Auto Parts for Brains

All eyes are on General Motors today, as the nation’s biggest car manufacturer stands on the brink of filing for bankruptcy. This weekend, news on GM, filing a petition at 8 am today has surfaced from a source that is said to have direct knowledge of the proceedings.

Though this is a really sad time in the history of the company, many are hopeful, calling this de facto government take over a new beginning for General Motors. The President is slated to address the nation before noon to discuss the rationale for the filing.

Chapter 11

GM is said to file for a Chapter 11 bankruptcy which aims to keep only aspects of the operation which are profitable while leaving all else behind. This means that many of the company’s models, plants and dealerships which are not making as much will have to be left behind. Many people are already familiar with this type of bankruptcy as Chrysler filed for the same at the end of April.

For GM, this will mean an added $30 billion from the government to the 19.4 billion which they received before. With this the government will now have a 60 percent equity share in the new company.

As a result of the filing, the company is expected to cut 20,000 jobs, lose 40 percent of its network of 6,000 retail dealerships and cut close to 12 plants before the end of next year.

Aftereffects

A lot of people and other companies dependent on GM’s survival will be affected by the filing. These will include nearly half a million retirees and their family members who depend on GM health insurance and pension plans. Another 300,000 employees at dealerships, and thousands more at auto part makers nationwide will feel the blow.

Though the company has tried its hardest to remain afloat with the economic downturn, it looks like the current move is the only solution for its continued survival. GM is not only the largest auto maker in the country, but a century old icon that must be kept alive.

I hope that this aid from the government will help the company cope with the challenges it is now facing and help it get back in its feet towards gaining back its place in the global auto industry.