General Motors Bankrupcy 2009

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Date Submitted: 09/25/2012 07:01 PM

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General Motors Bankruptcy 2009

“After years of losses, the troubled automaker is forced into bankruptcy. GM is set to close a dozen facilities and cut more than 20,000 jobs” (Isidore, 2009, para. 1). After the Second World War, General Motors (GM) conquered the American automotive market capturing 50.7% of its market niche in 1962 (Holstein, 2009). Whether GM was late introducing a new feature or design was irrelevant, Bob Lutz (cited in Holstein, 2009) was quoted as saying "we had such enormous power that we could always steamroller everybody else." In 2009 GM’s stock dropped below that of the minimum price required to trade in the New York stock market and closed at its lowest in 76 years at 37 cents (Sandler, Green & Ramsey, 2009). GM therefore was obligated to file for bankruptcy protection. The aim therefore of this paper is to do the following:

• Review the General Motors bankruptcy that occurred during 2009.

• Identify the type of bankruptcy and the decisions which went into the bankruptcy declaration.

• Review how the creditors of GM and workers and related businesses at GM fared in the bankruptcy process and the positives and negatives of this bankruptcy making use of examples and

• Discussing whether there is a moral hazard in allowing companies that make bad decisions to survive bankruptcy.

Brief Review of GM’s Bankruptcy

According to Business Week in 2005, the Chief Executive of GM G. Richard Wagoner Jr. decided to publish an internal memo to all employees seeking quash rumours and put the minds of employees at ease by indicated that bankruptcy was not a viable option because it was not in the interest of customers, employees, investors, and by large stakeholders. Wagoner Jr. further stated that GM had enough cash and assets which could be readily liquidated to keep the company afloat.

Type of Bankruptcy Filed and Declaration Decision for Bankruptcy

Four years later according to Court documents filed by GM on June...