Khao Aur Khilao budget by Arindam Chaudhuri
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The choice is to execute viability plan or declare bankruptcy
Winds blowing across the Wall Street have certainly had an adverse impact on Detroit and its iconic brands. Toyota Motor Corp has dethroned American brand, GM, as the world’s largest car maker and the merger mania (GM and Chrysler) at Michigan has been put in cold storage, and presently it is the fear of bankruptcy that looms large over the iconic General Motors Corporation, GM.
The fear is not uncalled for; consider the state of the auto industry in the US – auto sales fell to 9.1 million in February 2009 (lowest rate since December 1981) from 15.4 million a year ago. GM and Ford reported sharp declines in light-vehicle sales as consumers with unprecedented low confidence stayed away from showrooms, extending a sales plunge that began in September 2008 and threatening the viability of many automakers. GM's sales have plunged by 53 per cent and that of Ford by 48 per cent since then. The sales figure only happens to be the tip of the iceberg. Having received a whopping $13.4 billion in emergency government loans since December 2008, GM in its latest filing with the Securities and Exchange Commission accepts that it may seek bankruptcy protection. The loss that the auto major has run into in the last couple of years speaks for itself, it has lost some $82 billion since 2005 and as per its latest financial report it has suffered a loss to the tune of $30.9 billion in 2008 alone. The statement in its annual report which categorically mentions, “Our future is dependent on our ability to execute our viability plan …. If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the US bankruptcy code" is but a mere reflection of its financials. The auditors, Deloitte & Touche, accepts the fact that recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about GM’s ability to continue as a going concern. The ability of GM to continue as a going concern primarily depends upon the sales volume (which has been heading southwards), and thus in order to get over the dependence the beleaguered auto major is currently seeking another $30 billion in loans from the US government.
It is clear by all means that the automotive depression highlights the dependence on the largesse and forbearance by lenders and governments. As far as the US government is concerned, the largesse and forbearance for GM totally depends on the trio, Treasury Secretary Timothy Geithner and President Obama’s chief auto advisors Ronald Bloom and Steven Rattner. As GM led by Rick Wagoner, teeters on the brink of failure it would be forced to seek relief through bankruptcy, "either through a pre-packaged plan of reorganisation or under an alternative plan, which could include liquidation". Analysts are skeptical; they fear that pre–packaged bankruptcy and the alternative plan would be catastrophic. The imminent question is, will the trio save Detroit?
Gyanendra Kashyap
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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The choice is to execute viability plan or declare bankruptcy
Winds blowing across the Wall Street have certainly had an adverse impact on Detroit and its iconic brands. Toyota Motor Corp has dethroned American brand, GM, as the world’s largest car maker and the merger mania (GM and Chrysler) at Michigan has been put in cold storage, and presently it is the fear of bankruptcy that looms large over the iconic General Motors Corporation, GM.
The fear is not uncalled for; consider the state of the auto industry in the US – auto sales fell to 9.1 million in February 2009 (lowest rate since December 1981) from 15.4 million a year ago. GM and Ford reported sharp declines in light-vehicle sales as consumers with unprecedented low confidence stayed away from showrooms, extending a sales plunge that began in September 2008 and threatening the viability of many automakers. GM's sales have plunged by 53 per cent and that of Ford by 48 per cent since then. The sales figure only happens to be the tip of the iceberg. Having received a whopping $13.4 billion in emergency government loans since December 2008, GM in its latest filing with the Securities and Exchange Commission accepts that it may seek bankruptcy protection. The loss that the auto major has run into in the last couple of years speaks for itself, it has lost some $82 billion since 2005 and as per its latest financial report it has suffered a loss to the tune of $30.9 billion in 2008 alone. The statement in its annual report which categorically mentions, “Our future is dependent on our ability to execute our viability plan …. If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the US bankruptcy code" is but a mere reflection of its financials. The auditors, Deloitte & Touche, accepts the fact that recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about GM’s ability to continue as a going concern. The ability of GM to continue as a going concern primarily depends upon the sales volume (which has been heading southwards), and thus in order to get over the dependence the beleaguered auto major is currently seeking another $30 billion in loans from the US government.
It is clear by all means that the automotive depression highlights the dependence on the largesse and forbearance by lenders and governments. As far as the US government is concerned, the largesse and forbearance for GM totally depends on the trio, Treasury Secretary Timothy Geithner and President Obama’s chief auto advisors Ronald Bloom and Steven Rattner. As GM led by Rick Wagoner, teeters on the brink of failure it would be forced to seek relief through bankruptcy, "either through a pre-packaged plan of reorganisation or under an alternative plan, which could include liquidation". Analysts are skeptical; they fear that pre–packaged bankruptcy and the alternative plan would be catastrophic. The imminent question is, will the trio save Detroit?
Gyanendra Kashyap
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM - Most Innovative B-School
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IIPM
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IIPM New Delhi, The Indian Institute of Planning and Management, India
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IIPM - International
Business and Economy - India's Most Influential Business and ...
Rankings IIPM, The Indian Institute of Planning and Management India
Management Certification, IIPM India
(IIPM) Management Education Institute India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
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