trucks sales since they were introduced. However, sales for SUVs across the industry dropped more than 30% this year and have been declining since 2004.

Years ago GM scrapped efforts to compete with nimble, fuel-efficient cars, and as gas prices rocketed, SUV sales plummeted. In the second quarter alone, G.M. took $1.3 billion in write-offs to reflect the drop in the value of trucks and SUV’s coming off lease. Overdependence on big SUV’s has also hit Ford and Chrysler hard, but, as the biggest producer, GM had the most to lose.(4)

Merger talks with Chrysler have also been silenced, which raises serious questions about its future as well.

Significant slashing of employee benefits, plant closures, hundreds of layoffs reported (perhaps thousands are imminent), and abandonment of GM’s former cash cows are just a few effects of GM’s struggles.

What do GM's struggles mean to you and your family? Post your thoughts on our AUTOMOTIVE BLOG

 
                                                                 

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