European Automakers Dispute Assumptions of 'Let GM/Chrysler Go Bankrupt" Case

[RedEarth]

......this post and the one linked below are certainly worth reaading... good analysis into what might happen if the Big 3 go into bankruptcy ....

The advocates of having GM and/or Chrysler file for Chapter 11 make their case often implicitly or explicit resting on certain assumptions. The fundamental notion is that Chapter 11 will produce less, or at least no more, economic damage than some combination of rescue funding and auto industry downsizing.

Now we are willing to grant that any future for the US automakers may be much darker than most are prepared to accept. One reader in comments today offered a back-of-the-envelope analysis for GM:

As a though experiment, I looked at GM's November sales and tried to see what models would be worth saving (i.e. sales have not fallen off the roof this year).

This is what I found:

Cars:

Cadilliac CTS
Chevy Cobalt
Pontiac G6
Pontiac Vibe
Saturn Aura
Chevy Malibu

Trucks:

Buick Enclave
Chevy HHR
GMC Acadia
Saturn VUE

Although they are not selling well, you have to include the Silverado/Sierra in the mix -- still the best selling vehicles in the US.

Almost all these vehicles are made in the US, except for the Vue (Mexico), VIBE (made in US at the joint plant with Toyota), HHR (Mexico), and Silverado (some Canadian production)

Based on that, I see the following GM plants surviving:

LANS GRD RIVER
LORDSTOWN
ORION
Fairfax
Numi

Flint
Ft. Wayne
Lans Delta
Pontiac

Canada: Oshwa
Mexico:Ramos Arizpe

Eyeballing it, it looks as we can expect GM to shut down 3/4 of their plants in the US.

That is massive hurt to suppliers, dealers, etc.

Remove the Pickups, and it is even worse.

Yves again. I'll assume this is a good first order approximation. I have a sneaking suspicion that few in the financial community have gotten their minds around the notion that GM might shutter 3/4 of its production.

With that as context, the proponents of Chapter 11 focus on the potential (in their view) upside, mainly gutting UAW contracts, but also dealer agreements and (in theory) cramming down bondholders. But the flip side is that once a company files, the process is irreversible. And if things do not work out as expected, there is no way to go back.

,,,,,,,,,more

http://www.nakedcapitalism.com/2008/12/european-automakers-dispute-assumptions.html

...another post on US auto makers....

http://www.nakedcapitalism.com/2008/12/is-gm-bankruptcy-inevitable.html

[Doremus]

1. Thank you for the analysis.

Off to read the links.