New vs Old GM. interesting read.

[ari666]

In 2009 when the fate of the entire General Motors company hung in the balance, a new entity called, "New GM" was created. New GM got all of the company's valuable assets and resources while "Old GM" got the toxic end of the deal like real estate the company didn't have use for, debt, etc. By freeing the "New GM" up from those burdens the company was able to live and and even thrive as we have seen lately. While that was going on, "Old GM" was slowly collapsing onto itself, selling off what assets it could in the form of old plants, land, etc, but racking up big debts in the process. On December 15, 2011, "Old GM" officially dissolved and it marked the end of the road for the 103-year old company which was once the largest manufacturing collossus the world had ever seen. Funny that the world is hung up on the demise of Saab when one of the most historic business enterprises in human history quietly padlocked the doors just days ago.

Yes, it is largely a technical thing as one would never know there was anything different about "New GM" from "Old GM" but one of the interesting things is does do is to protect "New GM" from lawsuits regarding to cars made before 2009, because that company no longer legally exists. Was that part of the "benefit" from creating the new company? We're not sure, but it seems like it could be one of many pieces.

One interesting fact we gleaned from a story in the Detroit News was that at peak, GM employed more than 525,000 people and when the company was finally dissolved, there were effectively two full time employees. It's hard to really compute how it all happened and with the swiftness that it did in 2007 and 2008, but they were dark days for sure. Apparently more than 400 lawyers worked a total of 70,000 hours for more than $45-million dollars through the whole bankruptcy and wind down process of "Old GM".

With "New GM"releasing some very solid products, creating specialty projects and programs like the COPO we have been raving about, and fighting well in market segments they had previously lagged in, it seems like things are heading in the right direction in Detroit. Here's hoping for another 103 years.

Source - Bang Shift : : Old GM Quietly Slips Under the Waves - Last Vestige of Original General Motors Dissolved

 

[Jesterarts]

Very interesting, never knew that, rep'd.

 

[monkeys437]

Its a very strange thing that allows them to dump all their baggage in the past and move on with just minimal restructuring of the company.
I was working for GM when they filed for chapter 11 and it was the strangest thing knowing that all that bankruptcy BS was going on yet nothing whatsoever changed in day to day business. Then when we were finally told we now worked for "new GM" and "old GM" was left in the past, we basically got sent a re-worded statement of company ethics to read over and continued on with our jobs as though nothing had happened.

 

[VR38]

So I take it SAAB is part of the Old GM?

 

[monkeys437]

So I take it SAAB is part of the Old GM?

No they stayed with new GM initially who then sold them to another company. But Saab was up for sale even before old GM filed for bankruptcy

 

[DAKSTER]

Lets hope they dont screw it up again. Any idea how many companies and individuals would have been hurt because GM rearranged its debts so it could avoid paying them?

I'm glad GM survives of course. I just feel for the little guys that got burnt to achieve it.

 

[monkeys437]

The little guys had to get burnt at some point or the company would have gone under. One of the biggest liabilities they had was post employment benefits like health care and pension plans which just aren't things you can have if you want to be competitive globally. I think i remember reading that Old GM were the second(?) biggest US health provider behind the US government.

So it sucks hardcore for the retired GM workers that lose their healthcare and benefits but at the end of the day they're a car company, not a healthcare provider so they needed to do this to keep in business

 

[Reaper]

No they stayed with new GM initially who then sold them to another company. But Saab was up for sale even before old GM filed for bankruptcy

SAAB has been as good as bankrupt for years and officially went into bankruptcy last week.

Lets hope they dont screw it up again. Any idea how many companies and individuals would have been hurt because GM rearranged its debts so it could avoid paying them?

I'm glad GM survives of course. I just feel for the little guys that got burnt to achieve it.

Most of the truly stupid stuff had been managed out of GM 5+ years ago. Their product development and time to market is still to slow and there are plenty of other areas that could improve too but compared to GM (say) 10 years ago - chalk and cheese is the difference. What the chapter 11 did achieve was absolve GM of the *massive* legacy health care and pension liabilities for employees who have long since left the company. From what I understood, these costs were up to 1/3 of GM's revenue - ie sell a $30k car and $10k of it went to pay the health care of employees who nolonger worked for GM . These were a classic case of unions abusing their power. The UAW had the power to bring GM to a halt in the 60's - 90's and often did. It's easy to say that management should have stood up to them however when faced with the alternatives of certain bankruptcy now or put it off into the future as a possibility the decision is pretty cut and dried. These problems were common to Ford and Chrysler too. Foreign automakers such as Toyota who had plants in NA neither had the gun put to their heads (they would simply shrug their shoulders and move off shore), not the overhead fixed costs of the big 3. No wonder they pulled out such a lead in product development and design. GM have made huge strides to bridge the gap over the last few years.

Reaper

 

[DAKSTER]

Thanks m8 I wasnt aware such a high percentage went to benefits like that. I made an assumption, I will never learn , that it would be mostly small suppliers far down the food chain that suffered.

The fact that its the retirement/health fund is not really different though, its just different people being affected of course.

I have vented against unions before, and still despise them (left doesnt necessarily mean union ) so you certainly wont get any argument from me there. The benefits were too high, and the unions are to blame for that.

However, when looking for a job, assuming you have the luxury of choice, you would be looking at what benefits that job offered vs a different job. Presumably at least some of the GM workers chose to work there specifically because of the benefits that came as part of the employment package.

They may have planned their life, their debts, their retirement funds, and perhaps even the age they retire at based on the package offered.

If you plan your life, and your finances, around what you think is a contract, I am sure you personally would not be pleased if someone came along and changed the deal retrospectively. You'll consider that you have already kept your part of the bargain, and them honouring their part of the deal is now a necessary part of the future you had planned.

Of course I am speaking of the former employees here too, those who have moved on in their lives but are basing it in at least some way on the promised benefits. Health cover is notoriously expensive in the US, and a vast majority of those with medical insurance are having it paid for by their employers. Not having to pay that gives you an effective and very substantial cash bonus. I assume there were also company pensions involved as well, and of course these people also have included the promised benefits as part of their budget, and made commitments accordingly.

Whether you have actually earned as much as you are getting isnt really relevant, when you have made commitments and plans based on the contract you had. Its still a contract with a major company that you could reasonably expect to be honoured in most circumstances.

I understand the necessity of the bankrupty. I am pleased GM survives. I dont object as such to them doing it. I just feel for the little guys that will suffer along the way.

 

[Lazyr8]

Yes, it is largely a technical thing as one would never know there was anything different about "New GM" from "Old GM" but one of the interesting things is does do is to protect "New GM" from lawsuits regarding to cars made before 2009

BAD GM :banstick: