GM Exits Bankruptcy

Posted: July 10, 2009

The New York Times reports, "General Motors completed a major step in its turnaround on Friday and closed the sale of its good assets to a new, government-backed carmaker, at a speed unimagined by auto and bankruptcy experts even six months ago."

According to the Washington Post, "General Motors officials are planning to announce the launch of "the new GM" [this] morning, after the automaker was cleared at noon [Thursday] to emerge from bankruptcy."

The end of its bankruptcy and the sale of its good assets means that, technically, GM as we have known it ceases to exist.  The New York Times explains, "G.M.'s sale of its desirable assets, including brands like Chevrolet, Cadillac and GMC, to the new company - now named Vehicle Acquisition Company but soon to be renamed the General Motors Company - is meant to shed decades of buckling liabilities."  CNNMoney says, "Other holdings, contracts and liabilities that GM wanted to shed as part of the bankruptcy process will be held by the old company, now to be known as Motors Liquidation Co."

For consumers and GM customers, the changes are, for the most part, in name only. GM brands like Saturn, Saab and Hummer have all been sold, while the company already announced the closing of Pontiac. Warranties will continue to be honored, and GM will even accept some liability claims from pre-bankruptcy buyers. CNNMoney says, "About 4,100 of its 6,000 U.S. dealerships will remain with the new company, although there will be a slow wind down over the next 14 months of the dealerships that GM plans to shed as part of this process."

Despite the speedy end to GM's bankruptcy, the automaker still faces an uphill battle to return to profitability. Bloomberg reports that GM "will keep losing U.S. market because it lacks new-model introductions for early 2010, according to Erich Merkle, an independent auto analyst."  Merkle argues that "GM's only new vehicle slated for that time period is the Chevrolet Cruze compact car," despite the introduction of the Chevrolet Equinox, Buick LaCrosse and the Cadillac SRX earlier this year.  Merkle told Bloomberg, "Those products could face some pretty stiff headwinds given the fact that this aura of bankruptcy will still follow General Motors."   However, in a feature on the new Camaro, the New York Times reports that GM has a hit on its hands: "G.M. sold 9,300 Camaros during the month of June - more than either its entire Buick or Cadillac divisions could muster on their own."  The Times reports that GM has a six-day supply of the Camaro nationally.  A 60-day supply of a car is the industry norm. 

Besides questions about how bankruptcy will affect consumer attitudes toward GM, it emerges from bankruptcy as a government-run entity -- something that could also sour consumers, or lead to management troubles.  The New York Times reports, "Senior administration officials have promised that they will not "micromanage" the company, despite being the majority owner and having already picked new directors."

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