GM is now less than a month away from its June 1 restructuring deadline imposed by President Obama’s auto industry task force, but any signs that it’s on the path to becoming viable may be a little hard to find considering the carmaker has just announced a $6 billion loss for the first quarter of 2009. Once again citing global economic pressures and low sales as the primary reasons for the loss, GM is using the result to highlight the importance of its most recent viability plan in turning around its fortunes.

"Our first quarter results underscore the importance of executing GM’s revised viability plan, which goes further and faster to lower our break-even point," said GM CEO Fritz Henderson. "It’s focused on taking care of customers every single day, winning with four core brands, and investing in new products and technology, while at the same time accelerating actions to lower our cost structure to return GM to profitability quickly."

The loss of $6 billion equates to roughly $9.78 per share and is down on the $3.3 billion loss for the same period one year ago. At the same time, revenues fell from $42.4 billion in the first quarter of 2008 to $22.4 billion this year. The drop in revenue was primarily due to GM’s production volume decline of 903,000 units, or approximately 40%, on a global basis year-over-year. However, industry wide sales saw a decline of almost 21% over the past year.

GM also said it burned through $10.2 billion in cash, while being supported by $13.4 billion in government funded loans in the quarter and an additional $2 billion since. By contrast, Ford only posted a $1.4 billion loss and mananged to increase its cash reserves from $13.4 billion to $21.3 billion.

The carmaker is now racing to beat its June 1 deadline to restructure and is in the process of selling its low-performance brands, including Hummer, Saturn and Saab, as well as attempting to secure deals with the UAW and bondholders to reduce its debt.

Less than a week out from the announcement of a global strategic alliance between Fiat and Chrysler comes news today that Sergio Marchionne will play the role of CEO for both carmakers. It was thought that Fiat, together with President Obama’s auto industry task force, would pick a new board of directors for Chrysler, which would then pick a new chief, but a spokesman for Fiat has revealed today that Marchionne will take the top job.

"Marchionne will be the new chief executive of Chrysler after the procedure," a Fiat spokesman revealed to the Associated Press, referring to bankruptcy protection for Chrysler and clearance by a U.S. courts for a rescue by Fiat to go ahead. In this way, Marchionne will play a similar role to Renault-Nissan boss Carlos Ghosn as the CEO of both carmakers.

Other issues that still need to be settled, however, include who would be placed on a new Chrysler board of directors. Previous reports have suggested that there are plans to include board members from Chrysler, Fiat and even the auto industry task force.

Problems that could get in the way involve the complex ownership situation affecting Chrysler, with Chrysler's debtholders and the UAW involved in difficult negotiations on how to administer the company.

Collapse of lenders' opposition to Chrysler bankruptcy sends message to GM creditors
by Robert Schoenberger/Plain Dealer Reporter
Friday May 08, 2009, 5:57 PM
Oppostion to Chrysler's bid to merge with Italian automaker Fiat collapsed Friday, clearing the way for a smooth bankruptcy process and sending a loud warning to General Motors creditors.

The five remaining dissident lenders gave up their court fight with Chrysler after OppenheimerFunds Inc. and Stairway Capital Management, said they were dropping out of the group because it had gotten too small to be effective.

Like those holding Chrysler debt, GM's creditors will have to decide whether to agree to sharply reduce the amount of money GM owes them or to take their own chances in court should GM also file Chapter 11.
......

Y: On a different bailout front, what do you think about the auto companies?

L: I think the optimum number of U.S. auto companies is one. Maybe two, but certainly not three. The worldwide auto industry is going to shrink, to a Chinese firm, a Japanese firm, an Indian firm, a Korean firm, a European firm -- and an American firm, I hope, but there's a chance there will be zero U.S. auto companies if we don't do this right. There are a lot of assets in America -- technological assets, know-how, skills, and labor. But I think a managed reorganization is the right approach. The companies need to shed their legacy costs. The government can offer protection to current workers and retirees.

Among the thousands of pages of documents filed in connection with Chrysler's Chapter 11 bankruptcy are affidavits from Chrysler executives that open up a window on the auto business previously closed to outsiders in this intensely competitive business.

They reveal an almost unimaginable complexity in the design, manufacturing, and distribution of new cars.

But what's more revealing is that the affidavits expose Chrysler's inability to successfully compete and the dangers facing the company in a prolonged bankruptcy.....

You also begin to understand why the chances of Chrysler emerging from bankruptcy in any shape that resembles intact looks increasingly unlikely.

Chrysler resale values down 6 percent since bankruptcy filing

Chrysler has been operating under Chapter 11 bankruptcy protection for less than two weeks now but the automaker’s resale values have already taken a tumble. Since Chrysler’s April 30th bankruptcy filing, the automaker has seen its vehicle resale values tumble by 6 percent.

According to a new report by Automotive Leasing Guide, Chrysler’s three brands – Chrysler, Dodge and Jeep – have seen a 6 percent drop in residual values across the board. Before Chrysler’s Chapter 11 filing, three-year old Chrysler, Dodge and Jeep vehicles held 34.8 percent, 37.3 percent and 38.4 percent, respectively, of their original sale price. However, since the April 30th filing, three-year old Chrysler, Dodge and Jeep vehicles have seen their values slide to just 28.8 percent, 31.2 percent and 32.4 percent of their original sale price, according to the Detroit Free Press.
In comparison, three-year old Toyotas retain 45.5 percent of their original price.
Needless to say, all Chrysler vehicles are being affected by the company’s bankruptcy filing, not just vehicles 36-months old. As a result, Chrysler-brand trade-in values are down, resulting in many consumers having to cough up a larger down payment for a new vehicle.
Chrysler hopes to emerge from bankruptcy by month’s end, but it remains to be seen how far residuals will drop before then.

Chrysler LLC and General Motors Corp. debt holders are receiving unfair treatment from the U.S. government, according to Edward Altman, creator of the Z-Score formula that calculates a company’s probability for bankruptcy.

Chrysler, in a U.S.-negotiated deal, is paying its creditors 29 cents on the dollar in a sale of most of its assets through bankruptcy to a company controlled by Fiat SpA. GM debt holders will be treated similarly in an “inevitable” bankruptcy, Altman said today in an interview with Bloomberg Television.

“They’re taking a hard line with respect to the creditors and they’re forcing them to take, in their eyes, a very poor deal,” said the 67-year-old finance professor at New York University’s Leonard N. Stern School of Business. “I’m not saying it’s illegal, but it does seem to be unfair.....”

Chrysler offers union worker buyouts; will announce 800 dealership closings

Chrysler will offer buyouts to union workers at seven of the eight United States plants that it plans to close, according to the United Auto Workers union, and a Chrysler dealer says that the automaker will make an announcement that it plans to cut 800 of its 3,200 dealerships nationwide on Thursday.

In order to stay on schedule to exit bankruptcy quickly, the worker buyouts must be completed by May 26, according to the U.S. Treasury.
“In the next few days, each member at these facilities will be sent a letter from the corporation listing the special program options,” a memo sent to local union presidents said.
Earlier this month, a court filing revealed the assembly plants that Chrysler intends to close. The automaker will also close two parts plants, including its Detroit Axle plant - the only one of the eight facilities that will not see buyouts offered to its workers. The reason for this omission is unclear.
The program will offer retirement-eligible workers $50,000 in cash, as well as a voucher good for $25,000 towards the purchase of a new Chrysler product.



Dealership closings
On Thursday, Chrysler will apparently make the announcement of the 800 dealers whose franchise agreements it does not plan to renew.
A dealer who listened to a conference call between lawyers planning to represent the dealers said that Chrysler intends to ask for a bankruptcy judge to reject the 800 franchises. Though no firm evidence of just which dealerships will close, analysts expect the majority of the doomed dealers to come from major metropolitan areas - with many on the West Coast.