Justice Sirikah

Most Belated Twist of Events Defeating the Purpose of Reorganization at General Motors Company

by Justice Sirikah November 26, 2009
0gm_logo.jpgThe chain reaction that started with the deep-seated recession rocking the global motoring landscape seem to be continuing at General Motors Company, also known as Motors Liquidation Company (PinkSheets: MTLQQ), in a way it wouldn’t have dared to reckon probable. Almost every move GM made to sell some brands deemed to have been running at a loss fell by the wayside, including the automaker’s own backtracking from a preliminary agreement to sell Opel to a consortium led by car parts manufacturer, Magna International (NYSE: MGA). 

  First it was Penske Automotive that betrayed GM’s downsizing campaign when it snubbed negotiations to buy Saturn in September, and then came the uncertainty of a 90 percent takeover of Hummer by Sichuan Tengzhong Heavy Industrial Machinery as the Chinese government continue to postpone regulatory proceedings. And this brings me the recent fallout between GM and Koenigsegg Group AB over Saab. The Swedish investment group reported on Tuesday that it was withdrawing from the dialogues to acquire the bankrupt unit, a move that could have saved thousands of jobs.

  Now, HotStocked regrets to report that tragedy has struck at GM once again, all in the name of “facing the reality of today’s market” as the company’s head of European operations Nick Reilly chose to put it on Wednesday. The automaker is to reduce manufacturing capacity by 20 percent across Europe at the cost of between 9,000 and 9,500 jobs from the current total headcount of 45,000, and $4.5 billion in restructuring expenses, Mr. Reilly confirmed.

  “We have to create a sustainable and viable business plan. The competition is intense and getting fiercer every day. We have to reduce structural costs...There will be difficult decisions to make and we will have to reduce people...We do expect some contributions from employees and funding help from governments”, he said in a statement. Germany is likely to lose the most jobs at 5,300, while Belgium stand to lose about 2,000 jobs amid fears that the sun could be setting on its Opel plant in Antwerp.

  The news did not go down well with trade unions in Germany who had endorsed a takeover bid led by Magna in appreciation of the arrangement that the parts maker had made with the German authorities involving minimal job cuts compared to what GM have proposed. This latest development at GM comes just two weeks after the company posted a smaller-than-expected loss of $1.2 billion for the July – September quarter, from $2.5 billion in the same period last year. On the results, GM said it was regaining a stranglehold in the auto industry and would start to pay back a portion of taxpayer loans sooner than anticipated.


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