| Line 66: |
Line 66: |
| | Chrysler entered bankruptcy in April 2009, after losing $16.8 billion in 2008, and is expected to lose another $4.7 billion in 2009. It hopes to emerge quickly, with the old owners wiped out. The new owners will be Fiat of Italy, the UAW and the U.S. government. | | Chrysler entered bankruptcy in April 2009, after losing $16.8 billion in 2008, and is expected to lose another $4.7 billion in 2009. It hopes to emerge quickly, with the old owners wiped out. The new owners will be Fiat of Italy, the UAW and the U.S. government. |
| | | | |
| − | GM enters bankruptcy in June 2009. After what is expected to be a short stay, bondholders will lose most of their investments and instead get 10% of the new stock. The new company will be 72% owned by the US government (along with the government of Canada), with the UAW health care trust (for retired workers) holding about 18% ownership. The US has already given GM $20 billion in loans; it will add another $30 billion, bringing its investment to $50 billion (in return it owns 70%). The new money will be used to keep GM operating in the US, Canada and Latin America. The unions have agreed to major wage concessions, so that wage rates will be similar to thed transplants. It will be a much smaller company with fewer dealers and no long-term debt. Whether it will make a profit is unknown. GM is selling its European operations to a consortium from Canada and Russia, with funding from the German government. | + | GM enters bankruptcy in June 2009. After what is expected to be a short stay, bondholders will lose most of their investments and instead get 10% of the new stock. The new company will be 72% owned by the US government (along with the government of Canada), with the UAW health care trust (for retired workers) holding about 18% ownership. The US has already given GM $20 billion in loans; it will add another $30 billion, bringing its investment to $50 billion (in return it owns 70%). The new money will be used to keep GM operating in the US, Canada and Latin America. The unions have agreed to major wage concessions, so that wage rates will be similar to the transplants. It will be a much smaller company with fewer dealers and no long-term debt. Whether it will make a profit is unknown. GM is selling its European operations to a consortium from Canada and Russia, with funding from the German government. |
| | | | |
| − | [[File:Gm-europe.jpg|thumb|290px]]
| |
| | Bankruptcy permits Chrysler and GM to shed over one fourth of the dealerships, and walk away from the money they owe the dealers. Once a dealer loses its status, it can sell other brands, or used cars, or go bankrupt. (The ex-dealers will no longer be able to handle repair work under warranty, an important part of their business.) | | Bankruptcy permits Chrysler and GM to shed over one fourth of the dealerships, and walk away from the money they owe the dealers. Once a dealer loses its status, it can sell other brands, or used cars, or go bankrupt. (The ex-dealers will no longer be able to handle repair work under warranty, an important part of their business.) |
| | Ford appears to be solvent. | | Ford appears to be solvent. |
| Line 75: |
Line 74: |
| | | | |
| | A bankruptcy of the Big Three would not quickly benefit foreign makers. The transplants would be severely hurt by the closing of parts companies like American Axle, Delco and Visteon they share with the Big Three, and their output would fall. There would be far fewer new cars for sale for years, and prices would soar. Eventually imports would come from abroad, but they would be much more expensive than current autos. It takes years to build new plants, and in the current financial crisis there is no funding available for risky multi-billion dollar manufacturing ventures.<ref> Louis Uchitelle, "If Detroit Falls, Foreign Makers Could Be Buffer," [http://www.nytimes.com/2008/11/17/business/economy/17impact.html?_r=1&hp&oref=slogin ''New York Times,'' Nov. 16. 2008] </ref> | | A bankruptcy of the Big Three would not quickly benefit foreign makers. The transplants would be severely hurt by the closing of parts companies like American Axle, Delco and Visteon they share with the Big Three, and their output would fall. There would be far fewer new cars for sale for years, and prices would soar. Eventually imports would come from abroad, but they would be much more expensive than current autos. It takes years to build new plants, and in the current financial crisis there is no funding available for risky multi-billion dollar manufacturing ventures.<ref> Louis Uchitelle, "If Detroit Falls, Foreign Makers Could Be Buffer," [http://www.nytimes.com/2008/11/17/business/economy/17impact.html?_r=1&hp&oref=slogin ''New York Times,'' Nov. 16. 2008] </ref> |
| | + | |
| | ===Chrysler=== | | ===Chrysler=== |
| | The new Chrysler emerged from bankruptcy in June 2009. The old debts are nearly all gone (except some money it owes the governments of the US and Canada). In terms of ownership of the stock, the UAW union's health care trust has 55%, which it will try to sell as soon as possible on the open market. the American and Canadian governments have 8% and 2% respectively; and Fiat of Italy has 20%. Fiat's stake will grow to 35% after Chryster pays off its government loans. The board of directors is more powerful and has nine members: three from Fiat, four named by the US Treasury, one by the Canadian government and one by the UAW. Actual control is held by Fiat.<ref> See [http://www.nytimes.com/2009/06/11/business/11primer.html?ref=business Michelle Maynard, "Questions About New Chrysler? Here Are Some Answers", ''New York Times'' June 10, 2009]</ref> | | The new Chrysler emerged from bankruptcy in June 2009. The old debts are nearly all gone (except some money it owes the governments of the US and Canada). In terms of ownership of the stock, the UAW union's health care trust has 55%, which it will try to sell as soon as possible on the open market. the American and Canadian governments have 8% and 2% respectively; and Fiat of Italy has 20%. Fiat's stake will grow to 35% after Chryster pays off its government loans. The board of directors is more powerful and has nine members: three from Fiat, four named by the US Treasury, one by the Canadian government and one by the UAW. Actual control is held by Fiat.<ref> See [http://www.nytimes.com/2009/06/11/business/11primer.html?ref=business Michelle Maynard, "Questions About New Chrysler? Here Are Some Answers", ''New York Times'' June 10, 2009]</ref> |