Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from essay:
The other important function of the plan was to shift responsibility for the pension obligations from the company to the United Auto Workers. While smaller creditors and contractual partners need not be satisfied with the reorganization, it is difficult to believe that the reorganization could have been done with the cooperation of the UAW. It would not have been politically expedient for the federal government to become involved and without their involvement the judge would have had had the option of the 363 asset sale. In accepting responsibility for the pension, the union has lifted a major portion of the liabilities from General Motors. In addition, a deal reached before the filing adjusted some of the work rules, ended bonuses and froze wages, all of which combined to save GM $1.2-1.3 billion per year. Combined with plant closures, the moves are expected to bring GM's labor costs more in line with those of its competitors. This will eliminate a major competitive disadvantage. The cost to the company is a significant UAW ownership stake and a union seat on the board (Strumpf, 2009).
It should be noted that the unique structure of automakers' operations stretches the impacts of the Chapter 11 reorganization's internationally. General Motors and Ford in particular have a significant amount of their production capacity in Canada. The Canadian government, therefore, needed to become involved in the Chapter 11 process. The Canadian Auto Workers, however, did not have the same involvement as the UAW in large part because the health care liabilities to pensioners are dramatically lower in Canada due to the socialized medical system. It is highly unusual for one federal government to become heavily involved in a Chapter 11 case, let along two governments, which makes the case of the automakers unique.
In theory the automakers have utilized Chapter 11 to free themselves from the majority of their liabilities. Without these liabilities on their balance sheets, and other burdensome contracts that were left behind during the course of the bankruptcy proceedings, the automakers are theoretically better equipped to compete with their rivals. The cost of goods sold will be significantly lower, since not only with the average hourly labor cost be lower but so will the average number of hours per vehicle.
By altering the underlying financial situation of the automakers, the focus can be shifted towards improving the operations side of the business. With the less efficient plants and product lines jettisoned, General Motors expects at this point to only have four lines of product. They will be able to better focus on meeting customer needs, the lack thereof in the past has contributed to the dire financial situation in which they found themselves.
Chapter 11 bankruptcy allows for insolvent companies to reorganize themselves in order to satisfy their creditors and relieve their debt burdens. If there is reason to believe that the company will otherwise fail, Section 363 can be utilized in order to allow the company to sell its assets, if there is a willing buyer. Two automakers, General Motors and Chrysler, filed for Chapter 11 protection in order to restructure their operations and balance sheets.
At GM, the company was able to cut unproductive assets, renegotiate union contracts and transfer its good assets to a new GM company backed by the federal government. The most significant of its legacy liabilities was its pension obligations, particularly with respect to health care. These obligations were transferred to the United Auto Workers in exchange for an ownership stake in the new company. Some other major creditors also received a stake.
The reorganization served some key functions, such as lower labor costs and dramatically improving the firm's balance sheet. What it did not do was address some of the other strategic and competitive issues facing the automakers. The hope is that by restructuring, these firms will be better able to respond to the challenges in today's competitive environment, allowing for their long-term survival.
King, Jr., N. & Terlep, S. (2009). GM collapses into government's arms. Wall Street Journal. Retrieved November 1, 2009 from http://online.wsj.com/article/SB124385428627671889.html
CBS. (2009). GM gets green light to exit bankruptcy. CBS. Retrieved November 1, 2009 from http://www.cbsnews.com/stories/2009/07/09/business/main5147084.shtml
US Courts (2009). Chapter 11: Reorganization under the bankruptcy code. U.S. Courts.gov. Retrieved November 1, 2009 from http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html#debtor
Cornell University. (no date). U.S. code collection: § 363. Use, sale or lease of property. Cornell University Law School. Retrieved November 1, 2009 from http://www.law.cornell.edu/uscode/11/usc_sec_11_00000363-000-.html
Morath, E. (2009). Pornography and section 363. Wall Street Journal. Retrieved November 1, 2009 from http://blogs.wsj.com/bankruptcy/2009/10/05/pornography-and-section-363/
Taylor, R. (2009). The decline and fall of General Motors. Suite101. Retrieved November 1, 2009 from http://businessmanagement.suite101.com/article.cfm/the_decline_and_fall_of_general_motors
MSN Moneycentral: Various pages. (2009). Retrieved November 1, 2009 from http://moneycentral.msn.com/home.asp
Wharton School. (2008). Behind the curve: Have U.S. automakers built the wrong cars are the wrong time -- again? Knowledge @ Wharton. Retrieved November 1, 2009 from http://knowledge.wharton.upenn.edu/article.cfm?articleid=2012
Koenig, B. (2009). UAW chief faces Reuther legacy, "crashing" industry. Bloomberg. Retrieved November 1, 2009 from http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=aTU6dWpTEicM
Grossman, a. (2008). Automakers needs bankruptcy, not bailout. Heritage Foundation. Retrieved November 1, 2009 from http://www.heritage.org/Research/Economy/lm33.cfm
General Motors 2008 Form 10-K. Retrieved November 1, 2009 from http://www.sec.gov/Archives/edgar/data/40730/000119312509045144/d10k.htm
US Bankruptcy Court. (2009). Chapter 11 Case No. 09-50026. Retrieved November 1, 2009 from http://gmcourtdocs.gardencitygroup.com/pdflib/2967_50026.pdf
Strumpf, D. (2009). What GM's Chapter 11 filing means. Manufacturing.net. Retrieved November 1, 2009 from http://www.manufacturing.net/Article-What-GM-Chapter-11-Filing-Means-060209.aspx?menuid=242[continue]
"Auto Industry On June 1 " (2009, October 31) Retrieved December 7, 2016, from http://www.paperdue.com/essay/auto-industry-on-june-1-18015
"Auto Industry On June 1 " 31 October 2009. Web.7 December. 2016. <http://www.paperdue.com/essay/auto-industry-on-june-1-18015>
"Auto Industry On June 1 ", 31 October 2009, Accessed.7 December. 2016, http://www.paperdue.com/essay/auto-industry-on-june-1-18015
These different elements are important because they highlight the real reason as to why the industry saw such a long-term decline take place. To rectify the situation, it is recommended that the entire industry aggressively begin selling as many hybrid vehicles as possible. This is important because the article the Potential of Hybrid and Diesel Powertrains, indicates that the company / companies that are able to have their entire
Automobile Industry "the foreign market has surpassed quality over the U.S. Automobile Industry" The automobile industry is one of the biggest manufacturing industries of the 20th century and puts a severe impact on the economy of the nation. In Japan, a largest auto manufacturer of the world, the expression 10% industry is frequently used which indicates that the auto industry is involved in 10% of the total employment. As automobiles comprises of
Yet, today, they sell only about 47% and this market share loss has accelerated over the past decade (Sullivan, 2008). The major issue, according to Sullivan, is the inability of the Big Three to effectively compete with their more efficient and market savvy Japanese rivals, even on their home turf. Opponents of the auto industry bailout feel that placing more money into a failed business strategy makes no sense
4). 2.4 Effects of Environment: Concerns related to carbon emission were heightened in mid-2000s and in 2007 Al-Gore in his book 'An inconvenient Truth' condemned the big three saying "They keep trying to sell large, inefficient gas-guzzlers even though fewer and fewer people are buying them." In comparison to other developed countries in Europe and Asia, American standard for distance covered in one U.S. gallon was only 25 mpg (miles per gallon).
growth of the Korean automobile industry in the Unites States from a trade and finance perspective. Use eight sources of information. Korean Auto Industry Red To begin an investigation into the Korean automobile industry, we first have to start with some basic facts about the Korean Passenger car Industry. The South Korean auto industry is the second largest in Asia and has been one of the key growth industries, along with construction, shipping
(Macdonagh-Dumler and Pebbles et al. 1-14) The Marquette Range, which consisted of huge deposits of high quality iron ore, was discovered in the year 1844, the operations were initiated in the year 1846. Other ranges that were opened by the year 1910, included the Menominee, Gogebic, Vermilion, Cuyuna, and, the Mesabi range in Minnesota, in the year 1892. (Macdonagh-Dumler and Pebbles et al. 1-14) In the year 1844 the first great
Geely Chinese Autos What is the issue/problem for Geely? By about 2006, as it made its first appearance at the Detroit Auto Show, Geely decided to be a trailblazer of sorts for the Chinese automotive manufacturing sector (text, page? In particular, what it was doing was setting its sights on making itself one of that nation's standout original equipment manufacturers, enabling it and China as a whole to be more flexible to the