Post-Bankruptcy GM To Be Billions Better Off

GENERAL MOTORS is looking to divest itself of around AU$15 billion in costs during its Chapter 11 reorganization, leading to a GM that could actually turn a profit, spend more on development, and resuscitate supply lines when existing stock clears out and new models can once again become the focus.

GM is also hoping to take advantage of an improved market by slashing nearly $4000 per vehicle from its buyer incentives program, allowing the company to save almost $10 billion in spending compared to pre-bankruptcy GM, according to Dave Cole, Chairman of the Centre for Automotive Research in Michigan.

"There's huge overcapacity right now," Mr Cole told Automotive News. "[If]you get 4 to 5 million units of Detroit 3 capacity out of the system and maintain incentive discipline, there's significant savings available."

Mr Cole says that, when GM exits bankruptcy, it will be a leaner and more competitive, and thanks to a clean balance sheet and reduced costs, it will be more able to prosper.

To reach its targets, GM will reduce production capacity and cut the number of US plants from 47 to 34 by 2010.

GM's US market share has fallen in 2009 to 19.5 percent, from 22.3 percent in 2008. Analysts predict that its share could drop to nearly 18 percent before any improvement is seen.

The former number one manufacturer sold nearly three million vehicles across the US in 2008, while its sales for 2009, through may, sat at 772,733 - meaning the company will be lucky if it clears 2 million sales for the year.

Mr Cole, son of former GM President Ed Cole, believes that despite a dismal showing for 2009, post-bankruptcy GM will be a stronger company - and that the industry will be the better for it.

The savings made during its reorganisation will allow the manufacturer to inject more funds into technology, as well as strengthening its support for suppliers by increasing output, thereby allowing its suppliers to keep their factories running closer to capacity.

"The automaker will have money for technology spending and can provide the kind of volumes that suppliers need to keep their own factories running closer to capacity," Mr Cole said.

Despite its bankruptcy, GM will spend $6.6 billion in 2009 on developing future products and technology.