Detroit News Claims Chapter 11 "Must Be An Option" for GM

January 16, 2009

Today Detroit News columnist Daniel Howes dispenses with pretty grim predictions for General Motors based on cold, hard numbers. What was GM's "base case," a prediction of 12 million U.S. light vehicles sales in 2009 (the number they gave to Congress in December's hearings), has now fallen to just 10.5 million units. Worse yet, overseas revenues should drop as well; sales worldwide are forecast to be down 15 percent in '09. It seems there's not a good sales story to be found for GM anywhere in the world, and Howes feels strongly that Chapter 11 is looming with increasing certainty.

Why Chapter 11? Won't that tarnish the automaker's image and, therefore, its ability to impress consumers and sell new vehicles? It seems GM is running out of the luxury of vanity. Bankrupty - "not an option" according to the automaker last fall" - is now quickly taking center stage as the most intelligent option. The company simply must engineer a smaller outflow of cash to suppliers, unions, and bondholders. Howes points out that Chapter 11 provides a real threat to this vast network of entities who receive income stream from GM, allowing - requiring - the manufacturing giant to re-negotiate contracts and allowing it to do so without threat of lawsuits, lengthy delays, and political pushback.

From howes fingertips to your eyes: "are they stating the obvious? Yes, to all but the most deluded. Sending a message? Absolutely." Would you buy a car from a bankrupt GM, and do you think this is the most logical solution to the financial disaster they find themselves in at present?

[source: Detroit News]

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