GM Loses Another $16 Billion -- Bankrupt?

[Dinner]

Originally posted by Arrian
TIME article (Is GM worth saving?):

http://www.time.com/time/business/ar...858702,00.html

Even if just one of the Detroit Three — and GM is the most likely, as Ford is in better shape and Chrysler is much smaller — spiraled into a free-fall bankruptcy, the systemic effects, at least initially, would be huge. The whole industry would not be able to build cars in the U.S., because of the lack of parts. "Unlike the airlines or steel, when you look at the automobile industry and the fact that the whole supplier base is connected — to Ford, Chrysler, Toyota — it will have a ripple effect on the entire industry,"

So basically it's saying that if any of the big 3 go under then it will cause most of the parts suppliers to go under (because GM stiffs them) and then even the domestically built Honda's and Toyotas couldn't get built for lack of supplies at least for a while.

[DanS]

That's just a Detroit talking point. In actual fact, GM's biggest parts supplier, Delphi, has already gone bankrupt, but is still delivering product.

Again, bankruptcy doesn't necessarily mean that they will shut down.

[Kidlicious]

There are other automanufacturers besides the big three who need supplies.

[Dinner]

Originally posted by DanS
That's just a Detroit talking point. In actual fact, GM's biggest parts supplier, Delphi, has already gone bankrupt, but is still delivering product.

Again, bankruptcy doesn't necessarily mean that they will shut down.

Please name a single auto maker ever to go through bankruptcy and survive. I can't think of one certainly not in the modern time. The fact is it's an extremely capital intensive industry and a bankruptcy would likely shut the door on the financing needed.

[DanS]

Off the top of my head, both Kia and Daewoo went bankrupt recently and have thrived in the aftermath.

[Dinner]

Neither were allowed to fail or declare bankruptcy. As you've advocated.

The South Korean government stepped in, took over Daiwoo, and kept running it for a year and a half injecting capital and looking for a foreign buyer. BTW Kia never actually declared bankruptcy. They were a distress sale to Hyundai who was already a partial owner. Of course that deal was also the result of state intervention by the South Korean government.

[Asher]

Originally posted by Oerdin


Neither were allowed to fail or declare bankruptcy. As you've advocated.

My ****ing God, do the basic research.

http://query.nytimes.com/gst/fullpage.html?res=990DEFDC1338F935A25754C0A961958260

Koreans Place Kia Motors Under Bankruptcy Shield

The Kia Motors Corporation, one of South Korea's leading car manufacturers, was effectively placed under bankruptcy protection today, as Korean banks announced emergency financial assistance to the debt-ridden company and many of its subsidiaries.

The Kia group of companies, centered on Kia Motors, is the fourth of the nation's top 30 conglomerates -- and the biggest so far -- to collapse or nearly collapse since the beginning of the year. The failures have weakened South Korea's financial system and raised alarm about the mountains of debt that many Korean industrial giants have accumulated in their race to expand.

Kia's difficulties are also a signal of problems, and perhaps of a consolidation, in the South Korean automobile industry. The big three Korean auto makers -- Hyundai, Kia and the Daewoo Motor Company, part of the Daewoo Corporation -- have created more capacity than is needed for the once-rapidly growing domestic market, intensifying pressure on the auto makers to increase exports. Adding to the pressure are plans by the giant Samsung Group to begin selling cars next year.

South Korea manufactured 2.81 million cars last year, and its auto makers are planning to increase annual production to 6 million cars in four years. Only 1.65 million cars were sold domestically in 1996.

Kia's export effort in the United States has been gradual, beginning three years ago with its Sephia sedan and the Sportage sport utility vehicle. Kia models are sold in Western, Southern and mid-Atlantic states, and the company plans to open dealerships in the New York area late this summer. Kia Motors America said today that ''the steps being taken in Korea have no immediate impact on the operation of Kia in the United States.''

$(On Wednesday morning, the Kia group said in Seoul that it would sell 1.9 trillion won, or about $2.1 billion, in land and other assets to raise cash and would reduce its work force of 56,000 by 4,300. In addition, half of the group's 28 companies will be sold or merged, reducing the number of concerns to 14.

$(In stock trading early Wednesday, the Korean composite index was down nearly 2 percent; since the first of the year, it is up 14 percent.$)

Until last month, Kia was manufacturing and shipping to the United States a small car sold as the Ford Aspire.

The Korean producer's troubles are a setback for the Ford Motor Company, which owns 9.4 percent of Kia Motors. Ford is already trying to revive Mazda, the Japanese producer of which Ford owns 33 percent; Mazda, in turn, owns 7.5 percent of Kia.

Today, Ford officials played down the effects from Kia's problems. ''To the extent it appears Kia will continue production, the vehicles we receive from them should continue,'' a Ford spokesman, John Spelich, said. Ford continues to sell a Kia-manufactured Festiva model, a car that resembles the Aspire, in Taiwan, Thailand and Australia.

The troubles at Kia could increase pressure in South Korea -- which imported only 10,315 cars last year -- to keep its home market virtually closed to foreign cars. Trade groups of American and European makers are in Seoul pushing to open markets.

Kia did not declare bankruptcy. Rather, it was designated for rescue today under a plan announced in April by South Korean banks that was created to prevent more big companies from failing. Kia will be allowed to continue operations, to temporarily forgo debt repayments and even to receive new loans while it works on a restructuring plan over the next two months.

In South Korea, though, being designated for protection from bankruptcy carries the same stigma as bankruptcy itself. Kia said today that it had not asked for such protection.

Jeun Sang Jin, a spokesman for Kia Motors in Seoul, said that the company thought that its debts were not unusually large by Korean standards and that the company ''can get back on track again in two months.''

The Kia group, the nation's eighth-largest conglomerate, has debts of 9.54 trillion won, or $10.7 billion. That approaches twice the nearly $6 billion in debt of Hanbo Steel when it collapsed in January.

Hanbo's collapse, which precipitated a political corruption scandal, was followed by that of the Sammi Steel, a smaller producer. Jinro, the 19th-largest conglomerate, was given help under the banks' plan, as was the Dainong Group.

Korean banks have long served as unofficial arms of the Government, extending credit to the conglomerates, to fuel the nation's export-driven economic development. But the companies often expanded recklessly and the banks loans' turned sour. Particularly hard hit has been the Korea First Bank, which is owed about $900 million by Kia and was also the leading creditor of Hanbo.

Kia had been looked upon as different from most of the conglomerates because it focuses mainly on one business, and has professional, not family management. But its smaller size has perhaps hurt it in competing against the larger and far more diversified Hyundai and Daewoo.

Still, the subsidiaries it does have are what hurt Kia. While Kia Motors had a small net profit of $8.3 million on sales of $7.8 billion last year, the entire group lost more than $140 million. A big problem is Asia Motors, a truck manufacturer that nearly defaulted on debt payments last month.

Kia has been rumored to be a takeover target for the Samsung Group, which already owns 6 percent. An acquisition of Kia would give Samsung instant market presence as it prepares to begin selling cars. Perhaps to keep Kia out of Samsung's hands, the Hyundai and Daewoo groups have been buying Kia's convertible bonds.

[Dinner]

It was a very odd deal because the "bank" in question we controlled/owned by the South Korean government and anyone who wanted to bid on Kia had to present plans to boost exports, maintain employment, and inject capital over the long haul. That certainly was not regular bankruptcy since the government refused to even consider liquidating assets. It was an effective nationalization via a government controlled bank.

But auto makers remain important sources of employment and symbols of national strength in many countries, making governments reluctant to allow their closure or sale to foreign investors. Such worries appeared to have played a role this week in the failed auction of the Kia Motors Corporation and its truck-making affiliate, the Asia Motors Company Ltd.

Kia and Asia Motors were put up for sale together this summer by their creditor banks after becoming unable to make payments on their many debts, which total an estimated $10 billion. But with some of the largest banks now financially troubled and effectively controlled by the South Korean Government, the terms of the auction went far beyond a conventional sale to the highest bidder. Instead, the terms required each bidder to submit a business plan to maintain exports and invest more cash. The auction's terms also required that bids include a stiff price for the auto makers' shares and an agreement to repay all of the auto makers' debt.

http://query.nytimes.com/gst/fullpage.html?res=9a0de2df153ff932a3575ac0a96e958260

Tell me of another "bankruptcy" where all debts have to be repaid, the company cannot be liquidated, employees cannot be fired, nor plants close. Face it Asher that wasn't much of a bankruptcy. That was a government take over with a later resale with lots of strings attached.

[Dinner]

I love how Asher starts mouthing off about things he doesn't know about. Stick with computers and leave cars to us straight guys.

[DanS]

In 1997, Daewoo America was incorporated as the wholly-owned subsidiary of Daewoo Motor Co., Ltd. (Daewoo Korea) and served as the exclusive U.S. distributor of Daewoo automobiles and the exclusive provider of Daewoo warranty services and replacement parts. On November 10, 2000, Daewoo Korea filed for bankruptcy protection in Korea under the Korean Corporate Reorganization Act and, pursuant to Korean bankruptcy law, the Korean bankruptcy court appointed a receiver over Daewoo Korea’s assets.

http://www.hklaw.com/id24660/publicationid1611/returnid31/contentid47496/

[Asher]

Originally posted by Oerdin
I love how Asher starts mouthing off about things he doesn't know about. Stick with computers and leave cars to us straight guys.

You're not talking about cars, you're talking about ****ing business. I assure you I have more business acumen than a man who looks at ****ing rocks all day then spends all night trying to catch lobsters on a dingy off the California coast telling fantastic tales about 48" pizzas.

You're a ****ing know-it-all know-nothing who talks before he takes the time to even do any kind of reasonable research with Google, which any good fraud can do. You're just a bad one.

It annoys the hell out of me because I can spot it from a mile away. You pretend like you're "in the know" on virtually every topic that pops up on Apolyton, and 99% of the time you end up looking like a completely ignorant buffoon but you don't seem to process it in your head that we all know you're a fraud. You just keep doing it.

I'll now leave you to your typical "straight man" macho posturing while I look on from the realm of reality.

[Naked Gents Rut]

You pretend like you're "in the know" on virtually every topic that pops up on Apolyton, and 99% of the time you end up looking like a completely ignorant buffoon but you don't seem to process it in your head that we all know you're a fraud. You just keep doing it.

QFT

[Dinner]

Dan, I'm currently reading "Avoiding the Apocalypse" By Marcus Noland which has a whole chapter on the collapse of Daewoo. I'll get back to you as soon as I finish reading the chapter.

http://books.google.com/books?id=83HQv0q2KisC&pg=PA240&lpg=PA240&dq=Daewoo+nationalized&source=bl&ots=Gn-uB4YQ-P&sig=x_TEHDPjCQiyKKPvyn_UtTqfsyc&hl=en&sa=X&oi=book_result&resnum=5&ct=result#PPA240,M1

[Imran Siddiqui]

Even people on "his side" know he's a fraud.

[Dinner]

Imran and Drake I am not concerned about.

Dan, go to page 238 of that link and read the in depth report on Daewoo. It's the exact same sort of stuff as with Kia where the take over was run almost exclusively be Nationalized banks much to the upset of foreign banks which were owed money. It seems the foreigners did get a fair bit of money as the non-auto assets were divested from Daewoo.