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Obama drives the changes for General Motors. Image by General Motors.

Obama drives the changes for General Motors
It has been a seminal seven days for the US car industry, so here's our overview of what's been going on in the week that was.
<< earlier General Motors article     later General Motors article >>

 


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This week, the American car industry finally fell off the precipice it's been standing next to for months. There was always a pile of US taxpayer dollars preventing it from actually 'teetering' there, but with every passing month that green paper buffer between it and the abyss has dissipated. On Monday (1st June 2009) it finally ran out.

But far from Barack Obama saying 'no more' and letting imperious US car giants GM and Chrysler plummet to their deaths - as the rules of US capitalism say they should - he has simply put a new pile of cash at the bottom of the pit, ready to cushion the blow when he big guns fall. Well, in GM's case he has.

In a seminal speech on Monday, Obama outlined and justified a plan that will see GM emerge from chapter 11 bankruptcy protection 'leaner' and, finally, hopefully, no longer dependent on the state handouts so repugnant to the majority of Americans. What will emerge is a company, it has transpired as the week has progressed, that will shed tens of thousands of jobs, close hundreds of dealerships and have its portfolio of outmoded brands reduced markedly.

It's not going to be easy. Despite receiving a further $30bn in aid from the government in exchange for a 60 percent stake (effectively making GM state owned, though Obama claims its involvement will be extremely 'hands-off'), GM will still struggle to re-organise and streamline; it cannot simply cut off all the dead wood. Its European arm (Opel/Vauxhall) has gone to Magna in a complex deal due to be tied up in September, although that has caused controversy because UK workers in Luton and Ellesmere Port now fear for their jobs after the German government fronted 1.5bn Euros in exchange for a guarantee that German factories would not cut staff in the short term. It's predicted that 11,000 jobs will go eventually, including 2,600 in Germany - so where are the rest coming from?

But in an amazing coup, GM looked like it might have sold Hummer - the poster-boy for the profligacy that got GM in this mess in the first place - to a Chinese industrial machinery company, though that's hitting problems now too because the Chinese government doesn't fancy another carmaker in its midst, and particularly not a maker of massive gas-guzzlers. Understandable, really. At least Saab will go to good hands - Koenigsegg is the front-runner to take the reins, which at least means Saabs might get exciting again. Here's hoping.

There's a long way to go for GM yet, but already it has announced it will close nine plants and put another three on 'standby', you know, just in case the whole restructuring plan works and it has to start building cars again. Some of the 21,000 who've lost their jobs - or made "a sacrifice for the next generation" as Obama put it on Monday - will hope that means a ticket to re-employment eventually. It's unlikely.

And what about Chrysler? Amazingly, the maker that a few months ago looked certain to simply disappear, and who is already deep into chapter 11 bankruptcy protection, will emerge very shortly under the stewardship of Fiat. That too is hitting problems - finance related, of course - but after failing to get control of GM, Fiat simply had to have an American car giant on its books, and should get its hooks into Chrysler next week. Make of it what you will, but there's been a lot of eye-rolling already at the prospect of that particular marriage. It should be interesting, at least.

And what of Ford, the other party in the Big Three? It's managed to stay quiet this week, but some analysts believe it too could be tempted to take some well-timed chapter 11 bankruptcy protection, which could serve as an easy solution to its woes - albeit lesser ones - while the heat's still with its fellow makers. We're not convinced, because Ford, unlike its peers, is already well into a 'global strategy' that will see costs cut and quality improved dramatically by worldwide platform and drivetrain sharing. If only GM and Chrysler had thought of that.

Mark Nichol - 5 Jun 2009








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