文化
Culture -YouthThink
General Motors
and
bankruptcy
A much needed wake up call By Angela Chiu
that it will back GM vehicle warranties as a way to increase consumer confidence and encourage people to purchase vehicles from not only GM but other companies. The plan states that 60 percent of ownership stake will belong to the federal government, 17.5 percent share going to the United Auto Workers, 12.5 percent to the Canadian government and 10 percent to unsecured bondholders. Existing GM shareholders are expected to be wiped out.
GM’s bankruptcy filing is the largest for an industrial company and is the fourth-largest in US history. The industry will continue to rely on financial assistance from the government, domestic and foreign, during the reorganization process despite the fact that the company is said to have $172.81 billion in debt and only $89.29 billion in assets. $30 billion from the Treasury Department, $9.5 billion from Canada, and $20 billion in taxpayer money GM has already received have been allotted to aid the company. People have often criticized that the $20 billion granted in the form of loans was ill spent and question the need and the usage of additional funds. Others are surprised at the huge amount of money that the company has already exhausted and will continue to use.
The uncertainty of GM’s future economic standing may scare away customers from buying vehicles anytime soon and the resale value of GM cars is expected to drop as did the values of Chrysler cars. Someone purchasing a GM vehicle today may have some difficulty with repairs under warranty because dealerships are closing to accommodate the change. Furthermore, GM’s bankruptcy filing could affect consumers who drive Fords, Toyotas, Hondas other brands of vehicles because the automobile industry is intertwined to each other through their suppliers. Simply speaking, the supply, demand, and price of a product, in this case GM automobiles, are likely to affect future supply, demand, and price of compliments (products that are commonly used/associated with each other) and substitutes (products that may be used in place of the original product), in this case, other brands of vehicles. So how does the so called fall of a major industry affect the common citizen? If you have been planning on purchasing a vehicle, prices will be low for the next several month. Old owners of GM vehicles should pay attention to the dealerships near them for news of possible closing and should schedule any necessary tuneups before dealerships close
The Obama Administration answered this by saying that the funds were needed to reach the envisioned end goal of GM. GM must reorganize into a self-sustainable size and give majority ownership stake to the government, and because of this, plans have also been made to close down 14 plants. The federal government has declared
Yet, with this situation at hand, the filing of Chapter 11 by GM may not entirely have negative ramifications. The silver lining of the situation is that price cuts, rebates, and other incentives will most likely be present in the next few months. Cash-back offers and discounts most likely will rise in value (estimated around a couple thousand dollars) and will
On June 1st, General Motors (GM), a century-old automaker, filed for Chapter 11 bankruptcy protection as part of the Obama administration’s plan. The company will follow a course similar to that taken by Chrysler LLC in April earlier this year when the smaller company filed for Chapter 11.
24 June 2009 asiatrendmagazine.com
serve as an incentive to lure in potential buyers. Furthermore, GM vehicles account for a large percentage of cars and supply of parts, shops, and technicians familiar with the vehicles are unlikely to wane quickly and the federal government has already promised to back warranties for GM vehicles. Furthermore, it is the needed shock to reality that many individuals need. While there are many things that may have attributed to the collapse of a major company, a majority of people have blamed the fall to have come from a lack of foresight and planning. The idea of bankruptcy have not been a recent issue; since 2008 the problem has come attention to many people and on November 16 of last year, former Chairman and Chief Executive G. Richard Wagoner Jr. decided to address the rumor. He made a declaration to his 325,000 employees that bankruptcy is “unnecessary.” “There is no plan to file for Chapter 11 protection… [such an action is] contrary to the interests of our employees, stock- and bondholders, dealers, and our suppliers and customers.” At the time, instead of trying to find a solution or a possible way to better the company’s standing, the potential problem was talked down in an effort that the situation would dissolve by itself. Honestly, there is no true source or answer to the question, “Who’s fault is it?” In reality, everyone is involved. But people should also focus on a way to turn the situation back around and ensure that this will not happen to any other companies. If anything, the physical state of GM’s company is not as likely to affect the market as much as the layoffs related to company adjustment and restructuring. The US simply will not be able to handle the burden of increased unemployment if another major company fails. Yes, management should still be held responsible for the ills they have caused but people need to point less fingers at management and point out more new ideas to ensure this does not happen again. Angela Chiu • angelachiu1243@hotmail.com
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